CELEX: 32021M10147
Language: en
Date: 2021-05-05 00:00:00
Title: Commission Decision of 05/05/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10147 - MITSUI & CO / MITSUI CHEMICALS / HONSHU CHEMICAL INDUSTRY) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 5.5.2021
                                                                C(2021) 3334 final
                                                                                  PUBLIC VERSION
                                                                  In the published version of this decision,
                                                                  some information has been omitted
                                                                  pursuant to Article 17(2) of Council
                                                                  Regulation (EC) No 139/2004 concerning
                                                                  non-disclosure of business secrets and other
                                                                  confidential information. The omissions are
                                                                  shown thus […]. Where possible the
                                                                  information omitted has been replaced by
                                                                  ranges of figures or a general description.
                                                                Mitsui & Co., Ltd.
                                                                2-1, Otemachi 1-chome, Chiyoda-ku
                                                                100-8631 Tokyo
                                                                Japan
                                                                Mitsui Chemicals, Inc.
                                                                Shiodome City Center, 1-5-2 Higashi-
                                                                Shimbashi, Minato-ku
                                                                105-7122 Tokyo
                                                                Japan
Subject:             Case M.10147 – Mitsui & Co / Mitsui Chemicals / Honshu Chemical
                     Industry
                     Commission decision pursuant to Article 6(1)(b) of Council Regulation
                     No 139/20041 and Article 57 of the Agreement on the European Economic
                     Area2
Dear Sir or Madam,
(1)        On 30 March 2021, the Commission received notification of a proposed
           concentration pursuant to Article 4 of the Merger Regulation by which Mitsui & Co.,
1     OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the
      Functioning of the European Union (the ‘TFEU’) has introduced certain changes, such as the replacement
      of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU
      will be used throughout this decision.
2     OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---         Ltd. (“Mitsui Bussan”, Japan) and Mitsui Chemicals, Inc. (“Mitsui Chemicals”,
        Japan) intend to acquire within the meaning of Article 3(1)(b) of the Merger
        Regulation joint control of Honshu Chemical Industry Co., Ltd. (“Honshu
        Chemical” or the “Target”, Japan) (the “Transaction”). The concentration is
        accomplished by way of purchase of shares. Mitsui Bussan and Mitsui Chemicals
        will be jointly referred to as the “Notifying Parties”. The Target and the Notifying
        Parties will be referred to as the “Parties”.
1.      THE PARTIES
(2)     Mitsui Bussan is a global trading organisation which is active in various sectors,
        including: (i) iron and steel products; (ii) mineral and metal resources; (iii) energy;
        (iv) machinery and infrastructure; (v) chemical products; (vi) life style; and
        (viii) innovation and corporate development. Mitsui Bussan is headquartered in
        Tokyo, Japan and is listed on the Tokyo Stock Exchange.
(3)     Mitsui Chemicals is engaged in the production and sale of chemical products
        worldwide. Mitsui Chemicals’ principal business areas are: (i) mobility products;
        (ii) healthcare products; (iii) food and packaging products; and (iv) basic materials.
        Mitsui Chemicals is headquartered in Tokyo, Japan and is listed on the Tokyo Stock
        Exchange.
(4)     Honshu Chemical is engaged in the production and sale of chemical products.
        Honshu Chemical’s principal activities are the production and sale of: (i) 4,4’
        biphenol; (ii) cresol derivatives; (iii) electronic materials; and (iv) special
        bisphenols. Honshu Chemical is headquartered in Tokyo, Japan and is listed on the
        Tokyo Stock Exchange.
2.      THE TRANSACTION
(5)     On 11 November 2020, the Notifying Parties entered into a shareholder agreement
        pursuant to which Mitsui Bussan and Mitsui Chemicals agreed to acquire joint
        control of the entire issued share capital of Honshu Chemical. Pre-Transaction, no
        single person or entity has sole control or joint control over Honshu Chemical (see
        further para (7) below). Following completion of the Transaction, Mitsui Chemicals
        will own 51% of the issued shares in Honshu Chemical, and Mitsui Bussan will own
        the remaining 49%.
(6)     As decisions in relation to Honshu Chemical’s commercial strategy will require a
        majority of at least 52% to pass, Mitsui Chemicals or Mitsui Bussan can each block
        decisions requiring a vote by the shareholders. Moreover, Mitsui Chemicals and
        Mitsui Bussan will each have the right to appoint three of the seven directors to the
        Board,3 including one representative director each4 and none of them has a casting
        vote. Finally, each of Mitsui Chemicals and Mitsui Bussan will have the right to veto
        strategic decisions of the Board including the adoption of Honshu Chemical’s annual
3   The seventh director will be appointed by unanimous consent of the Shareholders Steering Committee.
    The Steering Committee is composed of four members, with the Notifying Parties each able to appoint
    two members.
4   Under Japanese corporate law, only representative directors have the power to “represent” the company in
    an official capacity (e.g. signing legal documents on behalf of the company).
                                                           2
 ---pagebreak---          budget and business plan. Honshu Chemical will therefore be jointly controlled by
         Mitsui Chemicals and Mitsui Bussan.
(7)      The Commission notes that pre-Transaction, Mitsui Bussan and Mitsui Chemicals
         have each already owned 27% of Honshu Chemical, representing […]% each of the
         de-facto voting rights in Honshu Chemical.5 It should be noted that Mitsui Bussan
         and Mitsui Chemicals belong to separate corporate groups and are ultimately
         controlled by separate entities.
(8)      The Commission’s Consolidated Jurisdictional Notice6 sets out that in the absence of
         specific veto rights, two or more undertakings with minority shareholdings may have
         joint control over an enterprise when: (i) the shareholders together hold a majority of
         the voting rights in the target enterprise; and (ii) they act together in exercising these
         voting rights, either as a result of an agreement or on a de facto basis.7 The
         Commission notes that pre-Transaction, neither of Mitsui Bussan and Mitsui
         Chemicals held specific veto rights or had any form of negative control over Honshu
         Chemical. While the first of these two cumulative criteria is fulfilled in the case at
         hand, the second is not, as (a) there are no agreements or arrangements (either
         formal or informal) between Mitsui Bussan and Mitsui Chemicals to coordinate their
         votes at Honshu Chemical’s shareholder meetings and (b) Mitsui Chemicals has
         never exercised its right to vote in any of Honshu’s shareholder meetings but has
         instead always delegated its votes to Honshu (although it was not obliged to do so).
