CELEX: 32020M9736
Language: en
Date: 2020-07-27 00:00:00
Title: Commission Decision of 27/07/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9736 - LONE STAR / BASF CONSTRUCTION CHEMICALS (EB) BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 27.7.2020
                                                                 C(2020) 5239 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                                                                  information omitted has been replaced by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.
                                                                 To the notifying party
Subject:             Case M.9736 – Lone Star/BASF Construction Chemicals (EB) business
                     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 22 June 2020, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which LSF11
          Skyscraper Investments S.à r.l. (Luxembourg), an indirect subsidiary of Lone Star
          Fund XI, L.P. (“LSF XI”, Bermuda), and belonging to the global private equity
          group Lone Star Funds (“Lone Star”, USA) acquires within the meaning of Article
          3(1)(b) of the Merger Regulation control of the whole of BASF’s construction
          chemicals business (“BASF’s EB business”, Germany).3 Lone Star is referred to as
          “the Notifying Party” and, together with BASF’s EB business, as “the Parties”.
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 (“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”).
3     Publication in the Official Journal of the European Union No C 217, 1.7.2020, p. 18.
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--- 1.      THE PARTIES
(2)     Lone Star is a private equity firm that invests globally in real estate, equity, credit
        and other financial assets. Two of the companies controlled by Lone Star are of
        interest in the case at hand, namely Xella International S.A. (“Xella”, Germany) and
        Stark Group A/S (“Stark”, Denmark). Xella is a producer of autoclaved aerated
        concrete (“AAC”) products in the EEA. Stark is a building materials distributor in
        the Nordic countries and Germany.
(3)     BASF’s EB4 business produces and distributes admixture systems and construction
        systems for new constructions, maintenance, repair and renovation of residential and
        commercial buildings, as well as infrastructure. BASF’s EB business has two main
        lines of business, namely (i) EBA5, which is specialised in the manufacture of
        additives for concrete and other cementitious materials and (ii) EBC6, which
        produces concrete repair and protection systems, performance grouts, waterproofing
        systems, sealants, performance flooring systems, wall systems and coatings for
        mulch and wood fibres.
2.      THE OPERATION AND THE CONCENTRATION
(4)     On 21 December 2019, the Parties entered into a sales and purchase agreement
        pursuant to which BASF’s EB business will be transferred to the Notifying Party.
        The Transaction will be accomplished by way of purchase of shares.
(5)     Following completion of the Transaction, the Notifying Party will thus acquire sole
        control of BASF’s EB business. The Transaction is therefore a concentration within
        the meaning of Article 3(1)(b) of the EU Merger Regulation.
3.      EU DIMENSION
(6)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million (Lone Star: EUR […] million; BASF’s EB business:
        EUR […] million)7. Each of them has an EU-wide turnover in excess of EUR 250
        million (Lone Star: EUR […] million; BASF’s EB business: EUR […] million), but
        they do not achieve more than two-thirds of their aggregate EU-wide turnover within
        one and the same Member State. The notified operation therefore has a Union
        dimension.
4.      MARKET DEFINITIONS
4.1.    Introduction
(7)     BASF’s EB business is active in the manufacture of polymer-based concrete
        admixtures (through EBA), as well as mortars and several other specialty
        construction products (through EBC).
4   “E” is a BASF organisational code. “B” stands for “Bauchemie”.
5   “A” stands for “Admixtures”.
6   “C” stands for “Construction Systems”.
7   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                          2
 ---pagebreak--- (8)      Xella, one of the companies currently under the control of Lone Star, is active in the
         production of construction materials, and in particular the following products:
         (a)     autoclaved aerated concrete (“AAC”) blocks; which are a lightweight,
                 precast, foam concrete building material made of autoclaved aerated concrete
                 which can be lifted by hand and do not require equipment for handling;
         (b)     AAC large format prefabricated compound units; which are made of the
                 same material as AAC blocks, but require equipment such as cranes for
                 handling;
         (c)     Aerated concrete roofing panels, fire walls and outer walls; which are a sub-
                 category of AAC large format prefabricated compound units that are
                 specifically used for roofing, walls, as well as fire walls applications;
         (d)     Mineral insulation boards; which are niche insulation products suitable for
                 special types of applications;
         (e)      calcium silicate units (“CSU”); which are masonry product units made from
                 a mixture of lime and natural siliceous materials (sand, siliceous gravel or
                 rock or mixtures thereof);8
         (f)     Mortars.9
(9)      In this Decision, AAC large format prefabricated compound units will be referred to
         as “AAC large format units” for concision’s sake, and, together with AAC blocks as
         “AAC products”.
(10)     Xella’s activities were examined closely in three recent Commission decisions all
         related to Lone Star.10
(11)     Stark is active in the distribution of building products at retail level, to both
         professional and non-professional customers.
(12)     The Transaction gives thus rise to different horizontal and vertical overlaps between
         the activities of BASF’s EB business, Xella and Stark.
4.2.     Concrete admixtures
(13)     Concrete admixtures are used to modify the properties of concrete and to provide it
         with some specific qualities. Concrete admixtures include air entrainers, water
         reducers, accelerators, retardants as well as plasticisers.
8   Since concrete admixtures are not used in the manufacture of CSUs, CSUs are not vertically linked to any
    products manufactured by BASF’s EB business. As a result, CSUs will not be discussed further in this
    Decision.
9   Xella does not produce and market mortar as a stand-alone product, but only as part of complete solutions
    involving its aerated concrete products. Moreover, these mortars are specially adapted to the needs of
    Xella’s AAC blocks, CSUs and mineral insulation boards, and sold at a higher price than the
    commoditised types of mortars, which account for the majority of mortars sales. See Form CO, paragraph
    74.
10  M.9406 – Lone Star – Stark group / Saint-Gobain BDD; M.8733 – Lone Star/Stark; and M.8341 – Lone
    Star Fund/Xella International.
                                                        3
 ---pagebreak--- 4.2.1. Product market definition
4.2.1.1. Commission precedents
(14)    In the past,11 the Commission found that chemical-based and mineral-based
        admixtures constitute separate product markets.
(15)    The Commission excluded any further segmentation of chemical-based and mineral-
        based admixtures. In particular, the Commission excluded the relevance of a
        potential distinction between different uses of admixtures (such as concrete
        admixtures, cement admixtures or mortar admixtures) because of a high degree of
        supply side substitutability between the different chemical admixtures for those
        uses.12
4.2.1.2. The Notifying Party’s view
(16)    The Notifying Party points out that BASF’s EB business is only active in chemical-
        based (and in particular polymer-based) concrete admixtures, thus belonging to the
        wider market of chemical admixtures.13 None of the companies controlled by Lone
        Star is active in the manufacture of concrete admixtures.
(17)    The Notifying Party agrees with the Commission’s precedents, and provided
        BASF’s EB business’ market shares in the market of chemical-based admixtures.14
4.2.1.3. Results of the market investigation and conclusion
(18)    Admixture customers15 and competitors16 confirmed that chemical-based admixtures
        are not substitutable with other products and therefore constitute a distinct product
        market. Both admixture customers17 and competitors18 also confirmed that no further
        segmentation of chemical-based admixtures by use or sub-category is necessary. In
        light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that chemical-based admixtures constitute a separate product
        market, distinct from the market for mineral-based admixtures, and that no further
        segmentation is necessary.
11  See Cases M.7498 – Compagnie de Saint Gobain/Sika and M.4177 - BASF/Degussa Construction
    Chemicals.
12 See Cases M.7498 – Compagnie de Saint Gobain/Sika, recital 104
13  Form CO, paragraph 125
14  Form CO, paragraph 127
15  See replies to question 8 of Q1 – Questionnaire to admixtures customers.
16  See replies to question 6 of Q2 – Questionnaire to admixtures competitors and to question 7, Q4 -
    Questionnaire to admixtures customers active in mortars and sealants.
17  See replies to question 9 of Q1 – Questionnaire to admixtures customers.
18  See replies to question 7 of Q2 – Questionnaire to admixtures competitors and to question 8 of Q4 -
    Questionnaire to admixtures customers active in mortars and sealants.
                                                         4
 ---pagebreak--- 4.2.2. Geographic market definition
4.2.2.1. Commission precedents
(19)    In the past,19 the Commission has left open whether the relevant geographic market
        for concrete admixtures was EEA-wide or narrower, and has analysed competition
        on the basis of national markets as the narrowest plausible market definition.
4.2.2.2. The Notifying Party’s view
(20)    The Notifying Party does not express a view on the relevant geographic market for
        chemical-based admixtures, but provided BASF’s EB business’ market shares in
        chemical-based admixtures at national level.
4.2.2.3. Results of the market investigation and conclusion
(21)    Replies of admixture customers and competitors indicate that the market may be
        wider than national. Responding customers are somewhat split between a regional
        market (a cluster of neighbouring countries), an EEA-wide market, or even a
        worldwide market.20 The majority of responding competitors see the market as
        worldwide.21 Ultimately, the question of whether the appropriate geographic market
        definition is national, or wider (regional, EEA-wide or worldwide) can be left open,
        as the Commission considers that the Transaction does not raise serious doubts for
        either geographic market definition. In this decision, the Commission will carry out
        its assessment on a national market basis as the narrowest plausible geographic
        market definition, this being the most conservative approach, since BASF EB
        business’ market shares would be lower under any broader geographic market
        definitions for chemical-based admixtures.
4.3.    Mortars
4.3.1. Product market definition
4.3.1.1. Commission precedents
(22)    In the past, the Commission has made a distinction between premix mortars, which
        are mixed at the factory and on-site mortars, which are mixed on the construction
        site.22 Within premix mortars, the Commission has distinguished between dry
        mortars (supplied in a dry powder form), wet mortars (ready-mixed with water at the
        factory), and ready-to-use paste mortars (supplied as paste, including organic
        compounds as binders.23 Moreover, the Commission has also distinguished between
        mortars based on the application, namely: (i) construction mortars, used for various
        building construction purposes, such as casting and setting, masonry, plastering,
        floor levelling and concrete repair; (ii) façade mortars, used as an outer layer of
19  See Cases M.7498 – Compagnie de Saint Gobain/Sika and M.4177 - BASF/Degussa Construction
    Chemicals.
