CELEX: 32021M10432
Language: en
Date: 2021-12-06 00:00:00
Title: Commission Decision of 06/12/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10432 - PTTGC / ALLNEX) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                               Brussels, 6.12.2021
                                                               C(2021) 9065 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                                                                 information omitted has been replaced by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.
                                                               PTT Global Chemical Public Company
                                                               Limited
                                                               555/1 Energy Complex,
                                                               Building A, 14th -18th Floor,
                                                               Vibhavadi Rangsit Road, Chatuchak
                                                               10900 Bangkok
                                                               Thailand
Subject:             Case M.10432 – PTTGC / Allnex
                     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 29 October 2021, the European Commission received notification of a proposed
           concentration pursuant to Article 4 of the Merger Regulation by which PTT Global
           Chemical Public Company Limited (“PTTGC” or the “Notifying Party”, Thailand)
           intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation
1     OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
      Functioning of the European Union (the “TFEU”) has in troduced certain changes, such as the replacement
      of “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU
      will be used throughout this decision.
2     OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- 4.1.1.1. Relevant product markets
(10)    The Commission has previously considered a segmentation of the relevant product
        market for the supply of coating resins by (i) delivery technology, (ii) chemistry and
        (iii) industrial application.6
        (a)      Delivery technology. A segmentation by delivery technology distinguishes
                 between the following categories of coating resins: (i) liquid resins that can
                 be further segmented into solvent borne and waterborne resins, (ii) radiation
                 curable resins (“radcure”) and (iii) powder resins. The Commission
                 considered that liquid, radcure and powder resins differ from one another in
                 terms of production process, the way they are applied to the substrate, the
                 curing time, the residue they leave behind and their environmental
                 friendliness and are not substitutable with one another and constitute separate
                 markets.
        (b)      Chemistry. A segmentation by chemistry distinguishes coating resins by
                 reference to the base chemical compound of the resin. Common chemistries
                 of coating resins include acrylics, alkyds, epoxies, polyurethanes and
                 polyesters or hybrids thereof, comprising two or more such chemistries.
                 Different base chemicals impart different performance characteristics to the
                 coating, and the chemistry that a resin manufacturer and its customers choose
                 is generally driven by the requirements of the coating’s intended industrial
                 application.
        (c)      Industrial application. By reference to the industrial application, the
                 Commission has previously considered segmenting coating resins into: (i)
                 Automotive OEM; (ii) Automotive refinish; (iii) Industrial Wood; (iv) Coil
                 and pre-coated metals; (v) Other Industrial uses; (vi) Marine; (vii) Special
                 Purpose; (viii) Packaging; (ix) Architectural; and (x) Adjacent coating and
                 non-coating applications While considering it appropriate to segment the
                 market for coating applications by industrial applications as well, the
                 Commission left the market open.
(11)    The Notifying Party agrees with the Commission’s decisional practice concerning a
        market segmentation of the coating resins market by delivery technology and by
        chemistry but submits that a segmentation by industrial application is not relevant,
        mainly because the nexus of the case lies on vertical relationships. According to the
        Notifying Party, a specific resin (segmented by delivery method and chemistry) uses
        the same inputs regardless of its ultimate industrial use. 7 The Commission’s market
        investigation did not give any grounds to depart from the Commission’s recent
        decisional practice in this respect.
(12)    For the purposes of this Decision, it is not necessary to further explore a narrower
        product market by industrial application, as the focus of the competitive assessment
        is potential customer foreclosure and Allnex’s shares of demand are already minimal
        considering the current broader product markets downstream (see Table 4 to Table 6
        below). Under such a potential narrower product market, for which the input
6   Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
    Assets), paragraph 13.
7   Form CO, paragraphs 243-246.
                                                     6
 ---pagebreak---         products would be the same, the same arguments would apply and the possibility of
        customer foreclosure would be even more remote. The issue of a potential
        segmentation of coating resins by industrial application can therefore be left open.
(13)    Therefore, based on the Commission’s previous decisions, its market investigation,
        and the Notifying Party’s arguments, the Commission considers that for the purpose
        of this Decision separate coating resins markets exist segmented by delivery
        technology and chemistry. The vertically affected product markets within coating
        resins are therefore (i) radcure waterborne ultra-violet polyurethane dispersion
        (“UV PUD”) and (ii) polyester powders.