(9)      Pre-Transaction, Honshu Chemical has been performing its operations on the
         markets where it is active on a lasting basis, beyond one specific function for either
         of Mitsui Bussan or Mitsui Chemicals and conducting a substantial portion of its
         activities beyond the scope of its sale/purchase relationships with its parents..
(10)     The Transaction therefore constitutes a concentration within the meaning of
         Article 3(1)(b) of the Merger Regulation.
3.       UNION DIMENSION
(11)     The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 5 000 million8. Each of them has a Union-wide turnover in excess of
         EUR 250 million, but they do not achieve more than two-thirds of their aggregate
         Union-wide turnover within one and the same Member State.
5   For the avoidance of doubts, each of Mitsui Bussan and Mitsui Chemicals are minority shareholders of
    Honshu Chemical, and neither Mitsui Bussan nor Mitsui Chemicals has any veto rights over any of the
    decisions taken by Honshu Chemical, nor has any of them has the right to appoint any directors to the
    Board or to appoint any members of Honshu Chemical’s senior management (or to block the appointment
    of any director or any members of Honshu Chemical’s senior management). As a result, neither of Mitsui
    Bussan and Mitsui Chemicals have control over Honshu Chemical pre-Transaction.
6   Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the
    control of concentrations between undertakings (OJ C 95, 16.4.2008, p. 1; the ‘CJN’).
7   Paragraphs 74 to 76 of the CJN. In the clear absence of de facto joint control (given that Mitsui Chemicals
    has never exercised its right to vote in any of Honshu’s shareholder meetings) it is not necessary to assess
    the extent of potential commonality of interest between Mitsui Bussan and Mitsui Chemicals that could be
    indicative of such a situation of de facto joint control as described in paragraph 76 of the CJN.
8   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                             3
 ---pagebreak--- (12)     The Transaction therefore has a Union dimension within the meaning of Article 1(2)
         of the Merger Regulation.
4.       RELEVANT MARKETS
4.1.     Introduction
(13)     The Transaction does not give rise to any horizontal overlaps. However, it results in
         a number of vertical relationships between Mitsui Bussan’s and Mitsui Chemicals’
         activity in the supply of basic chemicals and Honshu Chemical’s activities in the
         supply of special bisphenol for polycarbonate resins and 4,4-biphenol.
4.2.     Market Definitions
4.2.1. Special bisphenol for polycarbonate resins
(14)     Special bisphenol for polycarbonate resins are chemicals used as a monomer in the
         production of polycarbonate resins, either as a substitute for bisphenol A (“Bis-A”,
         whose use in certain applications, such as baby bottles, has been prohibited in many
         jurisdictions), or co-polymerised with Bis-A to reinforce polycarbonate resins. The
         main categories of special bisphenols for polycarbonate resins (representing the
         majority of special bisphenols for polycarbonate resins commercialised worldwide)
         are listed in Table 1 below.
          Table 1 Special bisphenols for polycarbonate resin products and their chemical
                                name (based on IUPAC Nomenclature)9
 Special bisphenols for polycarbonate            Chemical Name (based on IUPAC Nomenclature)
                  resin
Bis-Z                                    4,4'-Cyclohexylidenebisphenol
                                         4,4'-[1-[4-[1-(4-Hydroxyphenyl)-1-
BisOC-FL
                                         methylethyl]phenyl]ethylidene]bisphenol
BisP-AP                                  4,4'-(1-Phenylethylidene)bisphenol
BisP-TMC10                               4,4'-(3,3,5-Trimethylcyclohexylidene)bisphenol
BisP-HTG                                 4,4'-(3,3,5-Trimethylcyclohexylidene)bisphenol
BisP-MIBK                                4,4'-(1,3-Dimethylbutylidene)bisphenol
BisPEO-FL                                Bisphenoxyethanolfluoren
9   Honshu Chemicals manufactures [Current sales strategy] special bisphenol for polycarbonate resins,
    [Current sales strategy].
10  BisP-TMC and BisP-HTG are listed in the table above as having the same chemical name. This is
    because BisP-TMC and BisP-HTG are in fact the same chemical, although they are treated as separate
    products by Honshu, for commercial reasons.
                                                         4
 ---pagebreak---   Special bisphenols for polycarbonate          Chemical Name (based on IUPAC Nomenclature)
                   resin
 S-BOC                                 4,4'-(1-Methylethylidene)bis(2-methylphenol)
 TrisP-HAP                             4,4',4''-Ethylidynetrisphenol
 BINOL-DC                              2,2'-([1,1'-Binaphthalene]-2,2'-diyldioxy)diacetic acid
 BisP-M                                4,4′-(1,3-Phenylenediisopropylidene)bisphenol
 BisP-B                                4,4′-sec-Butylidenediphenol
 BisOPPEO-FL                           2,2'-[(fluoren-9,9-diyl)bis(bipheny-5,2-diyloxy)]diethanol
 BINOL-2EO                             2,2'-([1,1'-binaphthalene]-2,2'-diylbis(oxy))bis(ethan-1-ol)
Source: Notifying Parties
 4.2.1.1. Product market definition
 (15)     The Commission has not yet considered the market for special bisphenols for
          polycarbonate resins (or any other category of bisphenol).
 (16)     The Notifying Parties consider that special bisphenols for polycarbonate resins form
          a market which does not include other special bisphenols, such as special bisphenols
          for epoxy resins (or other bisphenols such as Bis-A), due to their specific properties
          and characteristics as well as the necessity to manufacture them on specific
          equipment which is different from that used for other special bisphenols. In any case,
          if a wider market definition for special bisphenols were to be considered, the
          combined market shares of the Parties would not be higher.11
 (17)     The Notifying Parties consider that special bisphenols for polycarbonate resins are
          widely substitutable among them, so that the market does not require further
          segmentation.12
 (18)     As regards potential market definitions broader than the supply of special bisphenols
          for polycarbonate resins, the Commission notes that both demand- and supply-side
          substitutability between special bisphenol for polycarbonate resins on the one hand
          and other types of bisphenols or special bisphenols on the other is limited. In
          particular, as regards demand-side substitutability, special bisphenol for
          polycarbonate resins fulfil specific functions, and provide specific characteristics,
          such as heat resistance and durability, to polycarbonate resins that other special
          bisphenols (or other types of bisphenols), such as special bisphenol for epoxy resins,
          do not provide.