20  See replies to question 21a of Q1 – Questionnaire to admixtures customers.
21  See replies to question 8 of Q2 – Questionnaire to admixtures competitors.
22  See Cases M.9276 - Sika/Financière Dry Mix Solutions, M.7498 – Compagnie de Saint-Gobain/Sika,
    M.4898 – Compagnie de Saint-Gobain/Maxit and M.3572 – Cemex/RMC.
23  See Cases M.9276 - Sika/Financière Dry Mix Solutions, M.7498 – Compagnie de Saint-Gobain/Sika and
    M.4898 – Compagnie de Saint-Gobain/Maxit.
                                                          5
 ---pagebreak---         buildings for protective or aesthetic purposes, or as part of insulation systems and
        (iii) tile-fixing mortars used for fixing tiles, both on substrate (adhesive mortars) and
        as sealants between tiles (grouts).24
4.3.1.2. The Notifying Party’s view
(23)    The Notifying Party does not express a view on the relevant product market for
        mortars.
4.3.1.3. Results of the market investigation and conclusion
(24)    Replies in the market investigation of competitors25 active in mortars confirmed the
        relevance of the Commission’ precedents in this respect, as well as the absence of a
        need to further sub-segment the market.
(25)    The questions of whether the appropriate product market definition is mortars as a
        whole or whether separate product markets exist for any of the segmentations listed
        in paragraph (22), which were considered in previous decisions, can be left open, as
        the Commission finds that no serious doubts arise for any of the possible product
        market definitions.
4.3.2. Geographic market definition
4.3.2.1. Commission precedents
(26)    In the past, the Commission left the geographic market definition open and
        conducted the competitive assessment both at national and at local/regional levels,
        assuming a 120 km radius around the production plant.26 In its most recent
        decisional practice, the Commission has carried out its competitive assessment on
        the basis of national markets but, with regard to large volume/low value heavy
        mortars, it has also considered narrower hypothetical regional/local markets,
        assuming a 120 km radius around production plants.27
4.3.2.2. The Notifying Party’s view
(27)    The Notifying Party does not express a view on the relevant geographic market for
        mortars, but explains that the types of mortars sold by BASF’s EB business, as well
        as Xella, do not fall under the category of large volume/low value heavy mortars, for
        which the competitive assessment should be carried out on the basis of a 120 km
        radius around production plants, and consequently provide the Parties’ market shares
        for mortars at national level only.28
24  See Cases M.9276 - Sika/Financière Dry Mix Solutions, M.7498 – Compagnie de Saint-Gobain/Sika,
    M.7249 – CVC/Parexgroup and M.4898 – Compagnie de Saint-Gobain/Maxit.
25  See replies to questions 5-8 of Q3 – Questionnaire to mortars and sealants competitors and questions 9-
    12 of Q4 - Questionnaire to admixtures customers active in mortars and sealants.
26  See Cases M.7249 – CVC/Parexgroup, M.4898 – Compagnie de Saint-Gobain/Maxit, M.4719 –
    Heidelberg Cement/Hanson and M.1779 – Anglo American/Tarmac.
27  See Cases M.9276 - Sika/Financière Dry Mix Solutions and M.7498 – Compagnie de Saint-Gobain/Sika.
28  Form CO, paragraph 73
                                                         6
 ---pagebreak--- 4.3.2.3. Results of the market investigation and conclusion
(28)    The majority of the replies in the market investigation of competitors29 active in
        mortars showed that the geographic scope for these products would be national. In
        light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that the market for mortars other than large volume/low value
        heavy mortars (which are of no relevance in the case at hand) could be national in
        scope. In any event, the precise geographic market definition can be left open, as the
        Transaction does not raise serious doubts under any plausible market definition (see
        paragraphs (22) and (26) above).
4.4.    AAC blocks
4.4.1. Product market definition
4.4.1.1. Commission precedents
(29)    In the past, the Commission found that AAC blocks form a single relevant product
        market, which is not likely to comprise other products.30 No further sub-
        segmentation was considered.31
4.4.1.2. The Notifying Party’s view
(30)    The Notifying Party considers that the product market definition for AAC blocks
        should encompass other products, such as aggregate blocks and potentially also other
        wall-building materials, in particular bricks, sand-lime bricks/calcium silicate units
        and pumice blocks.32 The Notifying Party, however, considers that the exact product
        market can be left open.33
4.4.1.3. Results of the market investigation and conclusion
(31)    Responses of AAC competitors suggest that AAC blocks may be substitutable with
        some other products34 and could thus be part of a broader product market including
        those other products as well.35 AAC competitors also took the view that no further
        sub-segmentation of AAC blocks by type or category was necessary.36
(32)    In light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that the question of whether AAC blocks constitute a separate
        product market or are part of a wider market also encompassing products such as
29  See to replies to question 9 of Q3 - Questionnaire to admixtures competitors active in mortars and
    sealants and question 14 of Q4 - Questionnaire to admixtures customers active in mortars and sealants.
30  See Cases M.8341 – Lone Star Fund/Xella International; M.8733 – Lone Star/Stark and M.9406 – Lone
    Star – Stark group / Saint-Gobain BDD
31  See Cases M.8341 – Lone Star Fund/Xella International; M.8733 – Lone Star/Stark and M.9406 – Lone
    Star – Stark group / Saint-Gobain BDD
32  Form CO, paragraph 37
33  Form CO, paragraph 38
34  See replies to question 10 of Q1 – Questionnaire to admixtures customers.
35  See replies to question 10.1 of Q1 – Questionnaire to admixtures customers. Potential substitutes
    mentioned by respondents include “[…] Dense Concrete blocks, CSU, clay blocks and timber framed
    structures […]”; “[...] brick, sand-lime brick […]”; “[…] calcium silicate or clay bricks [...]”; “[…]
    clay bricks – ceramic, precast concrete elements, wood panels, etc […].”.
36  See replies to question 11 of Q1 – Questionnaire to admixtures customers.
                                                          7
 ---pagebreak---         clay bricks, clay blocks, aggregate blocks, dense concrete blocks, CSU and other
        building products can be left open, as the Commission considers that the Transaction
        does not raise competitive concerns under either product market definition. The
        Commission also considers that no further segmentation of AAC blocks is necessary.
        For the purposes of this decision, the Commission will carry out its assessment on
        the basis of a market restricted to AAC blocks only as the narrowest plausible
        product market definition, this being the most conservative approach, since Xella’s
        market shares would be lower under any broader product market definitions for
        AAC blocks
4.4.2. Geographic market definition
4.4.2.1. Commission precedents
(33)    In the past, the Commission found that the relevant geographic market for AAC
        blocks was local in scope and examined the market for AAC blocks in Germany
        under four separate regions (North Germany, West Germany, South Germany and
        East Germany).37
4.4.2.2. The Notifying Party’s view
(34)    The Notifying Party submits that the geographic market for AAC blocks is at least
        national in scope.38
4.4.2.3. Results of the market investigation and conclusion
(35)    Responses of AAC competitors took the view that the geographic scope of the AAC
        blocks market is narrower than national.39
(36)    Ultimately, the question whether the appropriate geographic market definition is
        national or local (smaller than national) can be left open, as the Commission
        considers that the Transaction does not raise serious doubts for either geographic
        market definition.
4.5.    AAC large format units and aerated concrete roofing panels, fire walls and
        outer walls
4.5.1. Product market definition
4.5.1.1. Commission precedents
(37)    AAC large format units and aerated concrete roofing panels, fire walls and outer
        walls were examined by the Commission in Case M.9406 – Lone Star – Stark group
        / Saint-Gobain BDD. In this case, the Commission found that aerated concrete
        roofing panels, fire walls and outer walls were part of the same market as AAC large
        format units. The Commission also found indications that AAC large format units
        for industrial construction are not substitutable with those for residential
37  See Cases M.8341 – Lone Star Fund/Xella International; M.8733 – Lone Star/Stark and M.9406 – Lone
    Star – Stark group / Saint-Gobain BDD
38  Form CO, paragraph 39
39  See replies to question 21 of Q1 – Questionnaire to admixtures customers.
                                                          8
 ---pagebreak---         construction. However, the Commission ultimately left the exact product definition
        for AAC large format prefabricated compound units open.
4.5.1.2. The Notifying Party’s view
(38)    The Notifying Party agrees that AAC large format units for industrial construction
        are not substitutable with those for residential construction, but considers that each
        of them form part of a broader product market. More specifically, the Notifying
        Party submits that AAC large format units for industrial construction form part of a
        market that also encompasses concrete panels and steel elements (but not elements
        made of in situ poured concrete which is not a usual method of producing panels for
        industrial buildings) and that AAC large format units for residential construction
        form part of a market that also encompasses concrete floor elements and full
        assembly floors out of reinforced concrete.40
4.5.1.3. Results of the market investigation and conclusion
(39)    Responses of AAC competitors indicate that AAC large format units are
        substitutable with some other products41 and could thus be part of a broader product
        market including those other products42 as well. They also replied that no further
        sub-segmentation of AAC large format units by type or category was necessary.43
(40)    Concerning aerated concrete roofing panels, firewalls and outer walls, AAC
        competitors confirmed that they are part of the market for AAC large format
        prefabricated compound units,44 and that no further-sub-segmentation would be
        necessary.45
(41)    In light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that the question of whether AAC large format units
        constitute a separate product market comprising aerated concrete roofing panels, fire
        walls and outer walls or are part of a wider market also encompassing products such
        as AAC blocks, prefabricated concrete panels or steel panels can be left open, as the
        Commission considers that the Transaction does not raise serious doubts under either
        product market definition. The Commission also considers that the question of
        whether a further sub-segmentation between AAC large format units for industrial
        construction and AAC large format units for residential construction is appropriate
        can be left open, as the Commission finds that the Transaction does not raise serious
        doubts under any product market definition set out above, this being the most
        conservative approach, since any wider product market definition for AAC large
        format units would lower Xella’s market shares.