4.1.1.2. Relevant geographic market
(14)    The Commission has previously considered that the appropriate geographic market
        for coating resins is either EEA-wide or worldwide.8 In line with the Commission’s
        previous decisional practice, the Notifying Party considers that the appropriate
        geographic scope is likely worldwide and at least EEA-wide.9 The Commission’s
        market investigation did not give any grounds to depart from the Commission’s
        recent decisional practice, and for the purpose of the current decision, it can be left
        open whether the appropriate geographic scope is worldwide or EEA-wide, as the
        Transaction does not give rise to serious doubts under either geographic scope.
4.1.2. Crosslinkers
(15)    Crosslinkers are hardeners that are frequently used in coating formulations to create
        bonds between the resin molecule chains to solidify a coating and enhance its
        performance. Crosslinkers are mixed with coating resins and other coating
        components in a coating formulation. After application of the coating and
        evaporation of the solvent, the cross-linking reaction takes place at ambient or
        increased temperature.
4.1.2.1. Relevant product markets
(16)    The Commission has previously identified two types of crosslinkers on the basis of
        chemistry: (i) crosslinkers amino resins, and (ii) crosslinkers phenolic resins.
        Regarding crosslinkers phenolic resins, a further distinction has been made between
        liquid phenolics (resols) and solid phenolics (novolacs). The Commission has also
        assessed separate markets for polyisocyanate crosslinkers produced on the basis of
        hexamethylene diisocyanate (“HDI”),          namely aziridines crosslinkers and
        carbodiimide crosslinkers.  10
(17)    For crosslinkers amino resins and crosslinkers phenolic resins, the Commission has
        previously considered a further possible segmentation distinguishing between the
        same industrial applications as for coating resins. 11 The Commission’s market
8   Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
    Assets), paragraph 23.
9   Form CO, paragraph 247.
10 Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
    Assets), paragraph 26.
11 Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
    Assets), paragraph 27.
                                                  7
 ---pagebreak---           investigation did not give any grounds to depart from the Commission’s recent
          decisional practice in this respect.
(18)      The Notifying Party agrees with the Commission’s decisional practice concerning a
          market segmentation of crosslinkers into the markets set out above, but submits that
          a segmentation by industrial application is not relevant.12
(19)      For the purpose of this Decision, it is not necessary to further explore narrower
          product markets by industrial application, as the focus of the competitive assessment
          is potential customer foreclosure and Allnex’s shares of demand are already minimal
          considering the current broader product markets downstream (see Table 4 to Table 6
          below). Under such a potential narrower product market, for which the input
          products would be the same, the same arguments would apply and the possibility of
          customer foreclosure would be even more remote. The issue of a potential
          segmentation of crosslinkers by industrial application can therefore be left open.
(20)      Therefore, based on the Commission’s previous decisions, its market investigation
          and the Notifying Party’s arguments, the Commission considers that for the purpose
          of this Decision separate crosslinkers exist segmented by delivery technology and
          chemistry. The only vertically affected market within crosslinkers is thus
          crosslinkers amino resins.
4.1.2.2. Relevant geographic market
(21)      The Commission has previously considered that the appropriate geographic market
          for crosslinkers amino resins is either EEA-wide or worldwide.13 The Notifying
          Party does not express a view on the appropriate geographic scope. The
          Commission’s market investigation did not give any grounds to depart from the
          Commission’s decisional practice, and for the purpose of the current decision, it can
          be left open whether the appropriate geographic scope is worldwide or EEA-wide, as
          the Transaction does not give rise to serious doubts under either geographic scope.
4.2.      Upstream markets
4.2.1. Diisocyanates
(22)      The primary use of diisocyanates is for the production of polyurethanes. There are
          aromatic isocyanates (made from benzene or toluene) and aliphatic isocyanates
          (based on saturated carbon). Aromatic diisocyanates are mainly used for the
          production of foams. Aliphatic diisocyanates are mainly used for coatings
          applications (due to their superior light stability).
12   Form CO, paragraph 280. The Notifying Party submits that considering a segmentation by industrial
     application, may lead to affected downstream markets within solvent borne acrylics and alkyds/polyesters
     for automotive refinish applications, where Allnex’s market share may be just above 30%. However, this
     would not change the Commission’s assessment as the resulting downstream markets would be so small
     that they do not make up a material fraction of demand for ups tream inputs. Furthermore, the
     Commission’s competitive assessment conservatively considers Allnex’s total demand for upstream inputs
     across all products (including non-affected ones) to exclude customer foreclosure even on that basis.