 (19)     As regards a potential narrower market definition, distinguishing between each
          individual type of special bisphenol for polycarbonate resin, the Commission
          observes that while there appears to be some degree of substitutability between
 11  Form CO, paragraphs 6.31 to 6.38
 12  Form CO, paragraphs 6.39 to 6.43
                                                       5
 ---pagebreak---         various categories of special bisphenols for polycarbonate resins, important price-
        differences among these categories of products would point towards the absence of
        complete demand-side substitutability, at least for some categories of customers. As
        regards supply-side substitutability, the Commission notes that the Notifying Parties
        acknowledge that it is not always possible to switch production easily between
        certain types of special bisphenol for polycarbonate resins (and in particular it is not
        possible to switch production between BisOPPEO-FL and other types of special
        bisphenol for polycarbonate resins).13
(20)    The market investigation did not indicate that the market for special bisphenols for
        polycarbonate resins could be broader, so as to include other special bisphenols, or
        should be further segmented.
(21)    In any event, the Commission considers that, for the purpose of this decision, the
        precise question of whether the relevant product market (i) comprises all special
        bisphenols, (ii) comprises only special bisphenols for polycarbonate resins or (iii) is
        segmented between all individual types of special bisphenols for polycarbonate
        resins listed in paragraph (14) (Table 1) above can be left open, as these alternative
        product market definitions do not affect the outcome of the competitive assessment
        of the Transaction as to its compatibility with the internal market or the functioning
        of the EEA Agreement.
4.2.1.2. Geographic market definition
(22)    The Commission has not yet considered the market for special bisphenols for
        polycarbonate resins.
(23)    The Notifying Parties submit that the geographic market for special bisphenols for
        polycarbonate resins is global given that: (i) suppliers are active globally from
        production facilities across the world; (ii) customers in the EEA are supplied from
        facilities located in other world regions; and (iii) there are no regulatory or other
        barriers preventing a new or existing supplier located outside the EEA from
        supplying customers located within the EEA.14
(24)    The Commission observes that special bisphenols for polycarbonate resins are rather
        expensive non-hazardous speciality chemical products, with low unit transport costs.
        These elements could point towards a potential global market for such products. The
        market investigation did not provide any indications pointing towards either
        plausible alternative potential geographic market definitions (i.e. EEA-wide or
        worldwide) for special bisphenols for polycarbonate resins.
(25)    In any event, for the purpose of assessing the Transaction, the exact scope of the
        geographic market definition can be left open since the above-mentioned plausible
        alternative geographic market definitions (EEA-wide or worldwide), do not affect
        the outcome of the competitive assessment of the Transaction as to its compatibility
        with the internal market or the functioning of the EEA Agreement.
13  Form CO, paragraph 6.41
14  Form CO, paragraphs 6.64 and 6.65
                                                   6
 ---pagebreak--- 4.2.2. 4,4’ biphenol
(26)    4,4’ biphenol is an organic compound and is a derivative of biphenyl, which is used
        to produce liquid crystal polymers (a key raw material in components for computers
        and electronic devices) and polyphenylsulfone (a polymer used in medical
        equipment and plumbing systems).
4.2.2.1. Product market definition
(27)    The Commission has not yet considered the market for 4,4’ biphenol.
(28)    The Notifying Parties consider that 4,4’ biphenol forms part of a market which does
        not include other biphenols such as 2,2’ biphenol, due the differences of specific
        properties, characteristics (such as melting temperature) and uses of the two
        products, as well as the necessity to manufacture 4,4’ biphenol on specific
        equipment.15 In any case, if a wider market definition for biphenol were to be
        considered, the combined market shares of the Parties would be lower.
(29)    The Commission observes that 4,4’ biphenol is not substitutable from either a
        demand-side or a supply side with any other chemical product (such as e.g. 2,2’
        biphenol). In addition, there is no further differentiation based on grade, application,
        quality or concentration within 4,4’ biphenol products. The market investigation did
        not provide any indication that the relevant product market should be defined as
        being narrower or broader than 4,4 biphenol.
(30)    As a result, the Commission considers that, for the purpose of this decision,
        4,4 biphenol constitutes a relevant product market.
4.2.2.2. Geographic market definition
(31)    The Commission has not yet considered the market for 4,4’ biphenol.
(32)    The Notifying Parties submit that the geographic market for 4,4’ biphenol is global
        given that: (i) suppliers are active globally from a limited number of production
        facilities, and in particular the United States of America and India; (ii) customers in
        the EEA are regularly supplied from facilities outside of the EEA in various
        locations around the world; and (iii) there are no regulatory or other barriers
        preventing a new or existing supplier located outside the EEA from supplying
        customers located within the EEA.16
(33)    The Commission notes that 4,4’ biphenol is a non-hazardous speciality chemical
        products, that is actively traded around the world. There are tariffs applied to imports
        of 4,4’ biphenol from outside the EEA, nonetheless, these represent only 5.5% of the
        sale price, and these tariffs do not apply to Japanese suppliers, as a result of the EU-
        Japan trade agreements. These elements could point towards a potential global
        market for 4,4’ biphenol. The market investigation did not provide any indications
        pointing towards either plausible alternative potential geographic market definition
        (i.e. EEA-wide or worldwide) for 4,4 biphenol.
(34)    In any event, for the purpose of assessing the Transaction, the exact scope of the
        geographic market definition can be left open since the above-mentioned plausible
15  Form CO, paragraphs 6.47 and 6.48
16  Form CO, paragraph 6.67
                                                   7
 ---pagebreak---         alternative geographic market definitions (EEA-wide or worldwide), do not affect
        the outcome of the competitive assessment of the Transaction as to its compatibility
        with the internal market or the functioning of the EEA Agreement.
4.2.3. Methyl isobutyl ketone (“MIBK”)
(35)    MIBK is an organic solvent used among other in paints, coatings, adhesives, in the
        production of tires as well as in the pharmaceutical industry as an extraction
        material.