40  Form CO, paragraphs 47 - 53
41  See replies to question 12 of Q1 – Questionnaire to admixtures customers.
42  See replies to question 12.1 of Q1 – Questionnaire to admixtures customers. Potential substitutes
    mentioned by respondents include AAC blocks, as well as prefabricated concrete or steel panels.
43  See replies to question 14 of Q1 – Questionnaire to admixtures customers.
44  See replies to question 13 of Q1 – Questionnaire to admixtures customers.
45  See replies to question 14 of Q1 – Questionnaire to admixtures customers.
                                                          9
 ---pagebreak--- 4.5.2. Geographic market definition
4.5.2.1. Commission precedents
(42)     In Case M.9406 – Lone Star – Stark group / Saint-Gobain BDD, the Commission
         left open whether the relevant geographic market for AAC large format units should
         be considered as local or national in scope.
4.5.2.2. The Notifying Party’s view
(43)     The Notifying Party submits that the relevant geographic market is national.46
4.5.2.3. Results of the market investigation and conclusion
(44)     Responses of AAC competitors in the market investigation confirmed that the
         geographic scope of the AAC large format prefabricated compound units, as well as
         for aerated concrete roofing panels, firewalls and outer walls markets are narrower
         than national. 47
(45)     Ultimately, the question whether the appropriate geographic market definition is
         national or local (smaller than national) can be left open, as the Commission
         considers that the Transaction does not raise serious doubts for either geographic
         market definition.
4.6.     Mineral insulation boards
4.6.1. Product market definition
4.6.1.1. Commission precedents
(46)     The product market definition for mineral insulation boards has not been examined
         in any Commission precedent so far.
4.6.1.2. The Notifying Party’s view
(47)     The Notifying Party considers that mineral insulation boards are part of a broader
         market encompassing other solution for interior and exterior insulation of buildings.
         The Notifying Party nonetheless explains that the exact product market definition for
         mineral insulation boards can be left open since Xella’s market shares would not
         exceed 20% under any plausible product or geographic market definition.48
4.6.1.3. Results of the market investigation and conclusion
(48)     Mineral insulation boards manufacturers indicated that mineral insulation boards are
         substitutable with some other insulation products49 and could thus be part of a
         broader product market including those other products50 as well. They also replied
46  Form CO, paragraphs 54 – 55
47  See replies to question 21 of Q1 – Questionnaire to admixtures customers.
48  Form CO, paragraph 59
49  See replies to question 12 of Q1 – Questionnaire to admixtures customers.
50  See replies to question 15.1 of Q1 – Questionnaire to admixtures customers. “Mineral wool insulation
    board can readily be replaced in many applications with various types of plastic foam insulation boards
    just as there are a number of other insulation products, like aerogel, cellulose, vacuum panels, natural
                                                         10
 ---pagebreak---         that no further sub-segmentation of mineral insulation boards by type or category
        was necessary.51
(49)    In light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that the question of whether mineral insulation boards
        constitute a separate product market or are part of a wider market also encompassing
        other insulation products can be left open, as the Commission considers that the
        Transaction does not raise serious doubts under either product market definition. The
        Commission also considers that no further segmentation of mineral insulation boards
        is necessary. In this decision, the Commission will carry out its assessment on the
        basis of a market restricted to mineral insulation boards only as the narrowest
        plausible product market definition, this being the most conservative approach (as
        indicated by the market investigation), since any wider product market definition for
        mineral insulation boards would lower Xella’s market shares.
4.6.2. Geographic market definition
4.6.2.1. Commission precedents
(50)    The geographic market definition for mineral insulation boards has not been
        examined in any Commission precedent so far.
4.6.2.2. The Notifying Party’s view
(51)    The Notifying Party believes that the relevant geographic market for mineral
        insulation boards is national in scope.52
4.6.2.3. Results of the market investigation and conclusion
(52)    Replies of mineral insulation boards manufacturers indicate that the geographic
        scope for mineral insulation boards is national, or even wider.53
(53)    In light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that the question whether the appropriate geographic market
        definition is national, or wider (regional or EEA-wide) can be left open, as the
        Commission considers that the Transaction does not raise serious doubts for either
        geographic market definition. In this decision, the Commission will carry out its
        assessment on a national market base as the narrowest plausible geographic market
        definition, this being the most conservative approach (as confirmed by the market
        investigation), since any wider geographic market definition, mineral insulation
        boards would lower Xella’s market shares.
    products like straw etc that in some applications can replace mineral wool insulation boards”; “Maybe
    other materials are possible, if the architect or the costomer prefer other insulation products.” ; “There
    are mineral insulation boards that can be substitutable with”.
51  See replies to question 16 of Q1 – Questionnaire to admixtures customers.
52  Form CO, paragraph 60.
53  See replies to question 21 of Q1 – Questionnaire to admixtures customers.
                                                          11
 ---pagebreak--- 4.7.    Distribution of building products
4.7.1. Product market definition
4.7.1.1. Commission precedents
(54)    In its previous decisions, the Commission considered that the markets for the
        distribution of building materials in general can be divided into: (i) wholesale sales
        to retailers; (ii) retail sales to professional customers (B2B); and (iii) retail sales to
        non-professional customers (primarily through DIY stores), but left the precise
        product market definition ultimately open.54
4.7.1.2. The Notifying Party’s view
(55)    The Notifying Party considers the above-mentioned product market segmentation to
        be conceivable, but nonetheless considers that it improperly reflects the real
        condition of the market. The Notifying Party considers in particular that distributors
        of construction materials do not keep track of their sales based on such a
        segmentation.55
4.7.1.3. Results of the market investigation and conclusion
(56)    Replies of distributors of building materials fully confirmed the Commission’s
        precedents regarding the product market definitions for the distribution of building
        products.56
(57)    Ultimately, the question of whether further sub-segmentation of the distribution of
        building material, between (i) wholesale sales to retailers; (ii) retail sales to
        professional customers (B2B); and (iii) retail sales to non-professional customers
        (primarily through DIY stores) is appropriate or not can be left open, as the
        Commission finds that the Transaction does not raise serious doubts under any
        product market definition set out above.
4.7.2. Geographic market definition
4.7.2.1. Commission precedents
(58)    The Commission has previously considered that the scope of the market for the
        distribution of building products as well as its potential sub-segments (retail sales to
        professional customers and retail sales to non-professional customers) is either
        national or potentially smaller than national.57
54  See Cases M.9406 – Lone Star – Stark group / Saint-Gobain BDD; M.7910 – Kesko/Onninen; M.7703 –
    PontMeyer/DBS; M.3407 – Saint Gobain/Dahl and M.3142 – CVC/Danske Traelast.
55  Form CO, paragraph 101.
56  See replies to questions 19 and 20 of Q1 – Questionnaire to admixtures customers.
57  See Cases M.9406 – Lone Star – Stark group / Saint-Gobain BDD and M.7910 – Kesko/ Onninen.
                                                        12
 ---pagebreak--- 4.7.2.2. The Notifying Party’s view
(59)     The Notifying Party submits that while the geographic market might exhibit both
         some national and some regional features, the vertical nature of this case would
         make it appropriate to consider these markets on a national basis only.58
4.7.2.3. Results of the market investigation and conclusion
(60)     Replies of distributors of building materials showed clearly that the market for the
         distribution of building products is narrower than national, both for professional and
         for retail customers.59
(61)     Ultimately, the question whether the appropriate geographic market definition is
         national or local (smaller than national) can be left open, as the Commission
         considers that the Transaction does not raise serious doubts for either geographic
         market definition.
5.       COMPETITIVE ASSESSMENT
5.1.     Overview of affected markets
(62)     The Transaction does not give rise to any horizontally affected markets.
(63)     The Transaction however gives rise to several affected vertical links, that can be
         classified under three main categories, namely
          (i) the vertical relationships between polymer-based concrete admixtures
               manufactured by EBA (upstream) and the manufacture and sales of various
               building and insulation materials (downstream) in 19 EEA countries (18
               Member States60 plus Norway) performed by Xella;
          (ii) the vertical relationships between polymer-based concrete admixtures
               manufactured by EBA (upstream) and the sales of building materials to
               professional and retail customers (downstream) in 4 EEA countries (three
               Member States61 plus Norway) performed by Stark; and
          (iii) the vertical relationships between mortars and several other specialty
               construction products manufactured by EBC (upstream) and the sale of building
               materials to professional and retail customers (downstream) in two EEA
               countries (Denmark and Norway) performed by Stark. Table 1 below
               summarises all these vertical links by category.
58  Form CO, paragraph 103
59  See replies to question 21 of Q1 – Questionnaire to admixtures customers.
60  Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary,
    Italy, Netherlands, Poland, Romania, Slovakia, Slovenia, Spain and Sweden
61  Denmark, Finland and Sweden
                                                         13
 ---pagebreak---       Table 1: vertically affected markets, sorted by category.
