CELEX: 32015M7558
Language: en
Date: 2015-05-21 00:00:00
Title: Commission Decision of 21/05/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7558 - DS SMITH / DUROPACK) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 21.5.2015
                                        C(2015) 3561 final

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                                        To the notifying party

Dear Sir/Madam,

Subject:    Case M.7558 – DS Smith/ Duropack
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
         Economic Area[2]

    1) On 15 April 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 and following a referral
       pursuant to Article 4(5) of the Merger Regulation by which DS Smith Plc ("DS Smith",  United  Kingdom)  acquires  within  the  meaning  of
       Article 3(1)(b) of the  Merger Regulation control of the whole of  Duropack GmbH ("Duropack", Austria) by way of purchase of shares[3] (DS
       Smith and Duropack are designated hereinafter as the "Parties".)

       THE PARTIES

    2) DS Smith is active in the production and supply of corrugated case material, corrugated sheet, corrugated cases and partitions in the EEA.

    3) Duropack is active in the production and supply of corrugated case material, corrugated sheet, corrugated cases and partitions in the EEA.

       THE OPERATION AND THE CONCENTRATION

    4) The operation consists of DS Smith acquiring 100% of the shares in Duropack. Following the transaction DS Smith  will  have  sole  control
       over Duropack. The proposed transaction therefore constitutes a concentration  within  the  meaning  of  Article  3(1)(b)  of  the  Merger
       Regulation.

       EU DIMENSION

    5) The operation does not have a Community dimension within the meaning of the Merger Regulation, because Duropack's  EU-wide  turnover  does
       not exceed the threshold of EUR 250 million (Article 1(2)(b) of the Merger Regulation) and because Duropack's turnover does not exceed EUR
       25 million in any of the Member States in which the Parties' combined aggregate turnover exceeds EUR 100 million (Article 1(3)(c)  of  the
       Merger Regulation).

    6) However, on 12 March 2015, the Commission received a referral request pursuant to Article 4(5) of the  Merger  Regulation,  by  which  the
       Notifying Party informed the Commission that the concentration was capable of being reviewed under the national  competition  laws  of  at
       least three Member States (i.e. Austria, Bulgaria, Hungary, Slovakia and Slovenia). The Parties requested  therefore  that  it  should  be
       examined by the Commission. None of the Member States concerned objected to the request for referral. As a consequence, the  concentration
       shall be deemed to have an EU dimension pursuant to Article 4(5) of the Merger Regulation.

       RELEVANT MARKETS AND COMPETITIVE ASSESSMENT

    7) The Parties' activities overlap in a number of markets along the value chain for the production of  corrugated  cases.  This  value  chain
       includes amongst others the supply of paper fibres, the production  of  corrugated  case  material  (CCM),  the  conversion  of  CCM  into
       corrugated sheet and the conversion of corrugated sheet into corrugated cases.

1 Market definitions

1 Corrugated Case Material (CCM)

    8) CCM (sometimes referred to as “containerboard”) is the main input product for the manufacture of corrugated sheet. The Commission  has  in
       the past considered a separate product market for CCM.[4]

    9) Within the market for the supply of CCM, the Commission has further considered a distinction between kraftliner (i.e. CCM made from virgin
       fibre) and testliner (i.e. CCM made from recovered fibres).[5] The Commission has in the past considered the market for the supply of  CCM
       and its possible sub-segments as at least EEA-wide in scope.[6] The Parties do not contest this product and geographic market  definition.
       In any case, for the purposes of this decision, the exact scope of the market definition can be left open,  as  the  proposed  transaction
       does not give rise to serious doubts under the narrowest possible market definition.

2 Corrugated sheet

    Product market

   10) CCM is converted into corrugated sheet in a corrugator by creating fluting (a rippled middle layer  of  paper),  which  is  combined  with
       liners (flat surface layers which are glued to each side of the fluting).