4.2.3.1. Product market definition
(36)    The Commission has not yet considered the market for MIBK.
(37)    The Notifying Parties submit that MIBK should be considered as one single product
        market, due to the absence of alternatives to MIBK in most applications. In addition,
        MIBK is generally manufactured in dedicated facilities that use a specialised
        equipment to this end.17
(38)    The Commission observes that MIBK is not substitutable from either a demand-side
        or a supply side with any other chemical product. In addition, there is no further
        differentiation based on grade, application, quality or concentration within MIBK.
        The market investigation did not provide any indication that the relevant product
        market should be defined as being narrower or broader than MIBK.
(39)    As a result, the Commission considers that, for the purpose of this decision, MIBK
        constitutes a relevant product market.
4.2.3.2. Geographic market definition
(40)    The Commission has not yet considered the market for MIBK.
(41)    The Notifying Parties submit that the geographic market for MIBK is at least EEA-
        wide.18
(42)    The Commission notes that (i) there are significant differences between EEA and
        non-EEA prices for MIBK, (ii) the transportation costs associated with importing
        MIBK into the EEA are significant (10-12%) and (iii) in addition, some tariffs
        (0-5%) may as well apply to imports of MIBK into the EEA. These elements could
        point towards a potential EEA-wide market for MIBK. The market investigation did
        not provide any indications pointing towards either plausible alternative potential
        geographic market definition (i.e. EEA-wide or worldwide) for MIBK. In any event,
        for the purpose of assessing the Transaction, the exact scope of the geographic
        market definition can be left open since the above-mentioned plausible alternative
        geographic market definitions (EEA-wide or worldwide), do not affect the outcome
        of the competitive assessment of the Transaction as to its compatibility with the
        internal market or the functioning of the EEA Agreement.
17  Form CO, paragraphs 6.58 and 6.59
18  Form CO, paragraph 6.71
                                                  8
 ---pagebreak--- 4.2.4. Acetone
(43)    Acetone is a widely used colourless solvent with a characteristic smell. It is also
        used as a raw ingredient in the manufacture of a wide variety of chemical products.
4.2.4.1. Product market definition
(44)    In previous decisions, the Commission identified a separate product market for
        acetone.19
(45)    The Notifying Parties agree with the Commission’s view regarding the market
        definition for acetone.20
(46)    The Commission observes that acetone is not substitutable from either a demand-
        side or a supply side with any other chemical product. In addition, acetone is a
        uniform chemical product, which does not have different grades. The market
        investigation did not provide any element suggesting that the Commission should
        depart from its past decisional practice with respect to the relevant product market
        definition for acetone.
(47)    As a result, the Commission considers that, for the purpose of this decision, acetone
        constitutes a relevant product market.
4.2.4.2. Geographic market definition
(48)    In previous decisions, the Commission considered the geographic market for acetone
        to be EU-wide.21
(49)    The Notifying Parties submit that the geographic market for acetone is at least EEA-
        wide.22
(50)    The Commission notes that (i) the transportation costs associated with importing
        acetone into the EEA are significant (up to 20%) and (ii) in addition some tariffs
        (0-6%) may as well apply to imports of acetone into the EEA. These elements could
        point towards a potential EEA-wide market for acetone. The market investigation
        did not provide any element suggesting that the Commission should depart from its
        past decisional practice with respect to the relevant geographic market for acetone.
(51)    In any event, for the purpose of assessing the Transaction, the exact scope of the
        geographic market definition can be left open since the above-mentioned plausible
        alternative geographic market definitions (EEA-wide or EU-wide), do not affect the
        outcome of the competitive assessment of the Transaction as to its compatibility
        with the internal market or the functioning of the EEA Agreement.23
19  See Cases M.3024 – Bain Capital / Rhodia, decision of 19 December 2002; M.5712 – Mitsubishi
    Chemical Holdings / Mitsubishi Rayon Co, decision of 25 February 2010; and Case M.6171 – IPIC /
    CEPSA, decision of 5 July 2011.
20  Form CO, paragraph 6.52
21  See Cases M.3024 – Bain Capital / Rhodia, decision of 19 December 2002; M.5712 – Mitsubishi
    Chemical Holdings / Mitsubishi Rayon Co, decision of 25 February 2010; and Case M.6171 – IPIC /
    CEPSA, decision of 5 July 2011.
22  Form CO, paragraph 6.68
23  The Commission notes that the Notifying Parties have only provided EEA market shares (instead of EU
    market shares) for acetone. Nonetheless, the Notifying Parties confirmed that their market shares for
                                                       9
 ---pagebreak--- 4.2.5. Methanol
(52)    Methanol is a liquid petrochemical derived (amongst other processes) from natural
        gas and used in the production of resins for building materials and engineering
        plastics; as well as in fuel applications, in particular the production of unleaded
        gasoline.
4.2.5.1. Product market definition
(53)    In previous decisions, the Commission identified a separate product market for
        methanol.24
(54)    The Notifying Parties agree with agree with the Commission’s view regarding the
        market definition for methanol.25
(55)    The Commission observes that methanol is not substitutable from either a demand-
        side or a supply side with any other chemical product. In addition, methanol is a
        uniform chemical product, which does not have different grades. The market
        investigation did not provide any element suggesting that the Commission should
        depart from its past decisional practice with respect to the relevant product market
        definition for methanol.
(56)    As a result, the Commission considers that, for the purpose of this decision,
        methanol constitutes a relevant product market.
4.2.5.2. Geographic market definition
(57)    In previous decisions, the Commission considered that, although methanol is
        internationally traded as a commodity (as it can be profitably transported over long
        distances) the market is not worldwide in scope as conditions of competition vary
        between the three main demand areas of the world (Western Europe, North America
        and Asia), principally due to differences in demand patterns and significant import
        duties in each region.26
(58)    The Notifying Parties submit that the geographic market for methanol is EEA-
        wide.27
(59)    The Commission notes that (i) the transportation costs associated with importing
        methanol into the EEA are significant (up to 20%) and (ii) in addition some tariffs
        (0-5.5%) may as well apply to imports of methanol into the EEA. These elements
        would point towards a potential EEA-wide market for methanol. The market
        investigation did not provide any element suggesting that the Commission should
        depart from its past decisional practice with respect to the relevant geographic
        market for methanol.
    acetone (both volume-based and value-based) at EU level would not differ substantially from their market
    shares for acetone at the EEA level.
