CELEX: 32020M9623
Language: en
Date: 2020-03-17 00:00:00
Title: Commission Decision of 17/03/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9623 - AMG / SHELL / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 17.03.2020
                                                                 C(2020) 1816 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                                                                    information omitted has been replaced by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 parties
Subject:             Case M.9623 - AMG / Shell / JV
                     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 12 February 2020, the European Commission received notification of a
              proposed concentration pursuant to Article 4 of the Merger Regulation by which
              AMG Advanced Metallurgical Group N.V. (“AMG”) and Shell Overseas
              Investments B.V. (“SOI”), a wholly owned subsidiary of Royal Dutch Shell plc
              (“Shell”), acquire within the meaning of Articles 3(1)(b) and 3(4) of the Merger
              Regulation joint control of a newly created joint venture Shell & AMG Recycling
              B.V. (“S&AR”, or the “JV”, the Netherlands)3. Shell and AMG are designated
              hereinafter as the “Notifying 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 56, 19.02.2020, p. 9.
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)       AMG is a global specialty metals and engineering group supplying products and
             solutions to the aviation, infrastructure, energy and chemical industries. AMG
             Critical Materials, one of AMG’s operating segments, provides recycling services
             for oil refineries in relation to the spent residue upgrading catalysts (“resid
             catalysts”) generated from crude oil processing.4 AMG is currently active in
             catalyst recycling only in North America and sells the metals extracted through
             the recycling process on worldwide trading markets.
   (3)       Shell is the parent company of a global group of energy and petrochemical
             companies with businesses including: (i) oil and gas exploration, production and
             marketing; (ii) manufacturing, marketing and shipping of oil products and
             chemicals; and (iii) renewable energy products. Via its wholly owned subsidiary
             Shell Catalyst & Technologies, Shell supplies fresh resid catalyst (“FRC”) to oil
             refineries as well as associated technology, technical advisory services and
             research and development expertise.
   (4)       The JV will be a greenfield entity with no pre-existing market presence that will
             offer recycling services to oil refiners that use resid catalysts. Pursuant to the joint
             venture agreement (“JVA”) of 7 October 2019, the JV will be active in:
         (a)      the sourcing, recycling and reclamation of SRCs outside North America. The
                  JV will do this [details on the JV's business strategy] once the proposed
                  concentration has completed. [Details on the JV's business strategy], it
                  expects to construct a recycling plant using AMG’s technology and know-
                  how in the Middle East, which will have the ability to serve [details on the
                  JV's business strategy]; and
         (b)      the worldwide sale of extracted by-products from the catalysts recycling
                  process.
2.       THE OPERATION AND CONCENTRATION
   (5)       AMG and Shell, via SOI, agreed to the creation of the full-function JV by signing
             a JVA on 7 October 2019.5 Under the JVA, the JV will be supervised and
             managed by the Board of Directors. AMG and Shell will each be entitled to
             appoint [an equal number of] board directors. [Information relating to the JV's
             governance structure] . Therefore, the proposed concentration consists of an
             acquisition of joint control of the JV by Shell and AMG.
4   Oil refiners can use various technologies to upgrade “bottom of the barrel” heavier “residue” crude oil into
    lighter, higher-value refined products (e.g. gasoline, diesel, or kerosene). One such technology is
    hydroprocessing which uses resid catalysts. When supplied to oil refiners, the resid catalysts are “fresh”
    (“FRCs”). Once used in the hydroprocessing process to upgrade the residue, the resid catalysts become
    “spent” (“SRCs”, “SRCs”).
5   The JV’s implementation is subject to the prior receipt of necessary competition clearances, but is
    expected to complete shortly thereafter.
                                                          2
 ---pagebreak---    (6)      The JV will have sufficient own staff6 and dedicated management, as well as
            financial resources for its operation and for the management of its portfolio and
            business interests. The JV will have an independent market presence. It will
            engage in advertising its recycling services to potential customers and developing
            commercial opportunities with such customers. [Details on the JV's business
            strategy] once the regulatory approval for construction has been obtained, the JV
            will start construction of the first of its future recycling facilities […]. The JV will
            negotiate and enter into contracts with both oil refiners for the recycling of SRCs
            and buyers of the extracted industrial metals and other by-products from the
            recycling process.7 […]. Finally, the JV is intended to operate on a lasting basis.
            Therefore, the JV is a full-function entity.
   (7)      Therefore, it can be concluded that the creation of a JV by Shell and AMG
            constitutes a concentration within the meaning of articles 3(1)(b) and 3(4) of
            Council Regulation (EC) No 139/2004 (“EUMR”).
3.      EU DIMENSION
   (8)      The undertakings concerned have a combined aggregate worldwide turnover of
            more than EUR 5 000 million [AMG […], Shell […]].8 Each of them has an EU-
            wide turnover in excess of EUR 250 million [AMG […], Shell […]], 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 an EU
            dimension.
4.      RELEVANT MARKETS [MARKET DEFINITION]
   (9)      The concentration does not give rise to horizontally or vertically affected markets.
            There are no horizontal overlaps or vertical links between the activities of the JV
            and Shell. As regards the activities of AMG and the JV, there is no horizontal
            overlap between the activities of the JV (which will be active outside of North
            America) and AMG ([…]) in respect of recycling of SRCs as the market is
            narrower than worldwide (see paragraphs 50 to 54). Although both AMG and the
            JV will be active in the sale of by-products retrieved from their respective
            recycling processes, AMG’s and the JV’s combined market share will remain
            below 20% on any plausible market.9 The sale of extracted by-products will
            therefore not be further discussed in this Decision.
6   Once established, the JV will be free to recruit its own staff and appoint its own independent management
    team. The Parents will provide the JV with initial funding of […].
7   The JV will develop its own market presence as it will enter into contracts: (i) with refiners to procure
    SRC to be recycled; and (ii) with buyers of the extracted industrial metals and other by-products from the
    spent catalyst recycling process. These operations will be distinct from both Shell’s activities (as Shell is
    not active in recycling and reclamation services) and AMG’s activities (as it will be active outside of
    North America […]).
8   Turnover calculated in accordance with Article 5 of the Merger Regulation.
9   The Notifying Parties estimated AMG’s market shares as respectively (i) [0-5] % on the worldwide
    market for the supply of vanadium and [5-10]% excluding China, and in any event less than 20% on any
    plausible market (see case M.4494); (ii) less than [0-5] % on an EEA wide or worldwide market for the
    supply of ferronickel molybdenum (see case M.4000); (iii) AMG […] sells calcium aluminate […], and an
                                                           3
 ---pagebreak---    (10)     However, Shell’s activities in the sale of FRCs can be considered as neighbouring
            activities to those of the JV (recycling of SRCs). Given Shell’s relatively strong
            position in the sale of FRCs, the Commission investigated whether conglomerate
            concerns could arise.
4.1.     Market for the supply of FRCs
   (11)     FRCs are used to treat refinery residue, i.e. the “bottom of the barrel” heavy oil
            remaining after distillates have been removed from crude oil feedstock. By
            treating refinery residues with resid catalysts, refiners can “upgrade” the residue
            and convert it into lighter fuels, such as gasoline, diesel, or kerosene.10 In contrast
            to other types of catalysts, FRCs refers to a group of catalysts which (i) have
            “active sites” composed of nickel and molybdenum that promote the reactions;
            and (ii) are supported on a shaped “carrier” with a high surface area upon which
            the active sites are distributed. They are used specifically in a process called
            “hydroprocessing” (including fixed bed resid reactors and ebullated bed resid
            reactors).11
4.1.1. Product market definition
4.1.1.1. The Commission's decisional practice
   (12)     The Commission has not previously analysed the market for FRCs.
   (13)     In previous cases concerning other types of catalysts, the Commission has found
            that catalysts can be distinguished based on their specific application.12
4.1.1.2. The Notifying Parties’ view
   (14)     The Notifying Parties agree with the Commission’s practice to distinguish
            catalyst markets based on the specific application of the catalyst and submit that
            the relevant product market is the market for FRCs, with its specific application
            being hydroprocessing.13
   (15)     FRCs are bespoke products, their composition differing to suit the nature of the
            residue feedstock they are seeking to upgrade (light, heavy etc.) and the desired
            output (specific by-products). However, all FRCs suppliers would be able to
            adapt the FRCs they produce to customer needs, according to the Notifying
            Parties.14
    overlap with the JV activities would occur […] on a global market for the supply of calcium aluminate
    where AMG’s market share is less than [0-5] % (see case M.4157); and AMG […] sells calcium sulphate
    […] and an overlap with the JV activities would occur […] on a global market for the supply of calcium
    sulphate where AMG’s market share is below [0-5] % (see case M.4898). The JV has no market activities
    yet, but the Notifying Parties confirm that no affected market is expected to arise in respect of any
    extracted by-product from the JV’s activities given AMG’s minor market shares.
10  Form CO, paragraph 87.
11  Form CO, paragraph 166.
12  Cases COMP/M.4102 – BASF / Engelhard, paragraph 9, and COMP/M.3125 Huntsman / Matlinpatterson
    / Vaticano, paragraphs 10-14.
13  Form CO, paragraph 168.
14  Form CO, paragraph 269.
                                                         4
 ---pagebreak---    (16)      The Notifying Parties therefore argue that it is not necessary to look at potential
             sub-segments of FRCs as (i) the resid catalysts used in the two main types of
             refinery residue upgrading process reactors (“fixed bed” and “ebullated bed”
             reactors) are broadly similar15 and (ii) the recycling of SRCs does not differ
             depending on the manufacturer of the catalysts, refinery specifications, type of
             reactor etc..16
   (17)      Therefore, the Notifying Parties submit that the relevant product market is that of
             FRCs and that no further segmentation is justified.
4.1.1.3. The Commission’s assessment
   (18)      There are different catalytic and non-catalytic options to upgrade heavy crude oil
             residue. However, the results of the market investigation confirmed that these
             options should not be part of the same product market as the supply of FRCs. A
             large majority of respondents replied that at the point in time when refineries
             decide on the technology to upgrade heavy crude oil residue, catalytic and non-
             catalytic solutions are not considered interchangeable/substitutable,17 as “process,
             product slate and equipment are very different” and it “depends on how well it fits
             within the existing refinery and synergies in the industrial complex.”18 Further,
             there are different catalytic solutions which customers do not consider
             substitutable either.19 Once customers have adopted a certain technology to
             upgrade heavy crude oil residue, they cannot easily switch, neither between
             different catalytic solutions nor between catalytic and non-catalytic solutions.20
   (19)      Based on the replies to its market investigation, the Commission considers that
             the product market definition should not be broader than FRCs.
   (20)      As for a potential sub-segmentation, the majority of respondents to the market
             investigation consider that no distinction is required between FRCs for fixed bed
             and ebullated bed technologies. Both of these technologies are used in the EEA
             (about half of the refineries that participated in the market investigation use one
             or the other, some use both).21 Whilst from a demand-side perspective, each
             refinery customer requires a FRCs that fits the technology and type of oil it uses
             (and as such, requires a bespoke solution), supply side substitutability is high: a
             majority of both competitors and customers confirmed that most competitors of
15  There are two main reactor types, “fixed bed” and “ebullated bed”. Fixed bed resid reactors tend to be
    used for relatively lighter residue feedstock. Such feedstock is reacted through catalyst that is fixed or held
    in a bed in the reactor. Once the catalyst is deactivated the unit is shut down and the catalyst is replaced.
    Ebullated resid reactors tend to be used for processing heavier residue feedstock. The ebullated bed
    reactor allows catalyst to be added and withdrawn in small portions several times per day, so no down
    time is required to replace the FRC. (Form CO, paragraph 167, footnote 129).
16  Form CO, paragraph 89.
17  Replies to question 5 of questionnaire to customers. Replies to question 3 of questionnaire to competitors
    FRC.
18  Replies to question 5.1 of questionnaire to customers.
19  Replies to question 5.2 of questionnaire to customers. Replies to question 3.3 of questionnaire to
    competitors FRC.
20  Replies to question 5.3 of questionnaire to customers.
21  Replies to question 6 of questionnaire to customers.
                                                            5
 ---pagebreak---             FRCs are able to supply FRCs for refineries using any type of residue upgrading
            process reactor, i.e. “fixed bed”, “ebullated bed” or any other technology.22
   (21)     Based on its market investigation, the Commission therefore considers that the
            relevant product market for the purposes of this case is that of the supply of
            FRCs. No further sub-segmentation is necessary for the purposes of this case.
4.1.2. Geographic market definition
   (22)     As explained in recital (12), the Commission has not previously analysed a
            market for FRCs.
4.1.2.1. The Notifying Parties’ view
   (23)     According to the Notifying Parties, the geographic market is worldwide, as
            suppliers of FRCs operate globally. Plant proximity to the customer location is a
            relevant consideration but not the determining factor. Rather, the decision will be
            based on […].23 All suppliers of FRCs (Axens, Sinopec, Nippon Ketjen and
            Albemarle) are active in the EEA, in the sense that they are often invited to
            participate in tenders.24
   (24)     Transport costs only make up 2-3% of the total supply price, so FRCs suppliers
            can profitably supply customers around the world.25 Prices do not differ between
            regions, but are negotiated individually with customers (notably, as FRCs are
            bespoke products).26
4.1.2.2. The Commission’s assessment
   (25)     The results of the market investigation pointed towards a worldwide market for
            FRCs.
   (26)     All suppliers of FRCs and a clear majority of customers consider that the market
            for the supply of FRCs is global, as all operators are active at a global level,
            “trade flows are worldwide” and there are “no specific barriers at this moment”.27
   (27)     Suppliers of FRCs explained that customers are still supplied from the closest
            facility where the FRC is produced as long as that facility has sufficient
            capacity.28
   (28)     The Commission notes that in […] Shell itself supplied FRCs to the EEA [details
            in respect of supply]29 .