13 Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
     Assets), paragraph 35.
                                                            8
 ---pagebreak--- 4.2.1.1. Relevant product markets
(23)    In a recent decision concerning coating resins, the Commission considered that there
        are separate markets for the following types of diisocyanates:14
        (a)      Hexamethylene diisocyanate (“HDI”);
        (b)      Isophorone diisocyanate (“IPDI”);
        (c)      4,4′-Dicyclohexylmethane diisocyanate (“H12 MDI”);
        (d)      Toluene diisocyanate (“TDI”);
        (e)      Methylene diphenyl diisocyanate (“MDI”); and
        (f)      Monomeric MDI (“mMDI”).
(24)    The Commission additionally considered that HDI derivatives constitute a separate
        market from HDI.15
(25)    The Notifying Party agrees with the Commission’s previous decisional practice
        concerning the relevant product markets within diisocyanates. 16 Additionally, the
        market investigation gave no grounds to depart from the Commission’s recent
        decisional practice discussed in paragraph (23).
(26)    Therefore, based on the Commission’s previous decisions, its market investigation
        and the Notifying Party’s arguments, the Commission considers that for the purpose
        of this Decision separate diisocyanate markets exist as set out in paragraph (23). The
        Transaction therefore gives rise to the following affected markets within
        diisocyanates: (i) HDI and (ii) IPDI.
4.2.1.2. Relevant geographic market
(27)    The Commission has previously considered that the appropriate geographic market
        for HDI and IPDI is either EEA-wide or worldwide.17 The Notifying Party agrees
        with this assessment.18 The Commission’s market investigation did not give any
        grounds to depart from the Commission’s recent decisional practice, and for the
        purpose of the current decision, it can be left open whether the appropriate
        geographic scope is worldwide or EEA-wide, as the Transaction does not give rise to
        serious doubts under either geographic scope.
4.2.2. Methyl methacrylate (“MMA”)
(28)    MMA is a commodity chemical product widely used in large amounts for the
        production of PMMA moulding compounds (an intermediary product used in the
14  Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
    Assets), paragraph 41.
15  Case M.8674 – BASF SE / Solvay S.A., recital 367.
16  Form CO, paragraph 93.
17  Case M.10006 – Covestro / Koninklijke DSM (Resins & Functional Materials Business and Other
    Assets), paragraph 46.
18  Form CO, paragraph 94.
                                                      9
 ---pagebreak---         manufacture of acrylic products), acrylic products, impact modifiers, acrylic latexes,
        lacquers, enamels, and resins for use in specialty chemicals and coatings. Other
        important applications for MMA include emulsion polymers principally for paper,
        textiles, leather and floor polishes, mineral-filled sheet, polyesters, polymer concrete,
        and adhesives.
4.2.2.1. Relevant product markets
(29)    The Commission previously considered that MMA forms a separate product
        market.19 While the Commission ultimately left the matter open, it indicated that
        there was likely to be a distinct product market for the supply of MMA and MMA
        derivatives.20 PTTGC does not sell MMA derivatives.21
(30)    The Notifying Party agrees with the Commission’s assessment in its past decisions. 22
        Additionally, the market investigation gave no grounds to depart from the
        Commission’s decisional practice.
(31)    Therefore, based on the Commission’s previous decisions, its market investigation
        and the Notifying Party’s arguments, the Commission considers that for the purpose
        of this Decision MMA and MMA derivatives constitute separate product markets.
        The Transaction therefore gives rise to an affected market for MMA. In any event,
        as PTTGC does not sell MMA derivatives and the Transaction does not raise serious
        doubts for the narrower market for MMA, the Commission’s assessment would also
        apply to the broader market.
4.2.2.2. Relevant geographic market
(32)    The Commission has previously considered that the appropriate geographic market
        for MMA is either EEA-wide or worldwide.23 The Notifying Party agrees with this
        assessment.24 The Commission’s market investigation did not give any grounds to
        depart from the Commission’s decisional practice, and for the purpose of the current
        decision, it can be left open whether the appropriate geographic scope is worldwide
        or EEA-wide, as the Transaction does not give rise to serious doubts under either
        geographic scope.