24  See Cases M.331 – Fletcher Challenge / Methanex, decision of 31 March 1993; M. 1813 – Industri
    Kapital/(Nordkem)/Dyno, decision of 12.07.2017; and M.4737 – SABIC / GE Plastics, decision of
    2 August 2017.
25  Form CO, paragraph 6.55
26  See Cases M.331 – Fletcher Challenge / Methanex, decision of 31 March 1993; M. 1813 – Industri
    Kapital/(Nordkem)/Dyno, decision of 12.07.2017; and M.4737 – SABIC / GE Plastics, decision of
    2 August 2017.
27  Form CO, paragraph 6.70
                                                       10
 ---pagebreak--- (60)     As a result, the Commission considers that, for the purpose of this decision, the
         market for methanol is EEA-wide.
5.       COMPETITIVE ASSESSMENT
5.1.     Overview of affected markets
(61)     The Transaction does not give rise to any horizontally affected markets. However,
         the Transaction gives rise to the creation of four affected vertical links, as
         summarised in Table 2 below:28
         Table 2: Vertically affected markets
   Upstream products           Downstream product           Reason why the link is vertically affected
   Acetone                     Special bisphenols Affected downstream, because Honshu
   MIBK”                       for     polycarbonate Chemical’s estimated market share in the
   Methanol                    resins                       sale of special bisphenol for polycarbonate
                                                            resins is approximately [30-40]% at
                                                            worldwide level and [60-70]% at EEA level
   Methanol                    4,4’ biphenol                Affected downstream, because Honshu
                                                            Chemical’s estimated market share in the
                                                            sale of 4,4’ biphenol is approximately [50-
                                                            60]% at EEA level
(62)     Only Honshu Chemical is active in the supply of special bisphenols for
         polycarbonate resins and 4,4’ biphenol, with market shares above 30% at either
         worldwide or EEA level. As regards the upstream products (namely acetone,
         methanol and MIBK), these are sold by both Notifying Parties, but not by Honshu
         Chemicals. The Notifying Parties’ market share in the supply of the upstream
         products are very limited. The Parties’ and their competitors’ market shares in the
         supply of special bisphenols for polycarbonate resins, 4,4’ biphenol, MIBK, acetone
         and methanol are presented below in Tables 3 to 7 respectively.
28  In addition to the four affected vertical links described in this table, the Commission notes that:
    (i) both Mitsui Bussan and Mitsui Chemicals are active in the sale of caustic soda, which is also an input
    for the manufacture of special bisphenol for polycarbonate resins as well as of 4,4’ biphenol. However,
    none of them supplies caustic soda in the EEA. While the Commission has consistently held that the
    relevant geographic market for caustic soda was the EEA, in case M.9756 – Nouryon/CP Kelco, the
    Commission also envisaged the possibility that the relevant geographic market for caustic soda could be
    worldwide in scope. While the market investigation in that case seems to exclude this possibility, the
    Commission ultimately left the geographic market definition open. At any rate, no risks of customer or
    input foreclosure arise as a result of Honshu Chemical’ strong position in the supply of the relevant
    downstream products, as Honshu Chemical’s purchase shares for caustic soda would be less than [0-5]%
    at both EEA and global level.
    (ii) Honshu Chemical is also active in the sale of additives for photoresists for g/i-Line (“APG”).
    However, Honshu Chemical has no sales of this product in the EEA, and the Notifying Parties claim that
    there are no customers for this product in the EEA. The Notifying Parties also confirmed that “they do not
    believe that Honshu Chemical’s shares are likely to exceed 30% on a worldwide basis”. Nonetheless,
    even if this were to be the case, the Notifying Parties confirmed that (a) the Parties’ market shares in the
    supply of all relevant inputs for the manufacture of APG would remain below [0-5]% and (b) Honshu
    Chemical’s purchase shares for each of these products would be less than [0-5]%. As a result, no risk of
    either input or customer foreclosure would arise even if Honshu Chemical had a strong position in the
    supply of APG.
                                                            11
 ---pagebreak--- Table 3: Market share estimates for the supply of special bisphenol for polycarbonate
resins, 2019
                                                    Worldwide                               EEA
                Supplier
                                      Volume shares           Value shares    Volume shares      Value shares
         Honshu Chemical                 [30-40]%               <[30-40]%       [60-70]%          <[60-70]%
         Rheine Chemie                     0 – 5%              Not provided      [0-5]%          Not provided
         Deepack Nitrite                 [10-20]%              Not provided     [30-40]%         Not provided
         Taoka Chemical Co.,
                                         [30-40]%              Not provided         -            Not provided
         Ltd
         Others                           5 – 10%              Not provided         -            Not provided
         Total                              100%                    100%          100%               100%
       Source: Notifying Parties’ estimates
Table 4: Market share estimates for the supply of 4,4’ biphenol, 2019
                                                    Worldwide                               EEA
                Supplier
                                      Volume shares           Value shares    Volume shares      Value shares
         Honshu Chemical                 [20-30]%               <[20-30]%       [50-60]%          <[50-60]%
         SI Group, Inc.                  [50-60]%              Not provided     [30-40]%         Not provided
         Others                          [20-30]%              Not provided     [20-30]%         Not provided
         Total                              100%                    100%          100%               100%
       Source: Notifying Parties’ estimates
Table 5: Market share estimates for the supply of MIBK, 2019
                                                    Worldwide                               EEA
                Supplier
                                      Volume shares           Value shares    Volume shares      Value shares
         Mitsui Chemicals                 [5-10]%                 [5-10]%        [0-5]%             [0-5]%
         Mitsui Bussan                     [0-5]%                 [5-10]%        [0-5]%             [0-5]%
         Combined                        [10-20]%                [10-20]%        [0-5]%             [0-5]%
         Shell       Netherlands
                                       Not provided            Not provided     [40-50]%           [30-40]%
         Chemie BV
         Arkema Group                  Not provided            Not provided     [10-20]%           [10-20]%
         Others                        Not provided            Not provided     [30-40]%           [60-70]%
         Total                              100%                    100%          100%               100%
       Source: Notifying Parties’ estimates
Table 6: Market share estimates for the supply of acetone, 2019
                                                    Worldwide
                Supplier            (for illustration, not a relevant market)              EEA29
                                      Volume shares           Value shares    Volume shares      Value shares
         Mitsui Chemicals                  [0-5]%                  [0-5]%           -                  -
         Mitsui Bussan                     [0-5]%                  [0-5]%        [0-5]%             [0-5]%
         Combined                          [0-5]%                  [0-5]%        [0-5]%             [0-5]%
         INEOS Phenol GmbH               [10-20]%                [10-20]%       [60-70]%           50 – 60%
         Cepsa           Química
                                       Not provided            Not provided     [20-30]%           10 – 20%
         Bécancour
         Versalis S.p.A.               Not provided            Not provided     [10-20]%           10 – 20%
         Total                              100%                    100%          100%               100%