22  Replies to question 4 of questionnaire to competitors FRC.
23  Form CO, paragraph 72.
24  Form CO, paragraph 177.
25  Form CO, paragraph 177.
26  Form CO, paragraph 167.
27  Replies to question 5 of questionnaire to competitors FRC. Replies to question 10 of questionnaire to
    customers.
28  Replies to question 7 of questionnaire to competitors FRC.
29  Form CO, paragraph 287.
                                                          6
 ---pagebreak---    (29)   That being said, the overview of all refineries worldwide purchasing FRCs shows
          that different suppliers are more present in certain parts of the world than others,
          suggesting that if there is a choice at closer proximity, this supplier may have an
          advantage. For instance, some suppliers of FRCs are only supplying refineries in
          Asia Pacific, in North America, Europe or the Middle East.30
   (30)   In any case, the exact geographic market definition can be left open between the
          EEA and worldwide, as the proposed concentration will not give rise to serious
          doubts as to its compatibility with the internal market or the functioning of the
          EEA Agreement on either of the two plausible geographic market definitions.
4.2.    Market for the recycling of SRCs
   (31)   After FRCs are used to upgrade oil residue, they become “spent” and cannot be
          used a second time. This waste product can be either landfilled or recycled by
          first roasting it and then melting the roasted catalyst in a primary and a secondary
          furnace. In these different steps, by-products can be recovered and resold on the
          market, namely: ferronickel molybdenum, calcium sulphate, calcium aluminate
          and vanadium.31
4.2.1. Product market definition
4.2.1.1. The Commission's decisional practice
   (32)   The Commission has not previously analysed the market for recycling of SRCs.
4.2.1.2. The Notifying Parties’ view
   (33)   The Notifying Parties argue that the service of SRCs recycling should not be
          further segmented between (i) different stages of the refining process, (ii) on the
          basis of recovered materials and the technology of the recycling process or (iii)
          between different types of SRCs.32
   (34)   The different stages of the recycling process are the collection of SRCs, the
          roasting and melting in a primary and a secondary furnace and the extraction of
          various by-products during this process. The Notifying Parties argue that a
          segmentation is not necessary as, from the perspective of customers, the
          individual procedural steps are not relevant for the selection of a recycling service
          provider.33
   (35)   While the type and amount of materials that can be reclaimed through SRCs
          recycling can vary, a further segmentation on the basis of recovered materials is
          not necessary. What and how much can be reclaimed impacts the commercial
          conditions under which the recycling service is provided, but the recycling
          process will remain the same.34
30  Form CO, Annex 12.
31  Form CO, paragraph 92.
32  Form CO, paragraph 97 a.
33  Form CO, paragraph 97 a.
34  Form CO, paragraph 97 b.
                                                   7
 ---pagebreak---    (36)     The Notifying Parties also consider that there are no differences between the
            recycling of different types of SRCs. Considering other recycling providers
            already active in the market ([…]), these do not differentiate their price for
            recycling services on the basis of catalyst type.35 So, there is no reason for a split
            on the basis of the fresh resid manufacturer, the refinery specifications or the type
            of reactor from which the SRC originated.36
   (37)     The Notifying Parties conclude that the relevant market should be the market for
            SRCs recycling including all stages of the recycling process. The Notifying
            Parties however submit that the precise product market definition can be left
            open.37
4.2.1.3. The Commission’s assessment
   (38)     Based on its market investigation, the Commission considers that for the purposes
            of this case, the relevant market is that of recycling of SRCs.
   (39)     As regards the different stages of recycling, replies to the Commission’s market
            investigation showed that recyclers are integrated to different extents. In respect
            of collection, according to the Notifying Parties, transportation of the SRCs is
            typically a responsibility of the refineries (although there can be specific instances
            where a recycler may agree with a refiner to take responsibility over the
            logistics). This seems to be supported by the market investigation.38 In any event,
            transportation is carried out by a (specialised) freight handler for the physical
            transportation of the SRC to the facilities of the SRC recycling services provider,
            since refineries (or recyclers) generally do not own specialised bins or rail cars for
            such transportation. As regards the stages of roasting, melting and by-product
            extraction, whilst the major competitors active in the recycling of SRCs are active
            across the value chain, there are some market participants who only offer
            roasting.39 AMG is […] active in the full value chain […]. The JV is intended
            [details concerning the JV’s services]. For the purposes of this Decision, the
            Commission therefore considers that it is not necessary to sub-segment the
            relevant market by different stages of recycling.
   (40)     As regards a sub-segmentation based on recovered materials and the technology
            used in the recycling process, this does not appear warranted. In order to recycle
            SRCs, there are different technologies that fulfil the function to dispose of non-
            hazardous waste and recover metals, in particular pyro-40 and hydrometallical41
            processes are used. There were some indications in the market investigation that
            some technologies are better for extracting certain types of metals than others
35  Prices are based on other factors such as: the metals content in the SRC, the hazardous content of the
    SRC, the volume of the SRC as a whole, contract duration, condition of the spent catalyst, and value of
    the metals contained within the spent catalyst.
36  Form CO, paragraph 97 c.
37  Form CO, paragraph 98.
38  Minutes call with a competitor for recycling services, paragraph 2.
39  Replies to question 5 and 5.1 of questionnaire to competitors recycling services.
40  Pyro-metallurgical processes involve the use of heat (i.e. thermal treatment) to bring about physical and
    chemical transformations in the materials to enable recovery of valuable metals.
41  Hydrometallurgy involves the use of aqueous chemical reactions (solvent) chemistry for the recovery of
    the metals.
                                                           8
 ---pagebreak---             (e.g. where the vanadium content is high, a different technology is preferable than
            where the platinum content is high in order to recover as much of these metals as
            possible)42, but in general, the respondents to the market investigation considered
            that generally their customers would not focus on the technology used by the
            recycler.43 In general, respondents indicated other factors determining whether
            recyclers could serve their refinery (e.g. proximity).44
   (41)     The type and amount of materials that can be reclaimed through SRC recycling
            can also vary between customers as products are bespoke and will normally
            impact the commercial conditions under which the recycling services are offered
            ([…] is one of the elements that determines the overall pricing of the recycling
            service). In addition, fluctuating metal prices determine the relative importance of
            reclaiming specific by-products, so the commercial needs of customers vary in
            terms of the recycling process. All suppliers of recycling services seem to be able
            to recycle SRCs with differing metal contents (albeit some are better and/or more
            focused than others with specific resid catalysts/types of metals).45
   (42)     As regards the recycling of different types of SRCs, respondents to the market
            investigation were largely of the view that a segmentation based on the type of
            SRC to be recycled is not warranted. Recyclers offer recycling services for SRCs
            to a refinery using any type of residue upgrading process reactor i.e. “fixed bed”
            and “ebullated bed”46. So a distinction between different sources of the SRC is
            not required.