                                                                               Geographic
                                   Upstream product /  Downstream product          level       Geographic level
           Category
                                      supplied by            / supplied by       affected   affected downstream
                                                                                upstream
                                     Chemical-based
                                                                                          15 Member States +
                                   admixtures / BASF’s AAC62 blocks / Xella               Norway
Category 1:                           EB business
Vertical relationships between       Chemical-based
                                                          AAC large format                12 Member States +
polymer-based           concrete   admixtures / BASF’s                         Austria
                                                              units / Xella               Norway
admixtures manufactured by            EB business                              Czech
EBA (upstream) and the               Chemical-based                            Republic
                                                          Mineral insulation
manufacture and sales of           admixtures / BASF’s                         Denmark    None
                                                            boards / Xella
various building and insulation       EB business                              Norway
materials (downstream) in 19         Chemical-based                            Spain
                                                          Aerated concrete                12 Member States +
EEA countries (18 Member           admixtures / BASF’s                         Sweden
States plus Norway) performed                           roofing panels / Xella            Norway
                                      EB business
by Xella                             Chemical-based
                                   admixtures / BASF’s     Mortars / Xella                None
                                      EB business
Category 2:                                                                               At regional level in
Vertical relationships between                                                            Denmark and Norway, in
polymer-based           concrete                                                          the regions of Denmark
admixtures manufactured by                                                                capital    and      Central
EBA (upstream) and the sales                                                              Jutland, as well as
                                                            Distribution of
of building materials to             Chemical-based                                       Norway       Troms      og
                                                         building materials to
professional      and      retail  admixtures / BASF’s                                    Finnmark and Sogn og
                                                       professional customers
customers (downstream) in 4           EB business                                         Fjordane, and probably
                                                                 / Stark        Denmark
EEA countries (3 Member                                                                   also in Finland, where
                                                                                 Norway
States plus Norway) performed                                                             Stark holds a market share
                                                                                 Sweden
by Stark                                                                                  of [20-30]% at national
                                                                                          level (no regional market
                                                                                          shares provided)
                                                                                          At regional level in some
                                                            Distribution of
                                     Chemical-based                                       regions of Denmark and
                                                         building materials to
                                   admixtures / BASF’s                                    Norway, as well as
                                                       retail (DIY) customers
                                      EB business                                         Finland probably (see
                                                                 / Stark
                                                                                          above).
Category 3:                                                                               At regional level in some
                                                            Distribution of
Vertical relationships between                                                            regions of Denmark and
                                  Mortars / BASF’s EB    building materials to
mortars and several other                                                            -    Norway, as well as
                                        business       professional customers
specialty construction products                                                           Finland probably (see
                                                                 / Stark
manufactured       by      EBC                                                            above).
(upstream) and the sales of                                                               At regional level in some
                                                            Distribution of
building       materials       to                                                         regions of Denmark and
                                  Mortars / BASF’s EB    building materials to
professional      and      retail                                                    -    Norway, as well as
                                        business       retail (DIY) customers
customers (downstream) in 2                                                               Finland probably (see
                                                                 / Stark
EEA countries (Denmark and                                                                above).
Norway) performed by Stark                                                                At regional level in some
                                                            Distribution of
                                     Other products                                       regions of Denmark and
                                                         building materials to
                                  manufactured by EBC                                -    Norway, as well as
                                                       professional customers
                                  / BASF’s EB business                                    Finland probably (see
                                                                 / Stark
                                                                                          above).
                                                                                          At regional level in some
                                                            Distribution of
                                     Other products                                       regions of Denmark and
                                                         building materials to
                                  manufactured by EBC                                -    Norway, as well as
                                                       retail (DIY) customers
                                  / BASF’s EB business                                    Finland probably (see
                                                                 / Stark
                                                                                          above).
      62   Autoclaved aerated concrete.
                                                                  14
 ---pagebreak--- 5.2.    Framework of the competitive assessment of vertical links
(64)    The Commission’s Guidelines on the assessment of non-horizontal mergers under
        the Merger Regulation (the "Non-Horizontal Merger Guidelines") distinguish
        between two main ways in which vertical mergers may significantly impede
        effective competition, namely input foreclosure and customer foreclosure.63
(65)    For a merger to raise input foreclosure competition concerns, the merged entity must
        have a significant degree of market power upstream.64 In assessing the likelihood of
        an anticompetitive input foreclosure strategy, the Commission has to examine
        whether (i) the merged entity would have the ability to substantially foreclose access
        to inputs; (ii) whether it would have the incentive to do so; and (iii) whether a
        foreclosure strategy would have a significant detrimental effect on competition
        downstream.65
(66)    For a merger to raise customer foreclosure competition concerns, the merged entity
        must be an important customer with a significant degree of market power in the
        downstream market.66 In assessing the likelihood of an anticompetitive customer
        foreclosure strategy, the Commission has to examine whether (i) the merged entity
        would have the ability to foreclose access to downstream markets by reducing its
        purchases from its upstream rivals; (ii) whether it would have the incentive to do so;
        and (iii) whether a foreclosure strategy would have a significant detrimental effect
        on consumers in the downstream market.67
5.3.    Vertical relationships between polymer-based concrete admixtures (upstream)
        and the manufacture and sales of various building and insulation materials
        (downstream)
(67)    BASF’s EB business, through its EBA business, manufactures chemical-based
        admixtures. Some of these products (as well as the ones manufactured by BASF’s
        EB business upstream competitors) are used in the manufacture of several building
        and insulation materials manufactured by Xella.
(68)    This vertical link gives rise to markets that are affected upstream at national level in
        six EEA countries (Austria, Czech Republic, Denmark, Norway, Spain and Sweden)
        because BASF’s EB business’ market shares in the sale of chemical-based
        admixtures is above 30% in these countries, as well as markets that are affected
        downstream in 19 EEA countries68 for most products sold by Xella (AAC blocks,
63 OJ L 24, 29.1.2004, p. 1.
64 Non-horizontal Merger Guidelines, paragraph 35.
65 Non-horizontal Merger Guidelines, paragraph 32.
66 Non-horizontal Merger Guidelines, paragraph 61.
67  Non-horizontal Merger Guidelines, paragraph 59.
68  Austria, Belgium, Bulgaria, Croatia, Denmark, France, Germany, Hungary, Italy, Netherlands, Romania,
    Slovakia, Slovenia, Spain, Sweden and Norway for AAC blocks; Austria, Belgium, Czech Republic,
    Denmark, Finland, France, Germany, Hungary, Netherlands, Poland, Slovakia, Slovenia, Sweden and
    Norway, for AAC large format units and Austria, Czech Republic, Denmark, Norway, Spain, Sweden and
    Norway for mineral insulation boards.
                                                       15
 ---pagebreak---            AAC large format units and mineral insulation boards, but not for mortars), because
           Xella’s market shares are above 30% for these products.69
(69)       Table 2 below provides an overview of these vertical relationships. Countries where
           Xella has manufacturing plants for the manufacture of a given product are marked by
           an asterisk “*” at the end of the corresponding line. Market shares below the 30%
           threshold are marked with a “-“.
Table 2: overview of the vertical relationships between chemical-based admixtures
manufactured by EBA (upstream) and the manufacture and sales of various building and
insulation materials (downstream) (for 2019)
                         BASF’s EB                            Xella’s market
                          business’s                               shares         Xella’s market
                                           Xella’s market                                            Xella’s market
                        market share                         downstream for            shares
                                               shares                                                    shares
                      upstream in the                           AAC large        downstream for
Relevant                                  downstream for                                            downstream for
                           sales of                               format              mineral
geographic                                AAC blocks (on                                              mortars70 (on
                          chemical                             prefabricated         insulation
markets                                      the basis of                                              the basis of
                         admixtures                          compound units       boards (on the
                                           volume of sales                                           volume of sales
                       (on the basis of                       (on the basis of    basis of volume
                                                 m3)                                                       m3)
                        value of sales,                       volume of sales       of sales m3)
                            EUR)                                    m3)
Austria               [40-50]%            [90-100]%        * [90-100]%         * [40-50]%           below [20-30]%
Belgium               [0-5]%              [70-80]%         * [90-100]%         * [0-5]%             below [20-30]%
Bulgaria              [0-5]%              [80-90]%           [0-5]%              [0-5]%           * below [20-30]%
Croatia               [0-5]%              [60-70]%           [0-5]%              [0-5]%             below [20-30]%
Czech Republic        [30-40]%            [0-5]%           * [90-100]%         * [30-40]%           below [20-30]%
Denmark               [40-50]%            [50-60]%           [70-80]%            [40-50]%           below [20-30]%
Finland               [0-5]%              [0-5]%             [30-40]%            [0-5]%             below [20-30]%
France                [0-5]%              [60-70]%         * [90-100]%           [0-5]%             below [20-30]%
Germany               [0-5]%              [50-60]%         * [90-100]%         * [0-5]%           * below [20-30]%
Hungary               [0-5]%              [90-100]%        * [90-100]%           [0-5]%             below [20-30]% *
Italy                 [0-5]%              [50-60]%         * [0-5]%              [0-5]%             below [20-30]% *
Netherlands           [0-5]%              [80-90]%         * [90-100]%         * [0-5]%             below [20-30]%
Norway                [30-40]%            [80-90]%           [90-100]%           [30-40]%           below [20-30]%
Poland                [0-5]%              [0-5]%           * [50-60]%          * [0-5]%             below [20-30]%
Romania               [0-5]%              [30-40]%         * [0-5]%              [0-5]%             below [20-30]%
Slovakia              [0-5]%              [50-60]%         * [90-100]%           [0-5]%             below [20-30]%
Slovenia              [0-5]%              [90-100]%        * [90-100]%           [0-5]%             below [20-30]%
Spain                 [60-70]%            [80-90]%           [0-5]%              [60-70]%           below [20-30]%
Sweden                [40-50]%            [50-60]%           [90-100]%           [40-50]%           below [20-30]%
         Source: Notifying Party’s estimates
(70)       In addition, as regards a potential sub-segmentation of AAC large format
           prefabricated compound units between AAC large format prefabricated compound
           units for industrial construction and AAC large format prefabricated compound units
           for residential construction, the Notifying Party has provided the following separate
           market shares estimates for these potential downstream markets.