   11) The Commission has in the past considered a separate product market for corrugated sheet.[7] Within the market for corrugated  sheet,  the
       Commission has further considered a distinction between conventional corrugated sheet and heavy duty corrugated sheet.[8] The  Parties  do
       not contest this product market definition. In this respect, the market investigation shows that customers do  not  consider  conventional
       and heavy duty corrugated sheet as substitutable.[9] Moreover, a number of competitors confirmed  that  even  though  standard  corrugated
       sheet can also be produced on production lines for heavy duty corrugated sheet, the opposite is not usually the case.[10] In any case, for
       the purposes of this decision, the exact scope of the product market definition can be left open, as the  proposed  transaction  does  not
       give rise to serious doubts under the narrowest possible market definition.

    Geographic market

   12) The Commission has in the past considered the market for the supply of corrugated sheet and  its  possible  sub-segments  as  national  or
       regional in scope with a radius of 300-400 km around the relevant production sites.[11] The Parties do not contest this geographic  market
       definition. However, the Parties further note that the territories of Austria, Hungary and Slovakia are smaller than  the  300  km  radius
       catchment area under a regional geographic market definition. Therefore, the geographic market definition at national  level  remains  the
       smallest plausible geographic market for these Member States. The importance of transport costs  and  necessity  to  have  a  supplier  at
       national or even local level in this market has generally been confirmed by the market investigation.[12] In any case, for the purposes of
       this decision, the exact scope of the geographic market definition can be left open, as the proposed transaction does  not  give  rise  to
       serious doubts under the narrowest possible market definition.

3 Corrugated cases

    Product market

   13) The conversion of corrugated sheet into corrugated cases for sale to end-customers involves printing, slotting and/or die-cutting, folding
       and gluing and/or stitching corrugated sheet.

   14) The Commission has in the past considered a separate product market for  corrugated  cases.[13]  Within  the  market  for  the  supply  of
       corrugated cases, the Commission has further considered a distinction between conventional corrugated cases, heavy duty  corrugated  cases
       and litho-laminated corrugated cases.[14] A strong majority of customers  and  the  majority  of  competitors  responding  to  the  market
       investigation confirmed that these three types of corrugated cases are not substitutable in terms of price  and  production.[15]   In  any
       case, for the purposes of this decision, the exact scope of the product market definition can be left open, as  the  proposed  transaction
       does not give rise to serious doubts under the narrowest possible market definition.

    Geographic market

   15) The Commission has in the past considered the market for the supply of conventional corrugated cases as national in scope or  regional  in
       scope with a radius […]* 200-300 km around the relevant production sites.[16] With regard  to  heavy  duty  corrugated  cases  and  litho-
       laminated corrugated cases, the Commission has in the past considered the market to be national in scope.[17] In this respect, the  market
       investigation has confirmed the importance of transport cost in this market, as competitors set out that cost competitiveness is  achieved
       when a supplier is geographically close to the customer. Moreover, the market investigation showed that the majority of customers  do  not
       source corrugated cases beyond the national or even local level.[18] In any event, for the purposes of this decision, the exact  scope  of
       the geographic market definition can be left open, as the proposed transaction does not give rise to serious doubts  under  the  narrowest
       possible market definition.

2 Competitive Assessment

   16) The proposed transaction gives rise to horizontally and vertically affected markets.

1 Horizontal relationships

   17) The proposed transaction leads to horizontally affected markets (i) in the supply of conventional corrugated sheet in France, (ii) in  the
       supply of conventional corrugated cases in Austria, Bulgaria, Croatia, Slovakia, Slovenia, Estonia, France, Lithuania and Sweden, (iii) in
       the supply of heavy duty corrugated cases in Slovakia and (iv) in the supply of litho-laminated corrugated cases in Hungary.

1 Corrugated sheet

   18) As regards the supply of conventional corrugated sheet in France, the Parties' combined market share amounts to [30-40]%  with  a  limited
       increment resulting from Duropack's market share of less than [0-5]%. The Parties'  combined  market  share  remains  therefore  moderate.
       Moreover, the merged entity would continue to face competition from a number of significant competitors such as Smurfit Kappa  ([20-30]%),
       Gondardennes ([20-30]%) or Prowell ([10-20]%).

   19) In the light of the above, the Commission concludes that the merged entity would not become an unavoidable  trading  partner  and  serious
       doubts do not arise as a result of the proposed transaction with respect to the supply of conventional corrugated sheet in France.