   (43)     For the purpose of this Decision, the Commission considers the relevant market to
            be that of recycling of SRCs without any further sub-segmentation.
4.2.2. Geographic market definition
4.2.2.1. The Commission’s decisional practice
   (44)     As explained in paragraph (32), the Commission has not previously analysed a
            market for the recycling of SRCs.
4.2.2.2. The Notifying Parties’ view
   (45)     According to the Notifying Parties, the geographic market for SRCs is EEA-wide,
            potentially including the Middle East and Asia as (i) transport costs for SRCs are
            significant, limiting the profitability of transporting the waste product from a
            refinery to a recycling facility, and (ii) as spent catalysts are toxic/hazardous, the
            related regulatory costs mean that recyclers in a different region are at a
            competitive disadvantage.47
   (46)     Given its hazardous nature and the relevant regulatory restrictions (as further
            discussed in paragraph (51)), SRC cannot be easily transported due to the cost
42  Reply to question 3.1 of questionnaire to competitors recycling services.
43  Replies to question 4 of questionnaire to competitors recycling services.
44  Reply to question 8.1 of questionnaire to customers.
45  Views of a purchaser of FRCs.
46  Replies to question 6 of questionnaire to competitors recycling services.
47  Form CO, paragraph 99.
                                                           9
 ---pagebreak---             involved.48 While regulatory hurdles can be overcome, in most circumstances
            spent catalysts are processed at regional level only, often in the vicinity of
            “clusters” of refineries, based on prevailing commercial conditions.49
   (47)     In addition, based on AMG’s experience [details on AMG's business strategy],
            transportation can account for up [details on AMG's business strategy].50
   (48)     The Notifying Parties therefore consider that, from the supply perspective,
            companies active in the SRC recycling business broadly operate on a regional,
            rather than a global, basis.51
   (49)     Therefore, the Notifying Parties submit that the geographic market is likely EEA-
            wide, potentially including the Middle East and Asia, but that the exact market
            definition can be left open between EEA-wide and worldwide.52
4.2.2.3. The Commission’s assessment
   (50)     The replies to the market investigation indicate that the relevant geographic
            market is likely to be EEA-wide or possibly EMEA (Europe, Middle East and
            Asia).53
   (51)     A majority of respondents confirmed that the distance between recyclers and
            refineries played an important role for the choice of recycler: “It is a benefit if the
            service provider is close by and long distance shipments can be avoided”,
            because of transport costs and regulatory constraints, namely:
            “European regulations on hazardous wastes;
            National regulations on hazardous wastes that can be even more constraining
             than EU regulations, such as the one implemented […];54
            Where these regulations do not apply (e.g. in Switzerland, even if that country is
             unrelated to [the refinery]’s activities in […]), the Basel Convention is relevant;
            Transportation costs and logistics (transportation by trucks); and CO2
             emissions.”55
   (52)     Consideration about greenhouse gas emissions are an additional reason for
            refineries to prefer recyclers located at shorter distance.56
   (53)     All competitors for recycling services considered the closeness of their
            customers’ plants and the facility where the spent resid catalyst is recycled
48  The spent catalyst is caked in toxic compounds and metals from the “bottom of the barrel” feedstock and
    becomes up to twice as heavier in weight as compared to when it is fresh (Form CO, paragraph 99).
49  Form CO, paragraph 101.
50  Form CO, paragraph 102.
51  Form CO, paragraph 104.
52  Form CO, paragraph 104.
53  Replies to question 14 of questionnaire to customers. Replies to question 7 of questionnaire to competitors
    recycling.
54  Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on
    shipments of waste.
55  Reply to question 14.1 of questionnaire to customers.
56  Reply to question 16.1 of questionnaire to customers.
                                                          10
 ---pagebreak---             somewhat or very important.57 Some refineries replied to the market investigation
            that they have procured recycling services from recycling plants that are located
            on average at a distance of around 1000-1500km and not more than 2500km from
            the refinery. Also this points to an EEA-wide market rather than one including the
            Middle East and Asia or a worldwide market.58 While shipments of SRCs do
            sometimes take place over longer distances depending on the amount of metals
            involved and the metal price, this appears rather exceptional.59
   (54)     Based on its market investigation, the Commission therefore considers that for the
            purpose of this Decision the relevant geographic market can be EEA-wide or
            EMEA-wide. The exact geographic market definition can be left open, as the
            proposed concentration will not give rise to serious doubts as to its compatibility
            with the internal market or the functioning of the EEA Agreement on either of the
            two plausible geographic market definitions.
5.      COMPETITIVE ASSESSMENT
   (55)     The proposed concentration does not give rise to horizontally affected markets,
            neither actually nor potentially.
   (56)     Nor does the proposed concentration give rise to actual or potential vertically
            affected markets. Shell currently has [details in respect of Shell’s group activities]
            and that is [details in respect of the JV’s operations].
   (57)     However, as the customers who purchase FRCs (a market where Shell has a
            market share of [40-50]% in the EEA) increasingly also purchase recycling
            services for the SRCs, this Decision analyses the effects of the proposed
            concentration on these potentially neighbouring markets.
5.1.    Conglomerate non-coordinated effects
5.1.1. Legal framework
   (58)     According to the Non-Horizontal Merger Guidelines, conglomerate mergers do
            not lead to any competition problems under most circumstances.60 However,
            foreclosure effects may arise where the merged entity offers a combination of
            products in related markets and has the ability and incentive to leverage a strong
            market position from one market to another closely related market through tying,
            bundling or other exclusionary practices.61
   (59)     Tying refers to situations where customers that purchase one good (the tying
            good) are required also to purchase another good from the producer (the tied
            good). Tying can take place on a technical or contractual basis.62
57  Reply to question 8 of questionnaire to competitors recycling services.
58  Replies to question 15 of questionnaire to customers.
59  Views of a purchaser of FRCs.
60  Non-Horizontal Merger Guidelines, paragraph 92.
61  Non-horizontal Merger Guidelines, paragraph 93.
62  Non-horizontal Merger Guidelines, paragraph 97.
                                                          11
 ---pagebreak---    (60)   Bundling can take the form of pure bundling, which is similar to contractual
          tying, or mixed bundling. Mixed bundling refers to situations where the products
          are also available separately, but the sum of the stand-alone prices is higher than
          the bundled prices.63 Tying and bundling as such are common practices that often
          have no anticompetitive consequences. Nevertheless, in certain circumstances,
          these practices may lead to a reduction in actual or potential rivals’ ability or
          incentive to compete. Foreclosure may also take more subtle forms, such as the
          degradation of the quality of the standalone product.64 It may reduce the
          competitive pressure on the merged entity allowing it to increase prices.65
   (61)   Foreclosure can be a potential concern, if (i) there is a large common pool of
          customers, which is more likely when products are complementary;66 (ii) at least
          one of the merging parties’ products is viewed by many customers as particularly
          important and there are few relevant alternatives for that product;67 and (iii) the
          merged entity must have a significant degree of market power, but not necessarily
          dominance, in one of the markets concerned.68
   (62)   The incentive to foreclose rivals through bundling or tying depends on the degree
          to which this strategy is profitable.69 For instance, it is unlikely that the merged
          entity would be willing to forego sales on one highly profitable market in order to
          gain market shares on another market where turnover is relatively small and
          profits are modest.70 The Commission will also take into account the ownership
          structure of the merged entity, type of strategies adopted on the market in the past
          or the content of internal strategic documents such as business plans.71
   (63)   Finally, it is only when a sufficiently large fraction of market output is affected by
          foreclosure resulting from the concentration that the concentration may
          significantly impede effective competition. If there remain effective single-
          product players in either market, competition is unlikely to deteriorate following a
          conglomerate concentration.72 The effect on competition needs to be assessed in
          light of countervailing factors such as the presence of countervailing buyer power,
          the likelihood that entry would maintain effective competition in the closely
          related markets concerned, or indeed the ability of single-product competitors to