4.2.3. Styrene monomer
(33)    Styrene is an intermediate chemical product and has no end-use in itself. It is used as
        a base material in the production of polystyrene and as a co-monomer in the
        production of a number of polymers and synthetic rubbers, as well as in the
        manufacture of unsaturated polyester resins, gel coats and vinyl ester resins.
19  Case M.942 – Veba / Degussa, paragraph 14.
20  Case M.9353 – Advent International Corporation / Evonik Methacrylates Business Division, paragraphs
    16-29.
21  Form CO, paragraph 186.
22  Form CO, paragraph 186.
23  Case M.9353 – Advent International Corporation / Evonik Methacrylates Business Division, paragraph
    41.
24  Form CO, paragraph 187.
                                                     10
 ---pagebreak--- 4.2.3.1. Relevant product markets
(34)    The Commission has previously considered that styrene monomer constitutes a
        separate relevant product market as there is no substitute for styrene in the
        manufacture of polystyrene and expanded polystyrene and other styrene
        derivatives.25
(35)    The Notifying Party agrees with the Commission’s assessment in its past decisions. 26
        Additionally, the market investigation gave no grounds to depart from the
        Commission’s decisional practice.
(36)    Therefore, based on the Commission’s previous decisions, its market investigation
        and the Notifying Party’s arguments, the Commission considers that for the purpose
        of this Decision styrene constitutes a product market without further segmentation.
        The Transaction therefore gives rise to an affected market for styrene.
4.2.3.2. Relevant geographic market
(37)    The Commission has previously considered that the appropriate geographic market
        for styrene is either EEA-wide or worldwide.27 The Notifying Party considers that
        the appropriate geographic scope for styrene is global, but submits that the
        appropriate geographic market definition can be left open between worldwide and
        EEA-wide as the Transaction does not give rise to competitive concerns for either
        geographic scope.28
(38)    PTTGC does not have styrene sales in the EEA, and has a minimal market share (c.
        [0-5]%) globally.
(39)    The Commission’s market investigation did not give any grounds to depart from the
        Commission’s decisional practice, and for the purpose of the current decision, it can
        be left open whether the appropriate geographic scope is worldwide or EEA-wide, as
        the Transaction does not give rise to serious doubts under either geographic scope.
4.2.4. Glycerol
(40)    Glycerol is a polyhydric alcohol which is derived from inputs such as tallow, palm
        oil, rape seed oil, soya bean oil or crude soap lye glycerine. Glycerol is used as raw
        material for various uses in the chemical industry (among which coating resins), but
        most notably as moistening agent in over 1,500 applications (including personal
        care, pharmaceutical and coating resins).
25  M.9238 – Ineos Enterprises Holdings Limited / Ashland's Global Compound Resin Business and
    Manufacturing Facility in Marl, paragraphs 11 and 13.
26 Form CO, paragraph 227.
27 M.9238 – Ineos Enterprises Holdings Limited / Ashland's Global Compound Resin Business and
    Manufacturing Facility in Marl, paragraph 12.
28 Form CO, paragraphs 228 and 229.
                                                        11
 ---pagebreak--- 4.2.4.1. Relevant product markets
(41)    In previous decisions, the Commission has left open whether all polyhydric alcohols
        are part of one and the same market or each polyhydric alcohol (such as glycerol)
        constitutes a separate product market. 29
(42)    The Notifying Party submits that glycerol should be viewed as a single relevant
        product market given its distinct chemical structure and properties as well as the fact
        that plants are specifically designed to manufacture certain types of polyhydric
        alcohols.30
(43)    For the purpose of the current Decision, it can be left open whether the appropriate
        market definition is polyhydric alcohols, or whether a separate product market for
        glycerol is appropriate, as the Transaction does not give rise to serious doubts for
        either product market definition and PTTGC’s market share is similarly low for both
        product markets. Additionally, the market investigation gave no grounds to depart
        from the Commission’s decisional practice.
(44)    Therefore, based on the Commission’s previous decisions, its market investigation
        and the Notifying Party’s arguments, the Commission will perform its competitive
        assessment on the narrowest plausible basis, i.e. a separate market for glycerol. In
        any event, as the Transaction does not give rise to serious doubts for glycerol, the
        Commission’s competitive assessment would apply for a broader market for
        polyhydric alcohols as well, as PTTGC’s market share is similarly low, and Allnex’s
        share of demand would be even lower than for glycerol.
4.2.4.2. Relevant geographic market
(45)    The Commission has previously considered that the appropriate geographic market
        for glycerol is either EEA-wide or worldwide.31 The Notifying Party considers that
        the appropriate geographic scope for glycerol is likely global, but submits that the
        appropriate geographic market definition can be left open between worldwide and
        EEA-wide as the Transaction does not give rise to competitive concerns for either
        geographic scope.32
(46)    The Commission’s market investigation did not give any grounds to depart from the
        Commission’s decisional practice, and for the purpose of the current decision, it can
        be left open whether the appropriate geographic scope is worldwide or EEA-wide, as
        the Transaction does not give rise to serious doubts under either geographic scope.
4.2.5. Purified terephthalic acid (“PTA”)
(47)    PTA is an organic compound in the form of fine white powder, principally used as a
        raw material for the production of polyester products, such as polyethylene
        terephthalate (“PET”)-resin.
29  M.4957 – Perstorp Holding / Solvay Interox (caprolactones business), paragraph 16.
30  Form CO, paragraph 233.
31 M.4957 – Perstorp Holding / Solvay Interox (caprolactones business), paragraph 26.
32 Form CO, paragraphs 234 and 235.
                                                        12
 ---pagebreak--- 4.2.5.1. Relevant product markets
(48)    In previous decisions, the Commission left open whether the relevant product market
        is the market for the production and supply of PTA, or a broader market including
        the production and the supply of di-methyl terephthalate (“DMT”).33 PTTGC does
        not produce DMT34 ; therefore, the matter is not relevant for the current Decision.
(49)    The Notifying Party agrees with the product market definition of the Commission for
        PTA in past decisions.35 Additionally, the market investigation gave no grounds to
        depart from the Commission’s decisional practice.
(50)    Therefore, based on the Commission’s previous decisions, its market investigation
        and the Notifying Party’s arguments, the Commission will perform its competitive
        assessment on the narrowest plausible basis, i.e. a product market for PTA. In any
        event, as PTTGC does not produce DMT, and the Transaction does not raise serious
        doubts for the narrower market for PTA, the Commission’s assessment would also
        apply to the broader market.
4.2.5.2. Relevant geographic market
(51)    The Commission has previously considered that the appropriate geographic market
        for PTA is either EEA-wide or worldwide.36 The Notifying Party agrees with this
        assessment.37 The Commission’s market investigation did not give any grounds to
        depart from the Commission’s decisional practice, and for the purpose of the current
        decision, it can be left open whether the appropriate geographic scope is worldwide
        or EEA-wide, as the Transaction does not give rise to serious doubts under either
        geographic scope.
4.2.6. Ethylene glycols (mono-ethylene glycol (“MEG”) and di-ethylene glycol (“DEG”))
(52)    MEG and DEG are ethylene glycols, sometimes referred to as alcohols. Ethylene
        glycols are grouped depending on their chain length. There are three main types of
        ethylene glycols: MEG, DEG and tri-ethylene glycol (“TEG”). MEG accounts for
        the great majority of the production (about 90%), with the remaining part of
        production distributed between DEG (about 9%) and TEG (about 1%). The most
        important applications for MEG are in the production of polyester for
        textile/industrial fibres, polyester film for packaging/photography, polyester resin
        used to make plastic (PET) bottles, and anti-freeze. DEG is used in the production of
        polyols for use in polyurethanes for clothing, automotive and construction
        applications, while TEG is used as a dehumidifier in oil and gas processing and as
        automotive antifreeze/coolant.
33  Case M.7918 – Indorama Netherlands / Guadarranque Polyester, paragraph 22 and case M.1293 –
    BP/Amoco, paragraph 10.