       Source: Notifying Parties’ estimates
29  The Notifying Parties have only provided EEA market shares (instead of EU market shares) for acetone.
    Nonetheless, the Notifying Parties confirmed that their market shares for acetone (both volume-based and
    value-based) at EU level would not differ substantially from their market shares for acetone at the EEA
    level.
                                                                 12
 ---pagebreak--- Table 7: Market share estimates for the supply of methanol, 2019
                                                   Worldwide
                                                                                           EEA
               Supplier            (for illustration, not a relevant market)
                                     Volume shares           Value shares    Volume shares     Value shares
        Mitsui Chemicals                  [0-5]%                 [0-5]%             -                -
        Mitsui Bussan                     [0-5]%                 [0-5]%         [0-5]%           [0-5]%
        Combined                          [0-5]%                 [0-5]%         [0-5]%           [0-5]%
        Methanex corporation             [5-10]%                [10-20]%       [20-30]%         [20-30]%
        Oman          Methanol
                                      Not provided            Not provided       0 - 5%           0 - 5%
        Company LCC
        OCI Beaumont LCC              Not provided            Not provided       0 - 5%           0 - 5%
        Others                          [80-90]%                [70-80]%       65 – 80%         65 – 80%
        Total                              100%                   100%           100%             100%
      Source: Notifying Parties’ estimates
5.2.    Vertical link between acetone, methanol or MIBK (upstream) and special
        bisphenol for polycarbonate resins (downstream)
5.2.1. The Notifying Parties’ view
(63)    As regards potential input foreclosure concerns, the Notifying Parties point to their
        very low combined market shares30 in the three upstream markets of acetone,
        methanol and MIBK, as well as to the presence in each of these markets of a large
        number of alternative suppliers (with market shares higher than those of the
        Notifying Parties, see Tables 5 – 7 above).
(64)    Therefore, the Notifying Parties conclude that the merged entity would not have the
        ability to engage in a customer foreclosure strategy.
(65)    The Notifying Parties also stress that they would have no incentive to engage in a
        customer foreclosure strategy, i.e. to reduce or restrict sales of upstream inputs of
        acetone, methanol and MIBK to Honshu’s downstream, competitors since these
        downstream competitors would simply source the relevant inputs from one of the
        many strong competitors of the Notifying Parties in the relevant upstream markets.
(66)    These upstream competitors of the Notifying Parties are collectively responsible for
        more than [90-100]% of the supply in each of the upstream markets, and would
        easily have sufficient capacity to supply all downstream manufacturers of special
        bisphenol for polycarbonate resins in the event of any attempted foreclosure by the
        Notifying Parties. As a result, any potential input foreclosure strategy would have
        the only effect of causing losses to the Notifying Parties upstream, and there would
        be no subsequent increase in sales by Honshu Chemical downstream, since Honshu
        Chemical’s competitors would be able to easily source their upstream inputs from
        the Notifying Parties’ upstream competitors.31
(67)    These facts, according to the Notifying Parties, are such that the combined entity
        will have neither the ability, nor the incentive to engage in any input foreclosure
        strategy following the Transaction, since Honshu Chemical’s competitors in the
        supply of special bisphenol for polycarbonate resins will have the possibility to
        source the upstream inputs from any of the Notifying Parties’ many competitors in
30  Form CO, paragraphs 6.96 to 6.101.
31  Notifying Parties’ response to the Commission’s RFI7, paragraphs 1.2 to 1.5
                                                                13
 ---pagebreak---        the upstream markets. These upstream competitors are collectively responsible for
       more than [90-100]% of the supply in each of the upstream markets.
(68)   As regards potential customer foreclosure concerns,32 the Notifying Parties observe
       that the entirety of Honshu’s supplies of acetone, methanol and MIBK, [Current
       production and procurement strategy], is sourced [Current production and
       procurement strategy]. Moreover, Honshu Chemical sources [Current production
       and procurement strategy], which means that there can be no customer foreclosure as
       a result of the Transaction with respect to MIBK.
(69)   Finally, for each of acetone, methanol and MIBK, Honshu Chemical accounts for
       less than [0-5]% of the purchasing market for the relevant upstream inputs globally
       and in the EEA, as all three of these products are also used for the manufacture of
       many other products, distinct from special bisphenol for polycarbonate resins.
       Therefore, there are numerous other potential purchasers of these inputs other than
       Honshu Chemical.
(70)   Therefore, the Notifying Parties conclude that the merged entity would not have the
       ability to engage in a customer foreclosure strategy.
(71)   The Notifying Parties also stress that they would have no incentive to engage in a
       customer foreclosure strategy. If Honshu Chemical were to reduce its purchases of
       the relevant upstream inputs from the Notifying Parties’ competitors, given Honshu
       Chemical’s de minimis share of purchases, there would be no effect on the upstream
       competitors’ competitive viability or profitability; they would simply supply their
       products to the many other available customers representing over [90-100]% of the
       share of purchases.