          combine their offers.73
63  Non-horizontal Merger Guidelines, paragraph 96.
64  Non-horizontal Merger Guidelines, paragraph 33.
65  Non-horizontal Merger Guidelines, paragraph 93.
66  Non-horizontal Merger Guidelines, paragraph 100.
67  Non-horizontal Merger Guidelines, paragraph 99.
68  Non-horizontal Merger Guidelines, paragraph 99.
69  Non-horizontal Merger Guidelines, paragraph 105.
70  Non-horizontal Merger Guidelines, paragraph 107.
71  Non-horizontal Merger Guidelines, paragraph 109.
72  Non-horizontal Merger Guidelines, paragraph 113.
73  Non-horizontal Merger Guidelines, paragraphs 103 and 114.
                                                      12
 ---pagebreak--- 5.1.2. Leveraging Shell’s position in FRC into the recycling of SRC
5.1.2.1. Potential concern
   (64)     Shell is active in the market for the supply of FRCs, whereas the JV will be active
            in the market for the recycling of spent catalysts. These two products/services are
            in principle purchased by the same customers, namely by refineries.
   (65)     Two competitors active in the recycling of SRCs in the EEA expressed some
            concerns that refineries would opt for a bundled offer and lose the flexibility to
            select the most appropriate FRC supplier and/or the most appropriate recycler,
            and that the large companies AMG and Shell will crowd out smaller family
            owned recycling businesses.74
   (66)     The Commission has assessed a potential competition concern whereby Shell
            would leverage its relatively strong position in the market for the supply of FRCs
            into the market for the recycling of SRC where the JV will be active and thereby
            foreclose recycling competitors, causing harm to consumers.
   (67)     The Commission has assessed in particular the ability and the incentive of Shell
            engaging in the following tying/bundling practices, together with the JV:
                 Technical tying: differentiating the degree of technical compatibility between
                  FRC and recycling of SRC;
                 Contractual tying/pure bundling: imposing the purchase of recycling services
                  for SRC by the JV on Shell’s customers of FRC; and/or
                 Mixed bundling: incentivising the joint purchase of FRC by Shell and
                  recycling services of SRC by the JV by offering higher prices for mix-and-
                  match solutions involving only one of the products as compared to the
                  bundle.
5.1.2.2. Shell’s position in the sale of FRCs
   (68)     At the outset, the Commission notes that in the EEA, only seven refineries out of
            around 90 currently use FRCs (and as such, are potential customers for SRC
            recycling services). Shell is currently the […] supplier of FRCs to […] refineries.
            In addition, […]. However, […] as of 2020.75
   (69)     Tables 1 and 2 below present the market shares of Shell and its competitors on an
            EEA-wide market for FRC. In 2018, Shell held a market share of [40-50]% both
            by volume and by value in the market for the supply of FRC.
74  Reply to question 26 of questionnaire to competitors recycling services.
75  As of 2020, Shell […] in the EEA, […]. […] (Form CO, paragraph 176). […] following tenders held
    annually (in 2017, 2018 and 2019).
                                                         13
 ---pagebreak---  ---pagebreak---  ---pagebreak---    (73)     Shell estimates that its market share on the global market for FRCs was at [30-
            40]% in 2019 and will [details in respect of market share changes] in 2020
            (volume) based on Shell’s actual sales for 2019, forecast sales for 2020, and
            Shell’s internal best estimates for total demand.78
5.1.2.3. Notifying Parties’ view
   (74)     The Notifying Parties argue that Shell will not have the ability and incentive to
            leverage its potentially strong position in the market for FRC into the market for
            recycling of SRC where the JV will be active. In any event, the Notifying Parties
            submit that any putative leverage could not lead to anticompetitive foreclosure of
            Shell’s or the JV’s competitors. The reasons are the following.
        (A)        As regards ability
   (75)     The Notifying Parties argue that Shell will not have the ability to leverage its
            market position in the market for FRC, because it lacks market power.
   (76)     First, the market shares of Shell are not indicative of sustained market power as
            they are prone to rapid change when refineries re-tender supply which occurs
            every 1-3 years. Moreover, currently only seven refineries in the EEA purchase
            FRC.79
   (77)     Second, Shell faces strong competition both at global and EEA level, notably
            from market leader ART (with [30-40]% at global level and [50-60]% in the
            EEA), as well as Sinopec, Nippon Ketjen and Axens. Although at present Axens,
            Sinopec and Nippon Ketjen do not have contracts in the EEA, they are often
            invited to participate in tenders. Generally, all suppliers of FRC operate globally,
            and could potentially become active in the EEA.80
   (78)     Third, the Notifying Parties argue that the rising demand for FRC will attract new
            entrants while existing suppliers are likely and able to increase capacity.81 For
            customers, there are no barriers to switching as contracts are relatively short (e.g.
            annual basis).82
   (79)     Fourth, technical tying is not a possibility as there are no specific characteristics
            that could create a technical dependence or otherwise require compatibility
            between Shell’s supply of fresh resid and the JV recycling business (or vice
            versa)83.84
   (80)     Fifth, contractual tying will not take place, as Shell will continue to have refinery
            customers who are free to use other recycling providers (e.g. better
78  Form CO, Table 13.
79  Form CO, paragraph 196.
80  Form CO, paragraph 177.
81  Form CO, paragraph 241.
82  Form CO, paragraph 253.
83  Although the JV’s business plans have not been finalised, its [details of the JV's strategy] strategy is to
    construct a recycling plant using AMG’s technology and know-how in the Middle East (Form CO,
    paragraph 12).