2 Corrugated cases

    Conventional corrugated cases

   20) The Parties' activities lead to affected markets in the national markets for conventional corrugated cases in Austria, Bulgaria,  Croatia,
       Slovakia, Slovenia, Estonia, France, Lithuania and Sweden. The respective market shares in 2013 are listed in Table 1 below:

|Country       |DS Smith       |Duropack        |Combined       |Competitor 1                    |Competitor 2                  |
|Austria       |[10-20]%       |[10-20]%        |[20-30]%       |[20-30]% (Dunapack)             |[10-20]% (Rondo)              |
|Bulgaria      |[0-5]%         |[30-40]%        |[30-40]%       |[20-30]% (Dunapack)             |[5-10]% (Vitavel)             |
|Croatia       |[0-5]%         |[30-40]%        |[30-40]%       |[30-40]% (Dunapack)             |[10-20]% (Model)              |
|Slovakia      |[10-20]%       |[10-20]%        |[30-40]%       |[10-20]% (Smurfit Kappa)        |[5-10]% (Dunapack)            |
|Slovenia      |[0-5]%         |[70-80]%        |[70-80]%       |[10-20]% (Dunapack)             |[5-10]% (Eurobox)             |
|Estonia       |[20-30]%       |[0-5]%          |[20-30]%       |[20-30]% (Stora Enso)           |[5-10]% (Smurfit Kappa)       |
|France        |[20-30]%       |[0-5]%          |[20-30]%       |[20-30]% (Smurfit Kappa)        |[10-20]% (SAICA)              |
|Lithuania     |[20-30]%       |[0-5]%          |[20-30]%       |[20-30]% (Stora Enso)           |[5-10]% (Smurfit Kappa)       |
|Sweden        |[20-30]%       |[0-5]%          |[20-30]%       |[30-40]% (Smurfit Kappa)        |[20-30]% (Stora Enso)         |

Table 1: Market shares of the Parties and competitors.

   21) In most cases, the Parties' combined market share remains reasonable and the increment  brought  about  by  the  proposed  transaction  is
       limited. Moreover, the market investigation shows that the Parties will  continue  to  face  competition  from  a  number  of  significant
       competitors in all of these markets, as displayed in Table 1 above.

   22) With particular regard to Slovenia, where the Parties' combined market share amounts to [70-80]%, the Commission notes that  increment  is
       very small, as DS Smith's share in that market amounts only to [0-5]%. This [0-5]% share is entirely made up  by  imports  with  DS  Smith
       having no production presence within Slovenia. Moreover, a number of customers indicated during the  market  investigation  that  both  DS
       Smith and Duropack were not perceived as particularly aggressive competitors in Slovenia and in general no negative impact is expected  by
       customers as a result of the proposed transaction.

   23) In light of the above, the Commission concludes that serious doubts do […]* arise as a result of the proposed transaction with respect  to
       the market for conventional corrugated cases in the above-mentioned countries.

    Heavy duty corrugated cases

   24) The Parties' activities lead to a horizontally affected market in the national markets for heavy duty corrugated cases in Slovakia,  where
       DS Smith has a market share of [10-20]% and Duropack of [20-30]% (combined: [30-40]%).

   25) The Parties' combined market shares remain moderate in Slovakia. In addition,  the  market  investigation  shows  that  the  Parties  will
       continue to face competition from a number of significant competitors, such as Thimm and NEFAB ([10-20]% each) and Mondi ([10-20]%).

   26) In the light of the above, the Commission concludes that serious doubts do not arise as a result of the proposed transaction with  respect
       to the market for heavy duty corrugated cases in Slovakia,

    Litho-laminated corrugated cases

   27) The Parties submit that their activities lead to a horizontally affected market in the  national  market  for  litho-laminated  corrugated
       cases in Hungary.