(72)   The Notifying Parties conclude that the only consequence of any customer
       foreclosure attempt from their side would be to limit Honshu Chemical’s potential
       sources of supply for the upstream inputs. This restriction on Honshu Chemical’s
       procurement abilities would be likely to increase Honshu Chemical’s costs and so
       decrease profitability, without generating any subsequent gains for the Notifying
       Parties at upstream level.33
(73)   As regards the definition of potential narrower markets for each individual type of
       special bisphenol for polycarbonate resins (e.g. BisPEO-FL), the Notifying Parties
       state that Honshu Chemical’s market share in the supply of special bisphenol for
       polycarbonate resins overall is “likely to be broadly representative” of its shares
       with respect to the individual special bisphenol for polycarbonate resins that it
       supplies.34 However, the Notifying Parties submit that there is no available data that
       could allow to estimate Honshu Chemical’s shares of individual special bisphenol
       for polycarbonate resins. The Notifying Parties observe as well that the relevant
       upstream products are homogeneous, indistinguishable products, which Honshu
       Chemical purchases [Current procurement strategy] for use in the manufacture of
       special bisphenols as well as several other products.35
32 Form CO, paragraphs 6.102 to 6.106.
33 Notifying Parties’ response to the Commission’s RFI7, paragraphs 1.8 to 1.13
34 Form CO, paragraph 6.88
35 Form CO, paragraph 6.41
                                                      14
 ---pagebreak--- (74)   Consequently, according to the Notifying Parties, there is no prospect of customer
       foreclosure with respect to any of the input products required to manufacture any
       special bisphenol for polycarbonate resins.
5.2.2. The Commission’s assessment
(75)   The Commission considers that none of the three vertical relationships in question
       would give rise to input foreclosure concerns, (i) for lack of ability, in light of the
       Parties’ limited market shares upstream in the supply of acetone, methanol and
       MIBK, as well as the presence of a large number of alternative suppliers for each of
       these inputs, and (ii) for lack of incentives, given that, in the absence of ability, such
       an input foreclosure strategy would only lead to a reduction of the combined entity’s
       profitability as a consequence of lost sales in the upstream market with no sales
       increase in the downstream market.
(76)   Given that the combined entity would not have the ability or the incentives to engage
       in an input foreclosure strategy, it is not necessary for the Commission to assess the
       potential impact of such a foreclosure strategy on effective competition.
(77)   For the reasons outlined below, the Commission considers as well that the
       Transaction does not give rise to any customer foreclosure concerns.
(78)   The Commission considers that the combined entity would not have the ability to
       engage in customer foreclosure strategies, in light of the fact that acetone, methanol
       and MIBK are very common chemicals, each one of them having a number of uses
       other than the manufacture of special bisphenol for polycarbonate resins. Honshu
       Chemical’s purchase shares for each of these products would be less than [0-5]% at
       both EEA and global level, such that the upstream rivals of the Notifying Parties will
       continue to have access to over [90-100]% of the worldwide and EEA customer
       bases for acetone, methanol and MIBK post-Transaction. In addition, as regards
       MIBK specifically, the Commission notes that Honshu Chemical already sources the
       [Current procurement strategy], so that there are [Current production and
       procurement strategy] to foreclose in that respect.
(79)   Concerning the Notifying Parties’ incentive to engage in a customer foreclosure
       strategy, the Commission concludes that the combined entity would have no
       incentive to pursue a customer foreclosure strategy since this would not lead to an
       increase in profitability in either the upstream or downstream markets, and would
       rather likely lead to a decrease in the overall profitability of the merged entity as a
       result of a reduction in available sources of supply for Honshu Chemical.
(80)   Given that the combined entity would not have the ability or the incentives to engage
       in a customer foreclosure strategy, it is not necessary for the Commission to assess
       the potential impact of such a foreclosure strategy on effective competition.
(81)   The Commission observes that this analysis would not change in the event that
       potential alternative market definitions were considered for special bisphenols for
       polycarbonate resins, namely:
       (a)     as regards a hypothetical broader market for the supply of all special
               bisphenols, the Notifying Parties estimate that Honshu Chemical’s market
               share would also be no higher than [30-40]% at worldwide level, and circa
               50-60% at EEA level. Notably, Honshu Chemical does not supply special
               bisphenols other than special bisphenols for polycarbonate resins in the EEA.
                                                  15
 ---pagebreak---                 The relevant affected upstream markets for all special bisphenols, are the
                same as for the narrower sub-segment of special bisphenols for polycarbonate
                resins. As a result, no customer foreclosure concerns arise, because the
                combined entity would not have the ability to engage in customer foreclosure
                strategies, in the same fashion as described above (see paragraph (78)). Same
                as above (see paragraph (79)), the combined entity would also have no
                incentive to engage in a customer foreclosure strategy, since the overall
                financial impact of such a customer foreclosure strategy would be detrimental
                to it. Same as above (see paragraph (80)), given that the combined entity
                would not have the ability or the incentives to engage in a customer
                foreclosure strategy, it is not necessary for the Commission to assess the
                potential impact of such a foreclosure strategy on effective competition.
       (b)      as regards the definition of potential narrower markets for each individual
                type of special bisphenol for polycarbonate resins (e.g. BisPEO-FL), as
                mentioned above, the Notifying Parties state that Honshu Chemical’s market
                share in the supply of special bisphenol for polycarbonate resins overall is
                “likely to be broadly representative”36 of its shares with respect to the
                individual special bisphenol for polycarbonate resins that it supplies. In any
                event, as Honshu Chemical’s purchase shares for each of the relevant
                upstream product would be less than [0-5]% at both EEA and global level,
                and as these upstream products are homogeneous, indistinguishable products,
                which Honshu Chemical purchases [Current procurement strategy] for use in
                the manufacture of special bisphenols as well as several other products,
                customer foreclosure concerns can be excluded, for lack of ability,
                irrespective of the precise segmentation of the downstream products and
                irrespective of Honshu Chemical’s precise market share in any potential
                downstream sub-market (see paragraph (78)(77)). Same as above (see
                paragraph(79)), customer foreclosure concerns can be excluded, for lack of
                incentive, since the overall financial impact of such a customer foreclosure
                strategy would be detrimental to it. Same as above (see paragraph (80)),
                given that the combined entity would not have the ability or the incentives to
                engage in a customer foreclosure strategy, it is not necessary for the
                Commission to assess the potential impact of such a foreclosure strategy on
                effective competition.
(82)    In light of the above, the Commission considers that the Transaction does not raise
        serious doubts as to its compatibility with the internal market or the functioning of
        the EEA Agreement in relation to the vertical link between acetone, methanol or
        MIBK (upstream) and special bisphenol for polycarbonate resins (downstream),
        under any plausible geographic market definition.