84  Form CO, paragraph 220(a)(i).
                                                      16
 ---pagebreak---            geographically located), Shell and the JV will operate at arm’s length, and as
           Shell and the JV will be accountable to their own shareholders they will not
           sacrifice potential margin or opportunity to support the other (unless collectively
           the most attractive competitive proposition).85
   (81)    Sixth, refinery customers enjoy a wide choice of other recycling services
           suppliers – with at least five providers active in the EEA. Moreover, as ten
           providers of recycling services are active globally, refinery customers could also
           seek interest from alternative suppliers. AMG (and the JV) have no current EEA
           presence. Refineries also have an interest in maintaining a choice of suppliers and
           may multi-source SRC recycling services.86
   (82)    Seventh, refineries are large and sophisticated customers who carry out
           procurement processes to secure optimal supply options, both in respect of fresh
           resid supply and spent resid recycling services. 87
   (83)    Eight, the competitive dynamics in FRC supply and SRC recycling differ, with a
           local presence far more significant in the choice of recycling provider given the
           transportation challenges involved.88
        (B)       As regards incentives
   (84)    According to the Notifying Parties, Shell does not have the incentive to engage in
           a bundling strategy of the two products it offers to refineries.
   (85)    First, the value of fresh catalyst contracts is significantly larger than that for
           recycling services. In 2018, the value of the overall fresh resid supply sales
           worldwide represented an estimated [550 – 600] million EUR compared to the
           market for recycling of SRC worth approximately [150 – 200] million EUR.89
   (86)    The Notifying Parties further argue that [information about the Parties' profit
           margins] stable margins are found in the business of supplying FRC to refineries,
           as compared with the supply of spent catalyst recycling services ([information
           about the Parties' profit margins]).
   (87)    Shell’s net sales of FRC in 2018 were EUR […] (2019 EUR […]) with a gross
           profit of EUR […] (2019 EUR […]). The gross margin amounted to […]% (2019
           […]%). For 2020 Shell expects the net sales to go [details in respect of Shell’s
           sales, customers and margins]. Based on AMG’s SRC recycling activities […], in
           2018 revenues were EUR […], with gross profits of EUR […] and a gross profit
           margin of […]. The Parties emphasize that the result was driven by […] and
           submitted that for 2019 […]. If taken over a two-year period (2018 – 2019),
           AMG's gross profit margin of below […].
   (88)    Therefore, according to the Notifying Parties, the JV's future business model
           ([details of the JV’s business model]) means Shell will have no incentive to put at
85  Form CO, paragraph 220 (a)(ii).
86  Form CO, paragraph 220 (a)(iii).
87  Form CO, paragraph 220 (a)(iii).
88  Form CO, paragraph 220 (a)(iii).
89  Form CO, paragraph 220 (b)(i).
                                                  17
 ---pagebreak---            risk a business yielding consistent gross profits and margins to pursue a bundling
           strategy outside of North America through the JV.90
   (89)    Second, in many cases, the JV would not be an attractive solution for Shell’s FRC
           customers, either because they do not recycle or because the transport to the
           location of the recycling facilities of the JV makes recycling too expensive. Thus
           Shell will be careful not to lose customers who are not interested in recycling
           services, or who do not consider the JV an attractive solution given its geographic
           location.91
   (90)    Third, refineries often purchase recycling services from more than one company,
           in particular if they generate large amounts of SRC, to manage any supply side
           risks.92
   (91)    Fourth, as explained in paragraph (78), switching costs for fresh catalyst are low,
           so Shell would risk losing contracts if it tried to leverage its market position and
           force refinery customers to acquire recycling services from the JV. Barriers to
           switching are also low for recycling services of SRC,93 so refineries could react
           timely to any attempts to bundle.
   (92)    Fifth, Shell’s competitors have the ability to increase production of FRC to react
           to changes in demand, by reallocating existing production capacity from other
           catalyst types to resid catalyst, as well as by adding additional capacity.94
   (93)    Sixth, as for the JV’s competitors in the EEA market for recycling of SRC, the
           Parties estimate that Treibacher is the market leader in the EEA with 50-70%
           market share, followed by Moxba (20-30%) and Eramet, Nickelhuette and Aura
           Technologie. Transport costs mean that recyclers located close to refineries have
           a stronger position.95
   (94)    Therefore, refinery customers will remain free to choose to use other FRC
           providers as well as recycling providers, while Shell and the JV will each operate
           to maximise their own financial performance and will therefore not sacrifice
           potential margin or opportunity to support the other.
        (C)       As regards effects
   (95)    According to the Notifying Parties, it should also be noted that not all refineries
           that purchase FRC also choose to recycle the spent catalyst after use. An
           estimated [20-30]% of SRC is disposed of in landfills, particularly in the Middle
           East.96 This is due to the current recycling capacity constraints in the industry.
   (96)    The Notifying Parties argue that the JV’s entry into the market for recycling
           services will enhance competition because it will add capacity to the market of
90  Response of 24 February 2020 to RFI dated 20 February 2020.
91  Form CO, paragraph 220 (b)(ii).
92  Form CO, paragraph 236.
93  Form CO, paragraph 236.
94  Form CO, paragraph 249.
95  Form CO, paragraph 209.
96  Form CO, paragraph 17.
                                                      18
 ---pagebreak---              recycling services for SRC and provide an alternative to landfill. The JV will also
             provide an alternative choice and increase availability of metal by-products which
             would otherwise be lost if they were landfilled.97
5.1.2.4. The Commission’s assessment
         (A)        Ability
    (97)     The Commission considers that Shell and the JV will not have the ability to
             engage in tying or bundling for the following reasons.
    (98)     First, despite Shell’s relatively strong market position in 2018 ([40-50]% in the
             EEA and [30-40]% worldwide), Shell does not have a significant degree of
             market power.
    (99)     In the EEA in particular, its market shares […]. There are currently only seven
             refineries in the EEA using hydroprocessing and Shell’s market share can
             decrease rapidly. In 2019, Shell […].98
    (100) The lack of market power is also supported by the replies to the market
             investigation where respondents indicated that (i) it is easy to switch suppliers;
             (ii) a choice of suppliers exists; and (iii) competitors are expected to expand and
             increase capacity.
    (101) Buyers of FRC are able to switch and do so regularly. A majority of customers
             that responded to the market investigation procure FRC by tender.99 Tenders for
             procuring FRC are concluded for different durations, ranging from one to five
             years.100 Around half of the buyers of FRC have switched supplier in the last five
             years.101 One other respondent to the market investigation observed that switching
             of FRC provider had not taken place, as they never faced problems.102 In
             consequence, there are no obstacles for customers to choose and change their
             supplier of FRC on a regular basis.
    (102) In terms of choice of suppliers of FRC, respondents to the market investigation
             indicated that several alternative suppliers compete in the supply of FRC both at
             EEA-wide and worldwide level.103 Whereas customers identified ART and Shell
             as those most active in the EEA, one competitor also named the following
             companies as competitors: Albemarle, Axens, JGC Holdings and Haldor Topsoe
             on a worldwide basis.104 Other players active on a worldwide market are for
97   Form CO, paragraph 5.
98   Form CO, paragraph 264.
99   Replies to question 19 of questionnaire to customers.
100  Replies to question 20 of questionnaire to customers.
101  Replies to question 21 of questionnaire to customers.
102  Reply to question 21 of questionnaire to customers.
103  Replies to question 18 of questionnaire to customers and replies to question 9 of questionnaire to
     competitors FRC.