   28) The Parties' combined share in the market for litho-laminated corrugated cases in Hungary amounts to [30-40]% with an increment of [0-5]%.
       The Parties' combined market share remains therefore moderate in Hungary for litho-laminated corrugated cases.  In  addition,  the  market
       investigation shows that the new entity will continue to face competition from a number of large competitors such as STI ([20-30]%), Stora
       Enso ([20-30]%) or Motivating Graphics ([10-20]%)

   29) In light of the  above, the Commission concludes that serious doubts do not arise as a result of the proposed transaction with respect  to
       the market for litho-laminated corrugated cases in Hungary

3 Market investigation

   30) In addition to the above, and with regard to all of these markets, the market investigation has confirmed  that  competitors  as  well  as
       customers […]** not perceive DS Smith or Duropack as particularly aggressive competitors.[19] Moreover, for each  of  the  above  markets,
       customers indicated that there are other suppliers apart from the Parties that they could switch to in the short term.[20]

   31) Moreover, competitors and customers in general did not expect any negative impact of the transaction, with some mentioning  the  potential
       for increased competition and lower prices.[21]

2 Vertical relationships

   32) The proposed transaction leads to a number of vertically affected markets, (i) for the upstream market  of  the  supply  of  CCM  and  the
       downstream market for the supply of conventional corrugated sheet (in Bulgaria and France), (ii) for the upstream market for the supply of
       conventional corrugated sheet and the downstream market for the supply of conventional corrugated cases (in  Bulgaria,  Croatia,  Slovakia
       and Slovenia) (iii) for the upstream market for the supply of conventional corrugated sheet and the downstream market for  the  supply  of
       litho-laminated corrugated cases (in Hungary) and (iv) the upstream market  for  the  supply  of  heavy  duty  corrugated  sheet  and  the
       downstream market for the supply of heavy duty corrugated cases (in Slovakia).

1 Conventional CCM & Conventional Corrugated sheet

    Bulgaria

   33) The Parties' combined market share in the upstream market for the supply of testliner CCM in the EEA amounts to [10-20]%. Duropack's share
       in the vertically affected downstream market for conventional corrugated sheet in Bulgaria, on which DS Smith in any event is not  active,
       amounts to [60-70]%. In addition, downstream competitors will continue to account for [30-40]% of the demand in  Bulgaria.  Moreover,  the
       Parties' upstream competitors are likely to continue to be able to sell their products elsewhere in the EEA-wide market for CCM.

    France

   34) The Parties' combined market share in the upstream market for the supply of testliner CCM in the EEA amounts  to  [10-20]%.  The  Parties'
       combined share in the vertically affected downstream market for conventional corrugated sheet in France amounts to [30-40]%. However,  the
       Parties' downstream competitors will continue to account for [60-70]% of the demand in France. Moreover, the Parties' upstream competitors
       are likely to continue to be able to sell their products elsewhere in the EEA-wide market for CCM.

2 Conventional Corrugated sheet & Conventional Corrugated cases

    Bulgaria

   35) Duropack's share in the upstream market for the supply of conventional corrugated sheet in  Bulgaria  amounts  to  [60-70]%.  The  Parties
       combined share in the downstream markets for conventional corrugated cases in Bulgaria amount to [30-40]%. This  overlap  is  mainly  pre-
       existing, as DS Smith's activities only add a limited market share of [0-5]% to Duropack's activities on the downstream market.

   36) Moreover, the Parties' downstream competitors are likely to be able  to  continue  to  purchase  corrugated  sheet  from  other  Bulgarian
       suppliers or from suppliers in neighbouring Member States within the reach of 300-400 km  around  their  production  sites.  Besides,  the
       Parties already self-supply […] sheet requirements and therefore do  not  purchase  corrugated  sheet  from  third  parties  in  Bulgaria.
       Consequently, they would not have the ability to shift demand to their own supplies post-transaction.

    Croatia

   37) Duropack's share in the upstream markets for corrugated sheet in Croatia amounts  to  [20-30]%  for  conventional  corrugated  sheet.  The
       Parties' combined share in the downstream market for all conventional corrugated cases in Croatia amounts to  [30-40]%.  This  overlap  is
       mainly pre-existing, as DS Smith's activities only add a limited market share of [0-5]% to Duropack's activities on the downstream market.

   38) Moreover, the Parties already self-supply […] sheet requirements and therefore do not purchase corrugated  sheet  from  third  parties  in
       Croatia. Consequently, they would not have the ability to shift demand to their own supplies post-transaction.