69    The Notifying Party did not provide market shares at sub-national level for AAC products. However, for
      the purposes of this case, when assessing the potential for customer foreclosure risks arising as a result of
      the vertical links between admixtures manufactured by EBA (upstream) and the manufacture and sales of
      AAC products (downstream), the Commission will analyse the downstream product market at national
      level. Even if the downstream products are considered at regional level and Xella constitutes the sole
      supplier in a particular region (which is already the case at national level in some countries, such as
      Slovenia for AAC large format prefabricated compound units), for the same reasons as at national level,
      the Transaction would not appear likely raise serious doubts as to its compatibility as a result of this
      vertical link (see assessment laid out in paragraphs (71) to (88)).
70    The Notifying Party confirmed that Xella’s market share downstream for mortars would remain below
      [20-30]% under any plausible product and geographic market definition.
                                                                16
 ---pagebreak--- Table 3: overview of Xella's market shares downstream for AAC large format prefabricated
compound units for industrial construction and AAC large format prefabricated compound
units for residential construction (market shares provided are in volume, m3, for 2019)
                                                 Xella’s market     Xella’s market
                                                      shares            shares
                                                downstream for     downstream for
                                Relevant            AAC large         AAC large
                               geographic             format            format
                                markets           prefabricated      prefabricated
                                                compound units     compound units
                                                  for industrial    for residential
                                                   construction      construction
                            Austria             [90-100]%        * [90-100]%        *
                            Belgium             [90-100]%        * [90-100]%        *
                            Czech Republic      [90-100]%        * [90-100]%        *
                            Denmark             [70-80]%           [70-80]%
                            Finland             [30-40]%           [30-40]%
                            France              [90-100]%          [90-100]%
                            Germany             [90-100]%        * [90-100]%        *
                            Hungary             [90-100]%          [90-100]%
                            Netherlands         [90-100]%        * [90-100]%        *
                            Norway              [90-100]%          [90-100]%
                            Poland              [50-60]%         * [90-100]%        *
                            Slovakia            [90-100]%          [90-100]%
                            Slovenia            [90-100]%          [90-100]%
                            Sweden              [90-100]%          [80-90]%
                          Source: Notifying Party’s estimates
5.3.1. Potential input foreclosure
5.3.1.1. The Notifying Party’s view
(71)    First, as regards ability, the Notifying Party argues that chemical-based admixtures
        are not an important input for the manufacture of AAC products, mineral insulation
        boards and mortars, and also, that admixtures represent a negligible cost factor in the
        production of all these products. The Notifying Party explains (i) that the share of
        chemical-based admixtures in Xella’s total per plant production costs where it
        produces the above-listed downstream products ranges between [0-5]% and [0-5]%
        only, depending on the factory, (ii) that as a share of Xella’s total production costs
        per country, it is only about [0-5]% in Germany and around [0-5]% in France, and
        sinks further to below [0-5]% in terms of Xella’s overall production costs in Europe,
        (iii) that since Xella’s competitors use similar production processes and
        technologies, it can be inferred that similar proportions would also apply to Xella’s
        competitors and (iv) that even considering producers of mortars that are not Xella’s
        direct competitors,71 chemical-based admixtures only account for well below [0-5]%
        of the production costs of the respective down-stream products (namely AAC
        blocks, AAC large format units, mineral insulation boards and mortars).72
(72)    The Notifying Party also claims that the cost of switching between different
        chemical-based admixtures suppliers is low, that there is a wide range of admixture
71  Xella does not produce and market mortar as a stand-alone product, but only as part of complete solutions
    involving its aerated concrete products. Moreover, these mortars are specially adapted to the needs of
    Xella’s AAC blocks, CSUs and mineral insulation boards, and sold at a higher price than the
    commoditised types of mortars, which account for the majority of mortars sales. See form CO, paragraph
    74.
72  Form CO, paragraphs 163 - 166
                                                            17
 ---pagebreak---         producers besides BASF’s EB business across the EEA and that EBA products do
        not represent a significant source of product differentiation for the downstream
        market of Xella’s products and their competing products since Xella’s and its
        competitors’ customers have no knowledge of, or interest in, the particular supplier
        that Xella relies on for chemical-based admixtures used in its AAC blocks or other
        products.73
(73)    Finally, the Notifying Party explains that overall the risk of potential input
        foreclosure strategies would be low, given that BASF’s EB business is only an
        important supplier of chemical-based admixtures to be used in AAC products for
        Xella. It explains that [70-80]% of BASF’s EB business’s sales of chemical-based
        admixtures to customers active in the manufacture of AAC products in the EEA
        today are already made to Xella. Apart from Xella, BASF’s EB business only
        supplies chemical-based concrete admixtures to only […] other purchasers in the
        AAC industry, with minimal purchases: [less than EUR 100,000 worth in each case].
        Thus, potential input foreclosure would be limited to those […] customers, which
        with the exception of the […] customer are not located in countries, where the
        merged entity would hold a strong market position upstream.74
(74)    Second, as regards incentive, the Notifying Party submits that any attempt to
        foreclose competitors of Xella would ultimately prove unprofitable, as Xella’s
        competitors can easily procure the chemical-based admixtures they need from
        alternative sources, without an appreciable (if any) effect on the production costs. As
        such, the combined entity would incur a decrease of its sales upstream without
        reaping any benefit from this strategy downstream.75
(75)    Third, as regards effects, the Notifying Party considers that given the lack of
        ability and incentive, any effects of such a potential input foreclosure would be
        purely hypothetical, in particular because of the existence of other chemical-based
        admixtures manufacturers across the EEA and Xella’s competitors’ ability to switch
        their procurements easily.76
5.3.1.2. The Commission’s assessment
(76)    First, as regards ability, the Commission notes that in several of the vertically
        affected markets for chemical-based admixtures, input foreclosure appears rather
        unlikely based on the merged entity’s relatively modest market shares at the
        upstream level, namely in Czech Republic: [30-40]%; Norway [30-40]%, and
        Sweden [40-50]% (market shares by volume, 2019). In other national markets, the
        merged entity would hold a more important position on the upstream market, namely
        in Austria ([40-50]%), Denmark ([40-50]%) and Spain ([60-70]%) (market shares by
        volume, 2019).
(77)    However, replies to the market investigation by chemical-based admixtures
        customers confirmed that post-transaction, there would remain a sufficient number
        of suppliers selling chemical-based admixtures including in the latter categories of
        countries (Austria, Denmark, and Spain), if BASF’s EB business stopped selling
73  Additional submission by the Notifying Party dated 25.06.2020, paragraphs 9 and 10
74  Form CO, paragraphs 180 – 182
75  Additional submission by the Notifying Party dated 25.06.2020, paragraph 11
76  Additional submission by the Notifying Party dated 25.06.2020, paragraph 13
                                                        18
 ---pagebreak---        chemical-based admixtures to their company.77 This suggests that in none of the
       relevant national markets (Austria, Czechia, Denmark, Norway, Spain and Sweden),
       the combined entity would not have the ability to put in place an effective input
       foreclosure strategy, simply because foreclosed customers would be in a position to
       find readily available alternatives for their chemical-based admixtures procurement
       on the market.
(78)   Second, as regards incentive, customers including those located in the six relevant
       countries listed in Austria, Czechia, Denmark, Norway, Spain and Sweden also
       confirmed that they did not expect that the combined entity would have an incentive
       to have BASF’s EB business stop selling chemical-based admixtures to their
       company.78
(79)   Third, as regards effects, based on the elements provided by the Notifying Party,
       the Commission considers that chemical-based admixtures do not appear to represent
       an important cost factor in the manufacture of any of the relevant downstream
       products (namely AAC products, mineral insulation boards and mortars). Replies to
       the market investigation by customers for chemical-based admixtures
       overwhelmingly showed that chemical-based admixtures represent less than 1% of
       their total production costs for the manufacture of AAC blocks, AAC large format
       prefabricated compound units, mineral insulation boards, CSU, aerated concrete
       roofing panels, fire walls and outer walls and less than 5% of the production costs of
       mortars.79 As a result, the Commission considers that a potential input foreclosure of
       chemical-based admixtures in Austria, Czechia, Denmark, Norway, Spain and
       Sweden will likely not have any material impact, given that those admixtures only
       account for below 1% of the production costs of the respective down-stream
       products (namely AAC blocks, AAC large format units, mineral insulation boards
       and mortars),80 and any deterioration of the terms or prices offered by BASF’s EB
       business would therefore have a minimal impact on the overall price of the final
       products. This was also confirmed by the fact that the majority of respondents to the
       market investigation expected no impact as a result of the Transaction.81
77 See replies to question 22 of Q1 – Questionnaire to admixtures customers as well as question 14 of Q4 –
   Questionnaire to admixture customers active in mortars and sealants. This was in particular the case from
   customers present in countries where BASF’s market shares in the sale of polymer-based concrete
   admixtures upstream is above 30%, namely Austria, Denmark and Spain, as well as Czech Republic,
   Norway and Sweden. Interestingly, with respect to AAC large format units, the Commission received
   responses from admixtures customers active in the production of AAC large formats units in Austria,
   Belgium, Czech Republic, Hungary, Slovakia, Slovenia and Sweden, suggesting that Xella’s market
   shares for AAC large format units in these countries might not be as high as [90-100]%. The Commission
   however did not receive any responses from AAC large format units manufacturers active in France,
   suggesting indeed that it might be possible that Xella holds a [90-100]% market shares for AAC large
   format units in this country.
78 See replies to question 23 of Q1 – Questionnaire to admixtures customers as well as question 15 of Q4 –
   Questionnaire to admixture customers active in mortars and sealants. This was in particular the case from
   customers present in countries where BASF’s market shares in the sale of polymer-based concrete
   admixtures upstream is above 30%, namely Austria, Denmark and Spain, as well as Czech Republic,
   Norway and Sweden.
79 See replies to question 3 of Q1 – Questionnaire to admixtures customers as well as question 3 of Q4 –
   Questionnaire to admixture customers active in mortars and sealants.
80 See also paragraph (71) above
81 See replies to question 24 of Q1 – Questionnaire to admixtures customers as well as question 16 of Q4 –
   Questionnaire to admixture customers active in mortars and sealants.
                                                        19
 ---pagebreak--- 5.3.2. Potential customer foreclosure
5.3.2.1. The Notifying Party’s view
(80)      First, as regards ability, the Notifying Party argues that Xella is not an important
          customer for chemical-based admixtures in the EEA, since Xella (overall) represents
          [0-5]% of all purchases of chemical-based concrete admixture (from BASF’s EB
          business and its competitors) in Germany, [0-5]% in France, and well below [0-5]%
          in all other countries where it is active. As such, if the combined entity were to put in
          place a customer foreclosure strategy, BASF EB business’ competitors in the
          manufacture of chemical-based admixtures would still have a sufficiently large pool
          of customers to sell to.82
(81)      Second, as regards incentive, the Notifying Party argues83 that since competitors
          of BASF’s EB business also have very low sales to Xella, a decision by Xella post-
          Transaction to divert its relevant chemical-based admixtures orders to the Target
          would not reduce the ability and incentive of the Target’s competitors to compete
          and therefore that Xella could not affect the Target’s upstream competitors by
          increasing their cost to access downstream customers or by restricting their access to
          a significant customer base.
(82)      Third, as regards effects, the Notifying Party explains that given the very limited
          importance of Xella’s purchases, the volume of lost sales for the Target’s
          competitors in case of a potential customer foreclosure attempt would be de minimis
          and would not give rise to price increases in the upstream market.84
5.3.2.2. The Commission’s assessment
(83)      First, as regards ability, the Commission notes that Xella has very high market
          shares (above 40%) at national level downstream in some countries, in particular,
          with respect to (i) AAC blocks in Austria, Belgium, Bulgaria, Croatia, Denmark,
          France, Germany, Hungary, Italy, the Netherlands, Norway, Slovakia, Slovenia,
          Spain and Sweden; (ii) AAC large prefabricated compound units in Austria,
          Belgium, Czech Republic, Denmark, France, Germany, Hungary, Netherlands,
          Norway, Poland, Slovakia, Slovenia and Sweden; and (iii) mineral insulation boards
          in Austria, Czech Republic, Denmark, Norway, Spain and Sweden (see Table 2
          above). Despite these high market shares, it would appear unlikely that the merged
          entity would have the ability to engage in customer foreclosure to the detriment of
          other suppliers of chemical-based admixtures.
(84)      Preliminarily, it should be noted that Xella only has manufacturing facilities in a
          subset of the countries where it sells construction material, namely in Austria,
          Belgium, Bulgaria, Czechia, France, Germany, Hungary, Italy, the Netherlands,
          Poland, Romania, Slovakia and Slovenia.85 In light of this and taking into account
82  Form CO, paragraph 185
83  Additional submission by the Notifying Party dated 25.06.2020, paragraph 16
84  Additional submission by the Notifying Party dated 25.06.2020, paragraph 17
85  More precisely, for (i) AAC blocks in Austria, Belgium, Czechia (not affected downstream), France,
    Germany, Hungary, Italy, Netherlands, Poland (not affected downstream), Romania, Slovakia and
    Slovenia; (ii) AAC large format units in Austria, Belgium, Czechia, Germany, Netherlands and Poland;
    (iii) for mineral insulation boards in Bulgaria and Germany (both countries not affected downstream); and
    (iv) for mortars in Italy and the Netherlands (both countries not affected downstream).
                                                           20
 ---pagebreak---         the national scope of the market for chemical-based admixtures, a potential customer
        foreclosure scenario resulting from Xella’s high market shares downstream at
        national level would be more likely to take place in countries with manufacturing
        facilities, rather than in those countries where it has no manufacturing facilities (in
        other words, if the potential customer foreclosure issue is considered at national
        level, thus in any country where Xella has no plant, there is as such no customer to
        foreclose). In particular, for mineral insulation boards, if the potential customer
        foreclosure issue is considered at national level, no customer foreclosure scenario
        would be possible with respect to chemical-based admixtures, since Xella does not
        purchase chemical-based admixtures in any of the 6 countries where it has a high
        market share (>30%) downstream86.
(85)    In addition, the market investigation confirmed that chemical-based admixtures are
        used in a multitude of applications, such as the production of regular concrete above
        everything else,87 and that the types of products manufactured by Xella only
        represent a small share in those applications. As such, Xella therefore does not
        appear to be an important purchaser of chemical-based admixtures. The market
        investigation also revealed that BASF EB Business’ competitors in the manufacture
        of chemical-based admixtures would still have a sufficiently large pool of customers
        to sell to if Xella stopped purchasing polymer-based concrete admixtures from their
        company, where Xella has a high market share (>30%) downstream, that is for (i)
        AAC blocks in Austria, Belgium, Bulgaria, Croatia, Denmark, France, Germany,
        Hungary, Italy, the Netherlands, Norway, Romania, Slovakia, Slovenia, Spain and
        Sweden; (ii) AAC large format units in Austria, Belgium, Czechia, Denmark,
        Finland, France Germany, Hungary, the Netherlands, Norway, Poland, Slovakia,
        Slovenia and Sweden and (iii) for mineral insulation boards in Austria, Czechia,
        Denmark, Norway, Spain and Sweden. 88
(86)    Second, as regards incentive, chemical-based admixtures manufacturers
        responding to the market investigation consider that post-Transaction, Xella would
        not have any incentive to stop purchasing polymer-based concrete admixtures from
        their company, where Xella has a high market share (>30%) downstream, that is for
        (i) AAC blocks in Austria, Belgium, Bulgaria, Croatia, Denmark, France, Germany,
        Hungary, Italy, the Netherlands, Norway, Romania, Slovakia, Slovenia, Spain and
        Sweden; (ii) AAC large format units in Austria, Belgium, Czechia, Denmark,
        Finland, France Germany, Hungary, the Netherlands, Norway, Poland, Slovakia,
        Slovenia and Sweden and (iii) for mineral insulation boards in Austria, Czechia,
        Denmark, Norway, Spain and Sweden.89
86 Austria, Czechia, Denmark, Norway, Spain and Sweden.
87 See replies to question 2.1 of Q2 – Questionnaire to admixtures competitors. Admixtures manufacturers in
   particular that confirm that the vast majority of admixtures sales are made to ready mix concrete plants as
   well as final customers producing plain concrete and plain concrete elements.
88 See replies to question 9 of Q2 – Questionnaire to admixtures competitors “There is a sufficient number of
   potential customers in precast and ready mix industries in the market for all producers of admixtures”,
   “Xella and Stark produce very special types of materials, which have limited use/application in the
   building industry”, “There will be sufficient customers” .
89 See replies to question 10 of Q2 – Questionnaire to admixtures competitors “No customer has long term
   interest in keeping itself out of this highly evolving and technical market of the admixtures. Concentrating
   its purchases on one supplier for othe reasons than the best cost/efficiency ration would jeopardize any
   commercial effort to stay competitive in its final market”
                                                            21
 ---pagebreak--- (87)     Third, as regards effects, the market investigation showed that chemical-based
         admixtures manufacturers consider that the Transaction would have no impact on the
         market for polymer-based concrete admixtures, where Xella has a high market share
         (>30%) downstream, that is for (i) AAC blocks in Austria, Belgium, Bulgaria,
         Croatia, Denmark, France, Germany, Hungary, Italy, the Netherlands, Norway,
         Romania, Slovakia, Slovenia, Spain and Sweden; (ii) AAC large format units in
         Austria, Belgium, Czechia, Denmark, Finland, France Germany, Hungary, the
         Netherlands, Norway, Poland, Slovakia, Slovenia and Sweden and (iii) for mineral
         insulation boards in.90
(88)     In light of the above, the Commission considers that the Transaction does not give
         rise to serious doubts as to its compatibility with the internal market in relation to the
         vertical link arising between chemical-based admixtures, in Austria, Czechia,
         Denmark, Norway, Spain and Sweden (upstream) and the manufacture and sales of
         various building and insulation materials, that is for (i) AAC blocks in Austria,
         Belgium, Bulgaria, Croatia, Denmark, France, Germany, Hungary, Italy, the
         Netherlands, Norway, Romania, Slovakia, Slovenia, Spain and Sweden; (ii) AAC
         large format units in Austria, Belgium, Czechia, Denmark, Finland, France
         Germany, Hungary, the Netherlands, Norway, Poland, Slovakia, Slovenia and
         Sweden and (iii) for mineral insulation boards in Austria, Czechia, Denmark,
         Norway, Spain and Sweden (downstream).
5.4.     Vertical relationships between chemical-based admixtures (upstream) and the
         retail sales of building materials to professional and non-professional customers
         (downstream)
(89)      BASF’s EB business, through its EBA business, manufactures chemical-based
         admixtures. Some of these products (as well as the ones manufactured by BASF’s
         EB business’ upstream competitors) are purchased and then resold by Stark to
         professional and retail customers.
(90)     This vertical link gives rise to markets that are affected upstream at national level in
         three EEA countries (Denmark, Norway and Sweden) because BASF’s EB business’
         market share in the sale of chemical-based admixtures is above 30% in these
         countries. It also gives rise to markets that are affected downstream at regional level
         in Denmark in the regions of Denmark capital and Central Jutland (where Stark has a
         [30-40]% market share in volume), in Norway in the regions Troms og Finnmark
         ([30-40]%) and Sogn og Fjordane ([50-60]%), and probably also in some regions of
         Finland (where Stark holds a [20-30]% market share at national level for the sales to
         professional customers, but was not able to provide a regional breakdown of its
         market share at sub-national level). The Notifying Party did not submit separate
         market share data for professional customers and non-professional customers at
         regional level.91 Table 4 below provides an overview of these vertical relationships.
90  See replies to question 11 of Q2 – Questionnaire to admixtures competitors.
91  The Notifying Party provided separate data for professional and non-professional customers for Stark at
    national level, as well as some rough estimates of Stark’s market shares in the sale of EBA and EBC
    products to professional, as well as non-professional customer, at regional level, in these five countries.
    However, these appear less informative than the ones provided in Table 4 since they are provided in the
    form of ranges (e.g. <30%) with upper bounds that are very similar to Stark’s overall market shares at
    regional level. Moreover, for the same reasons as mentioned above in Footnote 69, given the national
                                                         22
 ---pagebreak--- Table 4: overview of the vertical relationships between chemical-based admixtures
manufactured by EBA (upstream) and the sales of building materials to professional and
retail customers (downstream). (market shares provided are in value, EUR, for 2019)
                      BASF’s EB
                       business’s
                        market
                         share
Relevant                             Stark’s market shares downstream for the      Stark’s market shares downstream for the
                       upstream
geographic                            sales of building materials to professional       sales of building materials to non-
                      in the sales
markets                                                customers                              professional customers
                           of
                       chemical-
                         based
                      admixtures
Denmark              [40-50]%        [20-30]% - ([20-30]% for Denmark all         [10-20]% - ([20-30]% for Denmark all
                                     customers / [30-40]% for Denmark capital -   customers / [30-40]% for Denmark capital -
                                     all customers / [30-40]% for Central Jutland all customers / [30-40]% for Central Jutland –
                                     – all customers)                             all customers)
Finland              [20-30]%
                                     [20-30]% Finland ([10-20]% all customers -   [5-10]% Finland ([10-20]% all customers -
                                     No regional breakdown for Finland.)          No regional breakdown for Finland.)
Norway               [30-40]%
                                     [5-10]% ([5-10]% for Norway overall / [30-   [0-5]% ([0-5]% for Norway overall - [30-
                                     40]% for Norway Troms og Finnmark - all      40]% for Norway Troms og Finnmark - all
                                     customers : [50-60]% for Sogn og Fjordane -  customers : [50-60]% for Sogn og Fjordane -
Sweden               [40-50]%        all customers)                               all customers)
                                     [10-20]% ([5-10]% all customers)             [5-10]% ([5-10]% all customers)
          Source: Notifying Party’s estimates
5.4.1. Potential input foreclosure
5.4.1.1. The Notifying Party’s view
(91)      First, as regards ability, the Notifying Party submits that Stark does not actively
          engage in the sale of chemical-based admixtures, and that these products are not
          generally sold through distributors of building materials. The Notifying Party further
          claims that Stark is not aware of sales of chemical-based admixtures by its
          competitors.92 As such, it would therefore appear that admixtures are not an
          important input for the distribution of building materials.
(92)      Second, as regards incentive, the Notifying Party, again93 argues94 that since
          competitors of BASF’s EB business also have very low sales to Xella, a decision by
          Xella post-Transaction to divert its relevant chemical-based admixtures orders to the
          Target would not reduce the ability and incentive of the Target’s competitors to
          compete and therefore that Xella could not affect the Target’s upstream competitors
          by increasing their cost to access downstream customers or by restricting their access
          to a significant customer base.
     nature of the market for admixtures, it appears relevant to the purposes of this case that the Commission
     carries its assessment of the downstream product market at national level when considering the potential
     for customer foreclosure risks arising as a result of the vertical links between admixtures manufactured by
     EBA (upstream) and the distribution of building materials (downstream).
92   Form CO, paragraph 110
93   See paragraph (81)
94   Additional submission by the Notifying Party dated 25.06.2020, paragraph 16
                                                                23
 ---pagebreak--- (93)    Third, as regards effects, the Notifying Party argues that such foreclosure strategy
        would likely lack of impact, given that chemical-based admixtures typically
        represent [0-5]% of the sales made by Stark as a distributor and [0-5]% of its
        procurements, and the Notifying Party submits that it can be inferred that the same
        ratio would apply to Stark’s competitors in the distribution of construction
        materials.95 Therefore, any attempt by the combined entity to cease supplying
        chemical-based admixtures to Stark’s downstream competitor, or degrade the terms
        or conditions of supply is not likely to have any meaningful impact on Stark’s
        competitors’ profitability on the downstream market.96
5.4.1.2. The Commission’s assessment
(94)    First, as regards ability, the Commission observes that BASF EB business’ market
        shares upstream suggests that in all three countries (Denmark, Sweden and Norway),
        there are alternative suppliers of chemical-based admixtures, which jointly make up
        for a large share in the supply in all three countries ([50-60]% in Denmark; [60-70]%
        in Sweden and [60-70]% in Norway).
(95)    Moreover, replies to the market investigation by chemical-based admixtures
        customers confirmed that post-transaction, admixture customers present in all three
        countries (Denmark, Sweden and Norway) and active in both the retail distribution
        of building materials to DIY customers and to professional customers consider that
        there would remain a sufficient number of suppliers selling chemical-based
        admixtures, if BASF’s EB business stopped selling chemical-based admixtures to
        their company.97 This would suggest that the combined entity would not have the
        ability to put in place an effective input foreclosure strategy, simply because
        foreclosed customers would be in a position to find readily available alternatives for
        their chemical-based admixtures procurement on the market.
(96)    Second, as regards incentive, the Commission notes that it is questionable whether
        the merged entity’s downstream market position would allow it to recover customers
        for chemical-based admixtures through the Stark distribution outlets, given that the
        market position at the downstream level is only strong in very limited regions.
        Therefore, it is questionable that the merged entity would have an incentive in
        engaging in input foreclosure.
(97)    The Commission’s market investigation confirmed that chemical-based admixtures
        customers present in all three countries (Denmark, Sweden and Norway) and active
        in both the retail distribution of building materials to DIY customers and to
        professional customers did not expect the combined entity to have an incentive to
        have BASF’s EB business stop selling chemical-based admixtures to their
        company.98
(98)    Third, as regards effects, based on information provided by the Notifying Party,
        the Commission observes that such foreclosure strategy would likely lack of impact,
        given that chemical-based admixtures typically represent [0-5]% of the sales made
        by Stark as a distributor, and the Notifying Party submits that it can be inferred that
95  Form CO, paragraphs 196 – 197
96  Form CO, paragraphs 196 – 198
97  See replies to question 22 of Q1 – Questionnaire to admixtures customers.
98  See replies to question 23 of Q1 – Questionnaire to admixtures customers.
                                                         24
 ---pagebreak---         the same ratio would apply to Stark’s competitors in the distribution of construction
        materials. Therefore, any attempt by the combined entity to cease supplying
        chemical-based admixtures to Stark’s downstream competitor, or degrade the terms
        or conditions of supply is not likely to have any meaningful impact on Stark’s
        competitors’ profitability on the downstream market.
(99)    This was confirmed in the course of the Commission’s market investigation, which
        unambiguously showed that chemical-based admixtures represent less than 1% of
        distributors of building materials’ sales, both to professional customers and to DIY
        customers.99 As a result, the Commission considers that a potential input foreclosure
        of chemical-based admixtures will likely not have any material impact, since any
        deterioration of the terms or prices offered by BASF’s EB business would have a
        minimal impact on the amount of sales made by distributors of building materials.
        The market investigation also revealed that the majority of customers expected no
        impact as a result of the Transaction.100
5.4.2. Potential customer foreclosure
5.4.2.1. The Notifying Party’s view
(100) First, as regards ability, the Notifying Party submits that Stark’s purchases
        represents well below 30% of the total sales of chemical-based admixtures in the
        countries where it is active, and that Stark can therefore not be considered as an
        important customer for admixture manufacturers.101
(101) Second, as regards incentive, the Notifying Party claims that excluding the
        chemical-based admixtures products of the Target’s competitors from Stark’s outlets
        would generate hardly any additional EBA sales through Stark, as the distribution of
        EBA products does not generally take place through such outlets.102
(102) Third, as regards effects, the Notifying Party explains that given the very small
        amount of chemical-based admixtures purchased by Stark, foreclosing access to
        Stark as a purchaser of chemical-based admixtures would not have any effects on the
        upstream competitors of BASF’s EB business, nor would it have any meaningful
        impact on the competitive dynamics of the market in general.
5.4.2.2. The Commission’s assessment
(103) First, as regards ability, the Commission observes that given the national nature of
        the market for chemical-based admixtures, any upstream competitor of BASF’s EB
        business in the market for admixtures would be likely to be rather indifferent to
        whether Stark is stronger in the distribution of building products to professional or
        retail customers at sub-national level in some regions than others, because their main
        interest would be whether Stark is an important buyer of admixtures at national level
        overall. Consequently, Stark’s market share in the distribution of building products
        to professional or retail customers at national level, is a sufficient proxy in order to
        carry out the assessment of these vertical relationships. These market shares at
99  See replies to question 4 of Q1 – Questionnaire to admixtures customers.
100 See replies to question 24 of Q1 – Questionnaire to admixtures customers.
101 Form CO, Annex 12
102 Additional submission by the Notifying Party dated 25.06.2020, paragraph 26
                                                         25
 ---pagebreak---          national level are below the 30% threshold for a market to be considered as
         vertically affected for every country where Stark is present, it would appear that any
         customer foreclosure scenario is very unlikely, for lack of ability.
(104) Moreover, the Commission’s market investigation confirmed that that BASF EB
         Business’ competitors in the manufacture of chemical-based admixtures would still
         have a sufficiently large pool of customers to sell to if Stark stopped purchasing
         polymer-based concrete admixtures from their company, where Stark has a high
         market share (>30%) downstream, that is in Denmark, Norway and Sweden.103
(105) Second, as regards incentive, the Commission’s market investigation revealed that
         chemical-based admixtures manufacturers consider that post-Transaction, Stark
         would not have any incentive to stop purchasing polymer-based concrete admixtures
         from their company.104
(106) Third, as regards effects, based on information submitted by the Notifying Party,
         the Commission observes that such foreclosure strategy would likely lack of impact,
         given that Stark’s purchases of chemical-based admixtures are below 30% of the
         total sales of admixtures in the countries where it is active. Moreover, the market
         investigation confirmed that chemical-based admixtures’ manufacturers consider that
         the Transaction would have no impact on the market for polymer-based concrete
         admixtures.105
(107) In light of the above, the Commission considers that the Transaction does not give
         rise to serious doubts as to its compatibility with the internal market in relation to the
         vertical link arising between chemical-based admixtures (upstream) and the
         distribution of building materials (downstream) to i) wholesale sales to retailers; (ii)
         retail sales to professional customers (B2B); and (iii) retail sales to non-professional
         customers (primarily through DIY stores) in Denmark, Norway and Sweden.
5.5.     Vertical relationships between mortars and several other specialty construction
         products (upstream) and the retail sales of building materials to professional
         and non-professional customers (downstream)
(108) BASF’s EB business, through its EBC business, manufactures a variety of products
         such as mortars, concrete repair and protection systems, performance grouts,
         waterproofing systems, sealants, performance flooring systems, wall systems and
         coatings for mulch and wood fibres. It is however noted that mortars are the most
         important amongst them. Some of these products (as well as the ones manufactures
         by BASF’s EB business upstream competitors) are purchased and resold by Stark to
         professional and retail customers.
(109) BASF’s EB business’ market share do not give rise to affected markets upstream106.
         Given the Parties’ (through BASF’s EB business) small market shares in the
         upstream markets, and consequently the combined entity’s inability to foreclose
         access to the relevant products post-Transaction, input foreclosure will not be
         assessed in this decision.
103 See replies to question 9 of Q2 – Questionnaire to admixtures competitors
104 See replies to question 10 of Q2 – Questionnaire to admixtures competitors
105 See replies to question 11 of Q2 – Questionnaire to admixtures competitors.
106 On the basis of data provided by the Notifying Party.
                                                          26
 ---pagebreak--- (110) This vertical link gives rise to markets that are affected downstream at regional level
         in Denmark in the regions of Denmark capital and Central Jutland (where Stark
         holds a [30-40]% market share), in Norway in the regions Troms og Finnmark ([30-
         40]%) and Sogn og Fjordane ([50-60]%), and probably also in some regions of
         Finland (where Stark holds a [20-30]% market share at national level for the sales to
         professional customers, but was not able to provide a regional breakdown of its
         market share). The Notifying Party did not submit separate market share data for
         professional customers and non-professional customers at regional level (see
         Footnote 91 above). Table 5 below provides an overview of these vertical
         relationships.
Table 5: overview of the vertical relationships between mortars and other products
manufactured by EBC (upstream) and the sales of building materials to professional and
retail customers (downstream). (market shares provided are in value, EUR, for 2019)
                    BASF’s EB
                     business’s
                       market
                        share
                      upstream
                         for
Relevant                            Stark’s market shares downstream for the      Stark’s market shares downstream for the
                      mortars,
geographic                           sales of building materials to professional       sales of building materials to non-
                      sealants,
markets                                               customers                              professional customers
                     grouts and
                        other
                    constructio
                    n chemicals
                    manufactur
                     ed by EBC
Denmark                             [20-30]% - ([20-30]% for Denmark all         [10-20]% - ([20-30]% for Denmark all
                                    customers / [30-40]% for Denmark capital -   customers / [30-40]% for Denmark capital -
                    <20% for all    all customers / [30-40]% for Central Jutland all customers / [30-40]% for Central Jutland –
                    products        – all customers)                             all customers)
Finland             under any
                    plausible       [20-30]% Finland ([10-20]% all customers -   [5-10]% Finland ([10-20]% all customers -
                    product or      No regional breakdown for Finland.)          No regional breakdown for Finland.)
Norway              geographic
                    market          [5-10]% ([0-5]% for Norway overall / [30-    [0-5]% ([0-5]% for Norway overall - [30-
                    definition      40]% for Norway Troms og Finnmark - all      40]% for Norway Troms og Finnmark - all
                                    customers : [50-60]% for Sogn og Fjordane -  customers : [50-60]% for Sogn og Fjordane -
                                    all customers)                               all customers)
         Source: Notifying Party’s estimates
5.5.1. Potential customer foreclosure
5.5.1.1. The Notifying Party’s view
(111) First, as regards ability, the Notifying Party claims that in light of the national
         nature of the upstream markets for mortars, sealants, grouts and other products
         manufactured by EBC (“EBC products”), it would be not be appropriate to consider
         Stark’s market shares at a sub-national level. Given that Stark’s market share in
         every country where it is active remains below 30%, the Notifying Party submits that
         the combined entity would lack the ability to foreclose access to an important
         customer downstream.107 In addition, the Notifying Party explains that Stark is not
         an important customer for products manufactured by EBC, which is evidenced by
         the fact that (i) Stark’s purchase shares for all EBC products in all countries where it
107  Additional submission by the Notifying Party dated 25.06.2020, paragraph 30
                                                               27
 ---pagebreak---         is active is below 30%,108 and (ii) [80-90]% of the total sales made by EBC in
        Denmark and [60-70]% in Norway were direct sales to customers (without the
        intermediary of a distributor).109 The Notifying Party further submits that BASF’s
        EB business’ competitors for EBC products follow similar commercial policies to
        those of BASF’s EB business and are comparably reliant on direct sales as opposed
        to sales to distributors.110 Therefore, Stark would not appear to be an important
        customer for EBC products.
(112) Second, as regards incentive, the Notifying Party submits that given the modest
        volumes of EBC products sold by Stark, any attempt by the combined entity to
        exclude sales by BASF EB business’ competitors would not generate an increase of
        sales in EBC products manufactured by BASF’s EB business that would be
        sufficient to outweigh the loss of sales of similar products manufactured by BASF’s
        EB business’ competitors. On the contrary, it would deteriorate Stark’s relationships
        with BASF’s EB business’ competitors, from whom Stark purchases a variety of
        products besides EBC products, which would in turn negatively affect the terms and
        conditions (e.g., discounts) offered by such suppliers to Stark for their whole range
        of products.111
(113) Third, as regards effects, the Notifying Party explains that given the modest
        volumes of EBC products sold by Stark and Stark’s modest purchase shares of EBC
        products in all countries where it is active, it cannot be considered that a sufficiently
        large fraction of upstream output is affected by the revenue decreases resulting from
        the Transaction, so that any attempt by the combined entity to put in place a
        customer foreclosure strategy would have no impact on the upstream market.112
5.5.1.2. The Commission’s assessment
(114) First, as regards ability, the Commission agrees that given the national nature of
        the upstream markets for mortars, sealants, grouts and other products manufactured
        by EBC, any upstream competitor of BASF’s EB business in the market for
        admixtures would be likely to be rather indifferent to whether Stark is stronger in the
        distribution of building products to professional or retail customers at sub-national
        level in some regions than others, because their main interest would be whether
        Stark is an important buyer of admixtures at national level overall. As a proxy for
        this in the first place, Stark’s market share in the distribution of building products to
        professional or retail customers at national level, appear to be sufficient for the
        purposes of the assessment of these vertical relationships. These market shares at
        national level being below the 30% threshold for a market to be considered as
        vertically affected for every country where Stark is present; it would appear that any
        customer foreclosure scenario is very unlikely, for lack of ability.
(115) Moreover, the Commission’s market investigation confirmed that BASF EB
        Business’ competitors in the manufacture of mortars, sealants and other EBC
        products would still have a sufficiently large pool of customers to sell all of their
108 See Annex 12 of Form CO
109 Additional submission by the Notifying Party dated 25.06.2020, paragraph 33. See also Annex 10 of the
    Form CO
110 Additional submission by the Notifying Party dated 25.06.2020, paragraph 34
111 Additional submission by the Notifying Party dated 25.06.2020, paragraphs 38 – 39
112 Additional submission by the Notifying Party dated 25.06.2020, paragraph 40
                                                        28
 ---pagebreak---         products to if Stark stopped purchasing mortars, sealants and other EBC products
        from their company.113
(116) Second, as regards incentive, the Commission’s market investigation confirmed
        that BASF EB Business’ competitors in the manufacture of mortars, sealants and
        other EBC products consider that post-Transaction, Stark would not have any
        incentive to stop purchasing mortars, sealants and other EBC products from their
        company.114
(117) Third, as regards effects, the Commission’s market investigation confirmed that
        BASF EB Business’ competitors in the manufacture of mortars, sealants and other
        EBC products consider that the Transaction would have no impact on the market for
        mortars, sealants and other EBC products.115
(118) In light of the above, the Commission considers that the Transaction does not give
        rise to serious doubts as to its compatibility with the internal market in relation to the
        vertical link arising between mortars and several other specialty construction
        products (upstream) and the distribution of building materials (downstream) toi)
        wholesale sales to retailers; (ii) retail sales to professional customers (B2B); and (iii)
        retail sales to non-professional customers (primarily through DIY stores) , Denmark,
        Norway and Sweden.
6.      CONCLUSION
(119) For the above reasons, the European Commission has decided not to oppose the
        notified operation 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
113 See replies to question 11 of Q3 – Questionnaire to mortars and sealants competitors
114 See replies to question 12 of Q3 – Questionnaire to mortars and sealants competitors
115 See replies to question 13 of Q3 – Questionnaire to mortars and sealants competitors
                                                         29