104  Replies to question 18 of questionnaire to customers, and replies to question 9 of questionnaire to
     competitors FRC.
                                                           19
 ---pagebreak---              instance Sinopec, Nippon Ketjen, Kuwait Catalyst Company (KCC), Cosmo
             Chemical.105
    (103) Finally, a clear majority of refineries expects the market for FRC to grow, with
             increasing demand from new hydroprocessing units all over the world.
             Competitors do not see capacity constraints in the market for FRC. In particular,
             several respondents noted that “there is plant capacity available in the Middle
             East.” In addition to existing production capacity that is not yet fully used, one
             respondent noted that “New resid capacity is coming online in 2020 that will
             address additional demand.”106 One customer also expects the entry of “one or
             two new players in the market in 10 years” for both economic and regulatory
             reasons107
    (104) Second, technical tying is very unlikely. None of the respondents to the market
             investigation mentioned technical tying as a possibility. One respondent to the
             market investigation noted with regard to the supply of fresh catalysts and
             recycling services for SRCs that “from a technical perspective, the two activities
             have nothing in common: they follow two different processing steps and there
             would be no possibility for the JV to technically link the two activities”.108
    (105) Third, contractual tying/bundling or mixed bundling is unlikely because in the
             first place, refineries’ choice of the supplier of FRC is not subject to offering
             recycling services but largely based on the performance of the catalyst. None of
             the respondents to the market investigation would refuse to consider a supplier
             for FRCs that does not offer recycling services.109 As one potential customer
             stated “FRCs, as any other catalysts, are a specialty materials that are selected
             based on performance/price ratio. Other factors are not so determining.”110 The
             offering of recycling service may be a nice add on, but will not determine the
             outcome of selecting the FRC provider.111
    (106) Where the offers for FRC differed, it would be easy to switch to a different
             supplier.112 When assessing a bundled offer including recycling, customers would
             carefully consider “[t]he whole picture […] the amount of discount reasonable
             and favourable, where is the recycling facility located, the amount of paperwork
             (different regulations) needed, etc.”113
105  Form CO, tables 2 and 3.
106  Replies to question 17 of questionnaire to competitors FRC.
107  Replies to question 22 of questionnaire to customers; “The non-catalytic route (e.g. solvent deasphalting,
     delayed coking) should not increase much because of difficulties in finding markets for asphalt and
     petroleum coke products. The catalytic upgrading of resid has also better economics at current oil prices
     and above. Besides the conversion economic incentive, there are also fiscal policies in some countries
     (e.g. Russia) stimulating resid upgrading by taxing black oil products exports. These are also supported
     by regulatory changes, such as the recent IMO shift from 3.5 to 0.5% sulfur fuel oil on international
     waters. This has led to a major change in crude oil selection for refiners not equipped with resid
     upgrading, with an economic impact.”
108  Minutes of a call with a competitor of recycling services, paragraph 11.
109  Replies to question 29 of questionnaire to customers.
110  Replies to question 29.1 of questionnaire to customers.
111  Views of a purchaser of FRCs.
112  Minutes of a call with a potential customer, paragraph 10.
113  Replies to question 30.1 of questionnaire to customers.
                                                           20
 ---pagebreak---     (107) The refineries that responded to the market investigation overall underlined that
             the supply of FRC is relatively more important than recycling services for the
             choice of a FRC supplier.114 Even if some respondents considered that offering a
             recycling service may give an advantage, act as a differentiator for refiners who
             need a “cradle to grave” catalyst solution, or indeed provide efficiencies for
             customers,115 the majority of customers buying FRCs clearly considered that they
             would procure FRCs from suppliers who do not offer recycling services. Only in
             a case where all FRC suppliers participating in a tender could provide the same
             quality and margins, could an offer for recycling services potentially make a
             difference.116
    (108) In the second place, refineries are sophisticated buyers that typically use tenders,
             both for the procurement of FRC and for the procurement of recycling services
             for SRC.117 These buyers have in the past been selecting and changing suppliers
             of FRC in tender procedures. They have also experience in selecting suppliers of
             recycling services. They will choose those suppliers for each service that provide
             the best performance and margins for the refinery.
    (109) In the third place, even if refineries procure both the supply of FRC and recycling
             services of SRC, all buyers of FRC that responded to the market investigation
             stated that they procure recycling services for SRC separately from the
             procurement of FRC.118 The duration of the contracts for respectively the supply
             of FRC and the recycling of FRC can differ (see paragraph (101) and footnote
             117). This difference in timing negatively impacts on the possibility of
             tying/bundling.
    (110) Finally, as explained in paragraph 103 of the non-horizontal merger guidelines,
             ability to foreclose is unlikely to exist if counterstrategies by rivals exist. One
             example cited is when single-product companies combine their offers so as to
             make them more attractive to customers. In this context, the Commission notes
             that, while the driver of FRC demand remains technical performance, there is
             demand for bundling on the market. Respondents to the market investigation
             confirmed that refineries have been asking their suppliers of fresh catalyst to also
             supply recycling services for the spent catalyst. As a competitor stated, “[t]here is
             a high demand in the industry to offer closed loop services and to keep the
             valuable metals involved in a circle. This is protecting the environment and
             reduces the mining activities for metals.”119
    (111) In consequence, some of Shell’s competitors offer to put their customers in
             contact with providers of recycling services, where requested by customers.
             Market leader ART stated: “We primarily sell FRCs. However, we have business
114  Replies to question 29 and 30 of questionnaire to customers.
115  Replies to question 29.1 of questionnaire to customers, replies to question 16 of questionnaire to
     competitors.
116  Views of a purchaser of FRCs.
117  The average duration of contracts is 2 to 5 years. Replies to question 25 of questionnaire to customers.
118  Replies to question 24 of questionnaire to customers.
119  Reply to question 19.1 of questionnaire to competitors recycling services.
                                                            21
 ---pagebreak---              arrangements with metals reclaiming companies.”120As such, counterstrategies
             between competing FRC suppliers and SRC recyclers already exist.
    (112) Therefore, the Commission considers that the JV will not have the ability to
             engage in foreclosure through tying or bundling.
         (B)        Incentives
    (113) The Commission considers that even if there were to exist an ability to foreclose
             through tying or bundling, Shell and the JV have no incentives to do so for the
             following reasons.
    (114) First, the margins […] on the sale of FRC are [details concerning Shell’s and
             AMG's margins], based on AMG’s experience […] (see paragraph (87).
    (115) Second, Shell’s likely incentives to foreclose recycling rivals is further reduced
             by the fact that Shell is only a 50% shareholder in the JV. It is therefore unlikely
             that Shell would sacrifice […] margins on its sale of FRC for […] offered by the
             JV.
    (116) Third, there is no evidence of past tying and bundling in the industry.121
    (117) Therefore, the Commission considers that Shell is unlikely to have the incentive
             to engage in foreclosure through a tying or bundling strategy.
         (C)        Effects
    (118) Any foreclosure strategy would be very unlikely to result in significant
             anticompetitive effects.