34  Form CO, paragraph 191.
35  Form CO, paragraph 192.
36  Case M.7918 – Indorama Netherlands / Guadarranque Polyester, paragraph 26.
37  Form CO, paragraph 193.
                                                    13
 ---pagebreak--- 4.2.6.1. Relevant product markets
(53)    The Commission has previously considered separate markets for MEG, DEG and
        TEG, but left open whether they constitute separate product markets or form part of
        a broader market of ethylene glycol. 38
(54)    The Notifying Party submits that it can be left open whether the appropriate market
        definition is ethylene glycol, or whether separate product markets for MEG and DEG
        are appropriate, as the Transaction does not raise competitive concerns for either
        product market definition and PTTGC’s market share is similarly low for all
        markets.39
(55)    All ethylene glycols, MEG, DEG and TEG, result from a single production process
        which yields roughly 90% MEG, 8-9% DEG and 1% TEG. Therefore, any producer
        of ethylene glycols typically supplies all three products. The Transaction does not
        give rise to serious doubts even on the narrowest basis of separate markets for each
        of MEG and DEG (no affected links arise for TEG). Therefore, for the purpose of
        the current Decision, it can be left open whether the appropriate market definition is
        ethylene glycol, or whether separate product markets for MEG and DEG are
        appropriate.
(56)    The Commission will perform its competitive analyses on the narrowest basis, i.e.
        separate markets for MEG and DEG.
4.2.6.2. Relevant geographic market
(57)    The Commission has previously considered that the appropriate geographic market
        for ethylene glycols (including MEG and DEG) is either EEA-wide or worldwide.40
        The Notifying Party agrees with this assessment. 41 The Commission’s market
        investigation did not give any grounds to depart from the Commission’s decisional
        practice, and for the purpose of the current decision, it can be left open whether the
        appropriate geographic scope is worldwide or EEA-wide, as the Transaction does
        not give rise to serious doubts under either geographic scope.
4.2.7. Aromatic solvents
(58)    Aromatic solvents include benzene, xylene, toluene and others. A solvent is a
        volatile organic compound that allows application of the coating to the substrate and
        evaporates from the surface upon application.
4.2.7.1. Relevant product markets
(59)    In the area of aromatic solvents, the Commission has in the past left open whether
        xylene constitutes a separate market or should be regarded as part of the overall
        market for gasoline additives.42 For toluene, another aromatic solvent, the
        Commission has considered, but left open, whether there is an overall market for
38  M.4094 – Ineos / BP Dormagen, paragraph 56.
39  Form CO, paragraph 197.
40 M.4094 – Ineos / BP Dormagen, paragraph 58.
41 Form CO, paragraph 198.
42 M.4426 – Sabic / Huntsman Petrochemicals UK, paragraph 30.
                                                    14
 ---pagebreak---         toluene or separate markets for toluene depending on purity (e.g. TDI-grade
        toluene).43
(60)    The Notifying Party considers that it is appropriate to consider separate product
        markets for each aromatic solvent (e.g. xylene, toluene, benzene) without further
        segmentation.44
(61)    The market investigation did not give indication on whether xylene or a broader
        market for gasoline additives is more appropriate. Based on the Commission’s
        previous decisions, its market investigation and the Notifying Party’s arguments, the
        Commission considers that, for the purpose of the current Decision, the appropriate
        product market definition can be left open between a market for xylene or a broader
        market for gasoline additives. The Transaction does not give rise to serious doubts
        even for the narrower product market of xyelene, for which a vertical link exists.
        PTT’s market share is similarly low for both product market definitions, and under
        the broader product market definition of gasoline additives, Allnex’s share of
        demand would be even lower. Therefore, the Commission’s competitive assessment
        for xylene also applies to the broader product market for gasoline additives.
(62)    The Commission will perform its competitive assessment on the narrowest basis, i.e.
        xylene.45
4.2.7.2. Relevant geographic market
(63)    The Commission has previously considered that the appropriate geographic market
        for xylene is either EEA-wide or worldwide.46 The Notifying Party considers that the
        appropriate geographic scope for xylene is global, but submits that the appropriate
        geographic market definition can be left open between worldwide and EEA-wide, as
        the Transaction does not give rise to competitive concerns for either geographic
        scope.47
(64)    The Commission’s market investigation did not give any grounds to depart from the
        Commission’s decisional practice, and for the purpose of the current decision, it can
        be left open whether the appropriate geographic scope is worldwide or EEA-wide, as
        the Transaction does not give rise to serious doubts under either geographic scope.
43  M.2389 – Shell / DEA, paragraph 165.
44  Form CO, paragraph 220.
45 The Transaction does not give rise to an affected market for toluene. Toluene is banned in a concentration
    equal to or higher than 0.1 % by mass in adhesives and spray paints intended for sale to the general public
    by Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006
    concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), annex
    XVII. In compliance with the EEA regulatory framework, PTTGC does not sell toluene in the EEA and
    has not done so in the past. From a demand-side perspective, in the EEA, Allnex as well as many of its
    competitors replaced toluene with xylene (already used by Allnex to produce crosslinkers amino resins in
    other countries).
46 M.2389 – Shell / DEA, paragraph 166.
47 Form CO, paragraphs 222 and 223.
                                                         15
 ---pagebreak--- 5.      COMPETITIVE ASSESSMENT
(65)    As set out in paragraph (6), PTTGC is active in the manufacture of various
        chemicals and basic feedstock for downstream industries. Allnex sources some of
        these products for the production of synthetic resin products. The Transaction
        therefore gives rise to markets that are affected by virtue of the vertical links
        between PTTGC products upstream and Allnex’s products downstream. The
        Transaction does not give rise to products that are horizontally affected, as PTTGC
        and Allnex are not active in the same product markets.
5.1.    Analytical framework
(66)    Article 2 of the Merger Regulation requires the Commission to examine whether
        notified concentrations are compatible with the internal market, by assessing whether
        they would significantly impede effective competition in the internal market or in a
        substantial part of it, in particular as a result of the creation or strengthening of a
        dominant position.48
(67)    In the assessment of non-horizontal mergers, the Commission distinguishes between
        two broad types of such mergers: vertical mergers and conglomerate mergers.
(68)    Vertical mergers involve companies operating at different levels of the supply chain.
        For example, when a manufacturer of a certain product (the “upstream firm”) merges
        with one of its distributors (the “downstream firm”), this is called a vertical merger. 49
(69)    Conglomerate mergers are mergers between firms that are in a relationship that is
        neither horizontal (as competitors in the same relevant market) nor vertical (as
        suppliers or customers). In practice, the Commission focusses on mergers between
        companies that are active in closely related markets (e.g. mergers involving suppliers
        of complementary products or products that belong to the same product range). 50 The
        Transaction does not lead to markets where a conglomerate effects assessment is
        warranted.
(70)    In assessing potential vertical effects of a merger, the Commission analyses whether
        a merger results in foreclosure so that actual or potential rivals' access to supplies or
        markets is hampered or eliminated as a result of the merger, thereby reducing these
        companies' ability and/or incentive to compete. Such foreclosure may discourage
        entry or expansion of rivals or encourage their exit. Foreclosure thus can be found
        even if the foreclosed rivals are not forced to exit the market: it is sufficient that the
        rivals are disadvantaged and consequently led to compete less effectively. Such
        foreclosure is regarded as anti-competitive where the merging companies — and,
        possibly, some of its competitors as well — are as a result able to profitably increase
        the price charged to consumers.51
(71)    Two forms of foreclosure can be distinguished. The first is where the merger is
        likely to raise the costs of downstream rivals by restricting their access to an
48   Regarding rules relating to the functioning of the EEA Agreeme nt, see Annex XIV to the EEA
     Agreement.
49 OJ C 265, 18.10.2008, p. 6-25 (the ’Non-horizontal Merger Guidelines’), paragraph 4.
50 Non-horizontal Merger Guidelines, paragraph 91.
51 Non-horizontal Merger Guidelines, paragraph 29.
                                                       16
 ---pagebreak---         important input (input foreclosure). The second is where the merger is likely to
        foreclose upstream rivals by restricting their access to a sufficient customer base
        (customer foreclosure).52
(72)    In assessing both types of foreclosure, the Commission assesses whether (i) the
        merged entity would have the ability to engage in foreclosure, (ii) it would have the
        incentive to do so, and (iii) what would be the overall impact on effective
        competition in the affected markets.53
5.2.    Affected markets
(73)    As illustrated above in Figure 1, the ten vertical relationships affected as a result of
        the Transaction are the following:
        (a)      HDI upstream with radcure waterborne UV PUD downstream;
        (b)      IPDI upstream with radcure waterborne UV PUD downstream;
        (c)      MMA upstream with radcure waterborne UV PUD downstream;
        (d)      Styrene upstream with radcure waterborne UV PUD downstream;
        (e)      Glycerol upstream with radcure waterborne UV PUD downstream;
        (f)      Glycerol upstream with polyester powders downstream;
        (g)      PTA upstream with polyester powders downstream;
        (h)      DEG upstream with polyester powders downstream;
        (i)      MEG upstream with polyester powders downstream;
        (j)      MEG upstream with crosslinkers amino resins downstream and
        (k)      Xylene upstream with crosslinkers amino resins downstream.