5.3.   Vertical link between methanol (upstream) and 4,4’ biphenol (downstream)
5.3.1. The Notifying Parties’ views
(83)    As regards potential input foreclosure concerns, the Notifying Parties underline that
        their combined share in the supply of methanol (which is an input for the
        manufacturing of 4,4’ biphenol) is extremely low (below [0-5]% in the EEA and
36  Form CO, paragraph 6.88
                                                   16
 ---pagebreak---        worldwide, see table 7). The presence of many other suppliers competing with the
       Notifying Parties for the supply of methanol is such that any input foreclosure
       strategy they might attempt to engage in will not succeed.37
(84)   Therefore, the Notifying Parties conclude that the merged entity would not have the
       ability to engage in a customer foreclosure strategy.
(85)   The Notifying Parties also stress that they would not have the incentive to engage in
       a potential input foreclosure strategy. The Notifying Parties have a de minimis share
       (<[0-5]%) in the EEA with respect to the supply of methanol. Their competitors
       upstream are collectively responsible for more than [90-100]% of the supply of
       methanol (which is a commodity product used across a variety of applications) and
       would easily have sufficient capacity to supply all downstream manufacturers of
       4,4’ biphenol in the event of any attempted foreclosure by the Notifying Parties. No
       manufacturer of 4,4’ biphenol is reliant on the Notifying Parties with respect to their
       supply of methanol.
(86)   The Notifying Parties conclude that the only consequence of any input foreclosure
       attempt on their side would be a loss of sales for them upstream. These losses would
       not be compensated by any subsequent increase in sales of 4,4’ biphenol by Honshu
       Chemical downstream, since Honshu Chemical’s competitors would be able to
       easily source their methanol requirements from the Notifying Parties’ competitors.38
(87)   As regards potential customer foreclosure concerns,39 the Notifying Parties argue
       once again that Honshu Chemical’s total share of purchase of methanol is less than
       [0-5]%.40 Moreover, methanol is used for many other uses apart from the
       manufacture of 4,4’ biphenol.
(88)   Therefore, the Notifying Parties conclude that the merged entity would not have the
       ability to engage in a customer foreclosure strategy.
(89)   The Notifying Parties also stress that they would have no incentive to engage in a
       customer foreclosure strategy. If Honshu Chemical were to reduce its purchases of
       methanol from the Notifying Parties’ competitors, given Honshu Chemical’s de
       minimis share of purchases, there would be no effect on the upstream competitors’
       competitive viability or profitability; they would simply supply their products to the
       many other available customers representing over [90-100]% of the share of
       purchases.
(90)   The Notifying Parties conclude that the only consequence of any customer
       foreclosure attempt from their side would be to limit Honshu Chemical’s potential
       sources of supply for the upstream inputs. This restriction on Honshu Chemical’s
       procurement abilities would be likely to increase Honshu Chemical’s costs and so
       decrease profitability, without generating any subsequent gains for the Notifying
       Parties at upstream level.41
37 Form CO, paragraphs 6.135 to 6.138
38 Notifying Parties’ response to the Commission’s RFI7, paragraphs 1.24 to 1.27
39 Form CO, paragraphs 6.139 to 6.145.
40 [90-100]% of which are made in Japan.
41 Notifying Parties’ response to the Commission’s RFI7, paragraphs 1.28 to 1.32
                                                      17
 ---pagebreak--- (91)   Therefore the Notifying Parties conclude that any customer foreclosure strategy
       attempted by the Notifying Parties will not be successful.
5.3.2. The Commission’s assessment
(92)   The Commission considers that this vertical relationship would give rise to no input
       foreclosure concerns, (i) for lack of ability, in light of the Parties’ limited market
       share upstream in, as well as the presence of a large number of alternative suppliers
       for, the supply of methanol, and (ii) for lack of incentive, since such a strategy would
       lead to a reduced profitability of the combined entity as a result of lost sales in the
       upstream market, which would not be compensated by any sales increase in the
       downstream market.
(93)   Given that the combined entity would not have the ability or the incentives to engage
       in an input foreclosure strategy, it is not necessary for the Commission to assess the
       potential impact of such a foreclosure strategy on effective competition.
(94)   For the reasons outlined below, the Commission considers as well that the
       Transaction does not give rise to any customer foreclosure concerns.
(95)   The Commission considers that the combined entity would not have the ability to
       engage in customer foreclosure strategies, in light of the fact that methanol is a very
       common chemical, which has a number of uses other than the manufacture of
       4,4’ biphenol. Honshu Chemical’s purchase shares would be less than [0-5]% in the
       EEA and global level, such that the Notifying Parties’ upstream rivals will continue
       to have access to over [90-100]% of the worldwide and EEA customer bases for
       methanol post-Transaction.
(96)   The Commission also considers that the Notifying Parties would have no incentive to
       pursue a customer foreclosure strategy since this would not lead to an increase in
       profitability in either the upstream or downstream markets, and would rather likely
       lead to a decrease in the overall profitability of the merged entity as a result of a
       reduction in available sources of supply for Honshu Chemical.
(97)   Given that the combined entity would not have the ability or the incentives to engage
       in a customer foreclosure strategy, it is not necessary for the Commission to assess
       the potential impact of such a foreclosure strategy on effective competition.
(98)   In light of the above, the Commission considers that the Transaction does not raise
       serious doubts as to its compatibility with the internal market or the functioning of
       the EEA Agreement in relation to the vertical link between methanol (upstream) and
       4,4’ biphenol (downstream), under any plausible geographic market definition.
5.4.   Conglomerate effects
(99)   The Commission considers that the Transaction does not raise serious doubtsas to its
       compatibility with the internal market or the functioning of the EEA Agreement in
       relation to potential conglomerate effects involving product sold by Honshu
       Chemical in the one hand and either of the Notifying Parties on the other hand.
                                                  18
 ---pagebreak--- 6.    CONCLUSION
(100) For the above reasons, the European Commission decides not to oppose the
      Transaction and to declare it compatible with the internal market and with the EEA
      Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger
      Regulation and Article 57 of the EEA Agreement.
                                                  For the Commission
                                                  (Signed)
                                                  Margrethe VESTAGER
                                                  Executive Vice-President
                                             19