    (119) First, the envisaged activities of the JV would likely only affect competitors to a
             limited extent. Both the market for FRC and the market for the recycling of SRCs
             is expected to grow in the future. Refineries generally expect “demand for
             recycling servicing will increase tremendously in the next 10 years as more and
             more resid hydroprocessing units are coming up all over the world”. Overall,
             “[r]ecycling services for SRCs should increase for three reasons:
             a) it should shadow the market for FRCs, which is expected to increase over the
             next 10 years […]
             b) regulatory requirements will enforce reuse of waste materials;
             c) economic incentive to reclaim base metals from SRCs helps offsetting the cost
             of recycling.”122
    (120) About half of the refineries that responded to the market investigation consider
             that there are not enough suppliers/capacity for recycling of SRCs.123 “There are
             more and more resid hydroprocessing units coming up all over world. Though
120  Reply to question 14.1 of questionnaire to competitors FRC.
121  [Details about the future commercial strategy of the JV], nor did anyone in the market investigation
     suggest that such behaviour or attempts at such behaviour has taken place in the past.
122  Replies to question 28 of questionnaire to customers.
123  Replies to question 27 of questionnaire to customers.
                                                           22
 ---pagebreak---              many spent catalyst recycling facilities are planning for revamp, there could be
             shortage of spent catalyst recycling capacity in the near future.”124
    (121) Furthermore, the respondents to the market investigation indicated that refineries
             no longer landfill their SRC in the EEA.125 A customer also noted that landfill
             will likely be banned worldwide in the future.126
    (122) Second, the market investigation further confirmed that several alternative
             suppliers of recycling services are present in the EEA and EMEA Customers or
             potential customers in the EEA listed the following companies as potential
             suppliers: Treibacher, Moxba, Sadaci,, whereas, for an EMEA-wide market, a
             Middle East located refinery also mentioned GS Ecometals, Rubamin and
             Gladiuex Metal Recycling.127 These companies will continue to offer alternative
             solutions to refineries and form a competitive constraint to the JV. Recyclers of
             SRCs list as their competitors also Eurecat and SPT Czech, in addition to those
             mentioned by refineries.128
    (123) Third, the JV will in fact increase competition and choice in the market. As one of
             the respondents to the market investigation considered “I hope this transaction
             brings good competition to the market”.129
    (124) This is despite the fact that replies to the market investigation indicated plans
             exist to increase recycling capacity in the future even if increasing capacity for
             recycling of SRCs is (very) difficult.130 The fact that recyclers have nevertheless
             plans to increase capacity shows that demand for hydroprocessing is expected to
             increase significantly.
    (125) The activities of the JV could prevent a future capacity shortage. A majority of
             respondents in the market investigation see an increasing demand for recycling
             services in the coming years: “[t]he volume of spent catalyst generated from
             hydroprocessing units is increasing due to the trend in higher capacity refinery
             units. Also, the environmental regulations for the disposal of hazardous waste or
             dangerous goods – in Europe and elsewhere - are becoming more stringent.
             Refiners are looking for more economic solutions to dispose of this material,
             which in some cases are recycling.”131
    (126) Fourth, the JV is likely to [details as to the JV’s strategy and plans] serve
             customers in the Middle East, as [details as to the JV’s strategy and plans]
             recycling facility of the JV is [details as to the JV’s strategy and plans] envisaged
             to be built in Saudi Arabia. The respondents to the market investigation indicated
124  Reply to question 27.1 of questionnaire to customers.
125  Replies to question 9 of questionnaire to customers. Non-confidential replies to question 24.1 of
     questionnaire to competitors recycling services.
126  Replies to question 28 of questionnaire to customers.
127  Replies to question 23 of questionnaire to customers. However, one refinery also noted that “[the refinery]
     currently […] and is not in a position to list other potential suppliers because it has opted for a particular
     technical choice for unloading catalysts limiting the number of potential suppliers - hydro-jetting”.
128  Replies to question 12 of questionnaire to competitors recycling services.
129  Reply to question 33 of questionnaire to customers.
130  Reply to question 21.2 of questionnaire to competitors recycling services.
131  Reply to question 16.2 of questionnaire to competitors FRC.
                                                             23
 ---pagebreak---              that there are not enough recycling facilities in this region, whereas demand is
             growing and whereas there are already a number of alternative recycling services
             suppliers for SRC in the EEA.
    (127) Competitors for recycling services recognised that “In Europe the volume of spent
             resid units is more or less in line with the current recycling capacity. In the
             Middle-East there is not enough capacity.”132 “In the Middle-east the number of
             resid units is growing”, so in consequence, demand for the recycling of SRC is
             high, but few recycling service suppliers are based in the region. Therefore,
             “[a]vailable capacities for recycling metal containing wastes are limited while the
             generation of these wastes is constantly increasing.”133
    (128) Therefore, the JV is likely to [details as to the JV’s strategy and plans] recycle
             SRCs from the Middle East, where demand is greatest and where the Notifying
             Parties are carrying out plants feasibility studies. In consequence, it would not
             closely compete with recyclers of SRC located in the EEA, on either an EEA or
             EMEA-wide market. It follows that the creation of the JV would have a limited
             impact on competition in the EEA if the market for recycling of SRC were to be
             defined as EEA-wide.
    (129) If the market for recycling of SRC were to be defined as EMEA-wide, the JV
             would compete with providers of recycling services for SRC listed in paragraph
             (122).
    (130) Therefore, even in case the JV would in the future establish recycling facilities in
             the EEA, this would have the positive effect of adding an alternative supplier to
             the market.
    (131) The market results of the market investigation also pointed to the ability of the JV
             to increase the availability of metals extracted via the recycling process: “Europe
             has no primary metal deposits for vanadium, nickel or molybdenum - so recycling
             (secondary raw materials) becomes increasingly important.”134
    (132) Finally, it is also unlikely the JV could leverage its future position in the market
             for the recycling of SRC to increase Shell’s sales of FRC. First, as set out above,
             refineries chose their supplier of FRC on the basis of the technical performance
             and consider the recycling service as an add-on. It is also unlikely that AMG
             would agree to leveraging the recycling service as only Shell would have the
             benefit of selling more FRC. In any event, it is unlikely that any offer for
             recycling services can determine the outcome of the selection process for the FRC
             supplier which is driven by the technical performance of the FRC.
5.1.3. Conclusion on conglomerate non-coordinated effects
    (133) Based on the analysis set out above, the Commission concludes that it is unlikely
             that the JV or Shell could, through tying and bundling the supply of FRC with the
             recycling of SRC, foreclose competitors in the EEA-wide or worldwide market
132  Replies to question 20 of questionnaire to competitors recycling services.
133  Reply to question 19.1 of questionnaire to competitors recycling services.
134  Reply to question 19.2 of questionnaire to competitors recycling services.
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 ---pagebreak---          for the supply of FRC or in the EEA-wide or EMEA-wide market for recycling of
         SRC.
6.     CONCLUSION
   (134) 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
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