(74)    All markets are vertically affected only by virtue of Allnex’s market share
        downstream, and not by PTTGC’s market share upstream, which always remains
        well under 30% as illustrated in the next section. The Commission’s investigation54
        has not yielded anything that would indicate that PTTGC possesses market power.
        Therefore, the Commission considers that the Transaction does not create a risk of
        input foreclosure based on the market structure. In light of this, the Commission’s
        competitive analysis will focus on the possibility of customer foreclosure.
5.3.    Market structure
(75)    PTTGC’s market shares in the affected upstream markets are provided below in
        Table 2.
52   Non-horizontal Merger Guidelines, paragraph 30.
53   Non-horizontal Merger Guidelines, paragraphs 32 and 59.
54 Responses to questionnaire Q1.
                                                       17
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---        products that sufficient alternative customers exist if Allnex’s demand disappeared
       from the market.61
(84)   Furthermore, for all upstream products, the relevant downstream products only make
       up a small percentage of the total demand (with a maximum of [5-10]% for PTA
       demand in the EEA destined for polyester powder production), showing that all
       upstream products have various alternative downstream uses. Respondents to the
       Commission’s market investigation confirmed that the relevant downstream products
       only make up a small fraction of demand of the vertically related upstream products.
       For each affected upstream product, the majority of respondents indicated that the
       downstream products affected by the Transaction only make up a small share
       (<10%) of upstream product demand.62 One respondent explains: “Radcure
       waterborne UV PUDs are a small niche of what is still a niche coating technology.
       The upstream materials listed, on the other hand, are commodities or specialties of
       very large use in many industries.”63 Similarly, for polyester powders and cross
       linker amino resins respectively, it explains: “Polyester Powders are produced in
       much greater volumes that Radcure Waterborne UV PUD, but still can only account
       for a fraction of the total use of the listed commodities used in the production of PET
       and as biofuel component” and “As above. Amino crosslinkers are common, but not
       so much!”64
(85)   This demonstrates that the downstream products in which Allnex is active are
       relatively niche uses of the upstream products, which are chemical commodities with
       uses over a large range of industries. Under these circumstances, it is implausible
       that the merged entity would have the ability to engage in a successful customer
       foreclosure strategy post-Transaction.
(86)   The facts of this case make it highly unlikely that the merged entity will have the
       ability to foreclose upstream competitors from access to downstream customers post-
       Transaction.
(87)   In addition to this clear lack of ability, the Commission considers that the merged
       entity would have no incentive to engage in customer foreclosure. Considering
       Allnex’s minimal share of demand for the upstream products, such customer
       foreclosure would not materially affect the ability of upstream competitors to
       compete with the merged entity. In turn, this would not affect the cost of
       downstream rivals and thereby allow the merged entity to set higher prices
       downstream. The merged entity therefore has nothing to gain from such a strategy.
(88)   Finally, even if customer foreclosure were to take place, the impact on the markets
       of such strategy would be small in view of Allnex’s limited procurement volumes
       compared to the overall size of the market.
(89)   In line with the above, the vast majority of respondents to the Commission’s market
       investigation did not indicate any concerns about the Transaction. One respondent
       voiced the concern that the merged entity may turn to captive use for upstream
61  Responses to questionnaire Q1, question 9.
62  Responses to questionnaire Q1, questions 5-7.
63 Response to questionnaire Q1, question 5.1.
64 Response to questionnaire Q1, questions 6.1 and 7.1.
                                                        21
 ---pagebreak---         products HDI and IPDI. However, as set out in paragraphs (82) and (84), Allnex
        makes up a limited share of sale for each product (including HDI and IPDI), and the
        affected downstream products only comprises a small share of all downstream
        applications for each upstream product (including HDI and IPDI). 65
5.5.    Conclusion
(90)    For the reasons set out above, the Transaction does not give rise to serious doubts as
        to its compatibility with the internal market or a substantial part thereof and the
        functioning of the EEA agreement in relation to vertical effects for any of the
        vertical links set out in paragraphs (73)(a)-(73)(k).
6.      CONCLUSION
(91)    For the above reasons, the European Commission has decided not to oppose the
        notified concentration 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
65   Responses to questionnaire Q1, question 11
                                                   22