    Slovakia

   39) The Parties' combined market share in the upstream market for conventional corrugated sheet in Slovakia amounts to [10-20]%. The  Parties'
       combined share in the vertically-affected downstream market amounts to [30-40]% for conventional corrugated cases.  However,  the  Parties
       already self-supply […] sheet requirements and therefore do not purchase corrugated sheet from third parties  in  Slovakia.  Consequently,
       they would not have the ability to shift demand to their own supplies post-transaction.

    Slovenia

   40) Duropack's share in the upstream market in Slovenia amounts to [10-20]% for conventional corrugated sheet. The […]* combined share in  the
       downstream market for conventional corrugated cases in Slovenia amounts to less than [70-80]%. This overlap is mainly pre-existing, as  DS
       Smith's activities only add a limited market share of [0-5]% to Duropack's activities on the downstream market.

   41) Moreover, the Parties' downstream competitors will continue to account  for  [20-30]%  of  the  demand,  so  that  the  Parties'  upstream
       competitors in the markets for corrugated sheet are likely to continue to be able to sell their products. In addition, Duropack is already
       sourcing the large majority of its input in-house and only purchases approximately [0-5]% of its corrugated sheet needs in  Slovenia  from
       third parties.

3 Conventional Corrugated sheet & Litho-laminated Corrugated cases

    Hungary

   42) The Parties' combined market share in the upstream market for conventional corrugated sheet in Hungary amounts to [10-20]%.  The  Parties'
       combined share in the vertically affected downstream market for litho-laminated corrugated cases in Hungary amounts to [30-40]%.  However,
       the Parties already self-supply […] sheet requirements and therefore do not purchase corrugated  sheet  from  third  parties  in  Hungary.
       Consequently, they would not have the ability to shift demand to their own supplies post-transaction.

4 Heavy duty Corrugated sheet & Heavy duty Corrugated cases

    Slovakia

   43) The Parties' combined market share in the upstream market for heavy-duty corrugated sheet in Slovakia amounts to  [10-20]%.  The  Parties'
       combined share in the vertically affected downstream market for heavy-duty corrugated cases amounts  to  [30-40]%.  However,  the  Parties
       already self-supply […] sheet requirements and therefore do not purchase corrugated sheet from third parties  in  Slovakia.  Consequently,
       they would not have the ability to shift demand to their own supplies post-transaction.

3 Conclusion

   44) On the basis of the above and the available evidence, the proposed transaction does not raise serious doubts as to its compatibility  with
       the internal market in any of the markets for CCM, corrugated sheet and corrugated cases and their submarkets in the EEA.

       CONCLUSION

   45) 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
                                        Member of the Commission

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[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 130, 22.4.2015, p. 12.

[4]   COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging; COMP/M.6682 Kinnevik / Billerud / Korsnäs.
[5]   COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging.
[6]   COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging.
[7]   COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging.
[8]   COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging.
[9]   Response to Question 5 of Questionnaire 1 to Customers.
[10]  Response to Question 5 of Questionnaire 2 to Competitors.
[11]  COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging.
[12]  Response to Question 14 of Questionnaire 2 to Competitors and to Question 14 of Questionnaire 1 to Customers.
[13]  COMP/M.3935 - Jefferson Smurfit / Kappa; COMP/M.6512 – DS Smith / SCA Packaging.
[14]  COMP/M.6512 – DS Smith / SCA Packaging.
[15]  Response to Question 6 of Questionnaire 1 to Customers and Response to Question 6 of Questionnaire 2 to Competitors.
*     Should read: of
[16]  COMP/M.6512 – DS Smith / SCA Packaging.
[17]  COMP/M.6512 – DS Smith / SCA Packaging.
[18]  Response to Questions 8, 10 and 12 of Questionnaire 1 to Customers.
*     Should read: not
**    Should read: generally do
[19]  Response to Questions 15 and 16 of Questionnaire 2 to Competitors and Response to Questions 16 and 17 of Questionnaire 1 to Customers.
[20]  Response to Question 15 of Questionnaire 1 to Customers.
[21]  [Should read: Response] to Questions 19-22 of Questionnaire 2 to Competitors and Questions 20-23  of  [Should  read:  Questionnaire]  1  to
      Customers.
*     Should read: Parties'

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 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.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE