CELEX: 32021M10206
Language: en
Date: 2021-07-19 00:00:00
Title: Commission Decision of 19/07/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10206 - MAYR-MELNHOF KARTON / INTERNATIONAL PAPER (POLAND)) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 19.7.2021
                                                                C(2021) 5494 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
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                                                                replaced by ranges of figures or a general
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                                                                Mayr-Melnhof Karton AG
                                                                Brahmsplatz 6
                                                                A-1040 Vienna
                                                                Austria
Subject:            Case M.10206 ― Mayr-Melnhof Karton/International Paper (Poland)
                    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 14 June 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation and following a referral
          pursuant to Article 4(5) of Council Regulation (EC) No 139/2004 by which Mayr-
          Melnhof Cartonboard International GmbH (Austria), belonging to the group Mayer-
          Melnhof Karton AG (“MM” or the “Notifying Party”) intends to acquire within the
          meaning of Article 3(1)(b) of the Merger Regulation control of the whole of Internal
          Paper (Poland) Holding Sp.z.o.o. (together with its subsidiaries “IP Poland”, Poland)
          (the “Transaction”)3. MM and IP Poland are designated as the “Parties”.
1    OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the
     Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the replacement of
     ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will
     be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
3    Publication in the Official Journal of the European Union No C 244, 22.6.2021, p. 25.
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)      MM is a producer of both cartonboard, in particular folding box board (“FBB”) and
         packaging products, in particular folding cartons (also referred to as “folding
         boxes”). To a limited extent, MM also produces (mechanical) pulp. MM is based in
         Vienna, Austria, and is active worldwide. On 11 June 2021, the Commission
         approved the acquisition by MM of Kotkamills, a cartonboard manufacturer based in
         Finland.4
(3)      IP Poland operates an integrated pulp and paper plant in Kwidzyn, Poland. Its
         products comprise uncoated woodfree paper, FBB, kraft paper and pulp. The focus
         of IP Poland’s business activities is Europe.
2.       THE OPERATION
(4)      The Transaction consists of the acquisition of 100% of the shares in, and sole control
         over, IP Poland by MM. The Transaction therefore is a concentration within the
         meaning of Article 3(1)(b) of the Merger Regulation.
3.       UNION DIMENSION
(5)      On 30 March 2021, the Commission received, by means of a reasoned submission, a
         referral request pursuant to Article 4(5) of the Merger Regulation with respect to the
         Transaction.
(6)      The Commission transmitted this submission to all Member States on 30 March
         2021. The Member States competent to examine the concentration5 did not express
         their disagreement to the request of referral within 15 working days.
(7)      The case is therefore deemed to have an EU dimension.
4.       MARKET DEFINITION
(8)      The Parties’ activities overlap with regard to the production and supply of
         cartonboard and pulp. Moreover, MM is active in the production and supply of
         folding boxes, which are made out of cartonboard. Therefore, this section will assess
         the market definition of (i) cartonboard, (ii) pulp and (iii) folding boxes.
4.1.     Cartonboard
(9)      Cartonboard is the main raw material used to manufacture folding cartons. A first
         broad distinction can be made between cartonboard for liquid packaging (“LPB”)
         and cartonboard for non-liquid packaging (NLPB”).6 Within non-liquid packaging
         board, a distinction is normally made between four main categories of cartonboard:
         white lined chipboard (“WLC”) which is made from recycled fibre; solid bleached
4   M.10122 Mayr-Melnhof Karton / Kotkamills.
5   According to the Parties, the Transaction would have been subject to merger control review under the
    national laws of Austria, Germany, Poland, the Czech Republic, Hungary and Lithuania.
6   Form CO, paragraph 95.
                                                         2
 ---pagebreak---          sulphate board (“SBB” or “SBS”); solid unbleached sulphate board (“SUS”); and
         FBB, which are all made from virgin fibre.7
(10)     In some cases, large brand-owners procure cartonboard directly from manufacturers
         by means of tenders, and then separately procure conversion services to produce
         their boxes.
(11)     As regards cartonboard, MM only manufactures and sells FBB and WLC and IP
         Poland only manufactures and sells FBB. Therefore, the only horizontal overlap as
         regards cartonboard between the Parties’ activities is in FBB.8
4.1.1. Product market
4.1.1.1. The Commission’s decisional practice
(12)     Cartonboard is the main raw material for the manufacturing of cartons. It is made
         from cellulose fibres that are produced either from timber (pulp) or by reusing
         recovered fibre. A combination of the two can be used and there are various types of
         fibre that produce different characteristics.
(13)     The Commission has in the past considered a distinction between FBB, WLC, SBS,
         SUS as well as coated natural kraft (“CNK”) in its case practice 9, but has ultimately
         left this open. The Commission in its most recent decision concerning the FBB
         market also considered but ultimately left open whether the market for the supply of
         cartonboard could potentially be sub-segmented on the basis of relevant end-
         application i.e. food, pharmaceuticals, tobacco, cosmetics, graphical and “other non-
         food” or by sub-grade of FBB i.e. GC1 and GC2.10
4.1.1.2. The Notifying Party’s view
(14)     The Notifying Party submits that the main different types of cartonboard are FBB,
         WLC, SBS and SUS. According to the Notifying Party, the relevant market
         comprises all types of cartonboard, for the following reasons.
(15)     From a demand-side perspective, customers can switch to a significant degree
         between the various types of cartonboard, and often do so.11 From a supply-side
         perspective, there is significant supply-side substitutability between LPB on the one
         hand and (certain) non-liquid cartonboard grades on the other. This applies in
         particular to FBB. Generally, FBB can be, and is, also produced on machines used
         for LPB (by contrast, the same flexibility does not exist in the other direction).
         Supply-side substitution also exists between FBB and other NLPB grades.12
7   Form CO, paragraph 98.
8   Both Parties also sell pulp, but MM sells mechanical pulp whereas IP Poland sells chemical pulp. These
    are not affected markets and will not be considered further in the horizontal competitive assessment.
9   M.8421 - Westrock/MPS, paras. 6-8; M.4057 - Korsnäs/Assidoman Cartonboard, paras. 13 and 22;
    M.1225 - Enso/Stora, paras. 18, 42 and 43.
10 M.10122 - Mayr-Melnhof Karton / Kotkamills, paragraph 25.
11 Form CO, paragraph 166.
12 Form CO, paragraph 166.
                                                           3
 ---pagebreak--- (16)    The Notifying Party further argues that, even if FBB is considered separately, the
        market should not be further sub-segmented, e.g. on the basis of different end-uses
        or grades/qualities. The characteristics of FBB do not significantly vary depending
        on end-use applications or grades, and customers can use the same type of FBB for a
        variety of different end-uses.13
4.1.1.3. The Commission’s assessment
(17)    The Commission’s market investigation supported the findings in the Commission’s
        recent M.10122 MM/Kotkamills decision. In particular, from a supply-side
        perspective, competitors indicated that while the type of fibre and fibre preparation
        was different according to the categories of cartonboard (notably WLC has a very
        different fibre preparation to the other categories),14 the remainder of the production
        process was similar. Adjustments can be made to the board machine, according to
        the category of cartonboard being manufactured.15
(18)    However, from a demand-side perspective, a majority of respondents indicated that
        the different categories of cartonboard were not all substitutable, although this
        typically depended on the end application.16 Examples of different end applications
        could include, packaging for food, pharmaceuticals, cosmetics or cigarettes.17 For
        example, one customer noted that “Generally, in the normal course of business, the
        answer is no. There may be limited occasions where board types could be substituted
        […]. The board grades have differing technical, physical, visual and commercial
        characteristics, rendering them fit for a certain purpose for certain applications and
        not for fit for purpose for others.”18 A competitor similarly noted that: “It is very
        much depending on the end use segment. For some of them all can be used, for
        some, only selected ones. Also the price/m2 factor is decisive. There can be a big
        difference e.g. in between SBS and WLC.”19
(19)    A majority of respondents also highlighted that different end uses required specific
        types of cardboard, with food packaging in particular requiring virgin-fibre grade
        cartonboard where food contact was required. For example, one competitor noted
        that: “Some difference exists for the grades used for tobacco packaging. Due to a
        specific printing method and high-speed packing lines not all FBB products are
        suitable for tobacco packaging. WLC cannot normally be used in applications that
        are in direct contact with food without an additional barrier as the recycled fibers
        may create a risk of food contamination.”20
(20)    The market investigation therefore tended to support the Commission’s previous
        practice to consider a distinction between the different categories of cartonboard
        (FBB, WLC, SBS, SUS).
13  Form CO, paragraph 166.
14  Replies to questions 8 and 10 of Questionnaire to competitors.
15  Replies to questions 8 and 10 of Questionnaire to competitors.
16  Replies to questions 6 and 8 of Questionnaire to customers and replies to questions 8 and 9 of
    Questionnaire to competitors.
17  Form CO, paragraph 167.
18  Replies to questions 6 and 8 of Questionnaire to customers.
19  Replies to questions 8 and 9 of Questionnaire to competitors.
20  Reply to questions 8 and 11 of Questionnaire to competitors.
                                                          4
 ---pagebreak--- (21)   Within the category of FBB, there are different sub-grades, namely GC1 and GC2.
       These terms are derived from the DIN Standard 193030 “Paperboard – Terms and
       Grades” that defines different grades of paperboard based on the surface treatment,
       the main finish and the colour or bulk.21 GC1 is a fully coated board with a coated
       reverse and GC2 is a fully coated board with an uncoated reverse. 22 GC1 is brighter
       in appearance, more expensive and tends to be used for more luxury applications and
       for good quality printing results and GC2 is less bright and a little cheaper, and tends
       to be used for cheaper applications such as food packaging.23 The different sub-grade
       of FBB used may therefore vary according to the different end application. Different
       end applications could include: food, tobacco and pharmaceutical applications.24
(22)   The market investigation results were however mixed regarding the question of
       whether there should be separate product markets according to the type of sub-grade
       of FBB, or according to the type of end-application. While a majority of customers
       said that there were specific end-applications that required a specific sub-grade of
       FBB, the reasons given for this differed. Some converters referred to the fact that
       their own customers specified the sub-grade to be used, while others referred to the
       particular function of the packaging. For example, one customer noted that: “E.g. in
       case one would like to print on the reverse side of a board, one might want to have
       the board pigment coated also on the reverse side. In case one would like to put in
       hot liquid, the board needs to fulfill this temperature requirement etc.”25 The replies
       did not indicate a consensus around any possible further distinctions within FBB; the
       needs of each customer varied. For example, one converter noted: “Some end
       customer prefer a special board for their product it could be product safety, product
       appearance or price and other commercial/operational demands that defines the
       need.”26 The responses in the market investigation therefore tend to indicate that
       customer preferences drive the type of FBB and these can vary from customer to
       customer.
(23)   The majority of competitors in the market investigation however confirmed that it
       would be possible to switch between production of GC1 and GC2 without significant
       investments of time or cost and that the production process was similar. However, it
       is easier to switch from GC1 to GC2 than vice-versa. As noted by one competitor:
       “Switching from GC2 or FSB to GC1 typically requires an investment into a reverse
       side coater (if the machine does not already have one), but the technical properties
       of GC1 (white reverse) can also be achieved through adjusting the pulps in the
       middle and reverse layer”;27 and “If the machine does not have a coating unit on
       reverse side the investment could be 5-10 M€.”28
(24)   For the purpose of this decision, as in M.10122 MM/Kotkamills, the exact product
       market definition can be left open between an overall market for cartonboard or
21 Form CO, paragraph 99.
22 Form CO, paragraph 99.
23 Replies to question 8 and 13 of Questionnaire to competitors and replies to questions 10 and 11 of
   Questionnaire to customers.
24 Form CO, paragraph 217.
25 Reply to question 11 of Questionnaire to customers.
26 Reply to questions 6 and 9 of Questionnaire to customers.
27 Reply to question 8 and 16 of Questionnaire to competitors.
28 Reply to question 8 and 16 of Questionnaire to competitors.
                                                        5
 ---pagebreak---         FBB, and between an overall FBB market or sub-segments for FBB according to end
        use or sub-grade of FBB. This is because the Transaction does not raise serious
        doubts as to its compatibility with the internal market or the functioning of the EEA
        Agreement under any plausible market definition.
(25)    In conclusion, the Commission will analyse the effects of the Transaction both on
        the overall FBB market and also on the basis that the market for FBB is segmented
        either by end-application i.e. food, pharmaceuticals, tobacco, cosmetics, graphical
        and “other non-food”, or by sub-grade of FBB i.e. GC1 and GC2. No affected
        markets arise considering an overall cartonboard market and so this will not be
        analysed further in this decision.
4.1.2. Geographic market
4.1.2.1. The Commission’s decisional practice
(26)    The Commission has previously defined the market for FBB as at least EEA-wide,
        including in its most recent decisions concerning the FBB market.29
4.1.2.2. The Notifying Party’s view
(27)    The Notifying Party considers the market for cartonboard to be at least EEA-wide
        and potentially worldwide, for the following reasons:
(28)    First, FBB is traded cross-border within the EEA (and beyond). Within the EEA,
        FBB production sites in Finland and Sweden account for 71% of the EEA-wide
        maximum production capacity of FBB. At the same time, Finland and Sweden
        correspond to only 2% of the EEA demand for FBB in 2019.30
(29)    Second, European cartonboard producers also face significant competitive pressure
        from outside the EEA. Producers outside Europe fulfil approximately 10-12% of the
        European demand for FBB.31
(30)    Third, each of the Parties’ sales distribution supports the existence of significant
        cross-border trade across the EEA (and beyond). [Share]% of MM’s EEA-wide FBB
        sales are delivered outside of its countries of production (ie. Germany, Netherlands
        and Slovenia). [Share] IP Poland’s worldwide FBB sales are also made outside of
        Poland.32
(31)    However, the Notifying Party submits that the exact market definition can be left
        open between EEA-wide and global since no significant impediment of effective
        competition is to be expected even by the narrowest definition.
29  M.10122 - Mayr-Melnhof Karton/Kotkamills, paragraphs 33-34, M.8951 – Suzano Papel e
    Celulose/Fibria Celulose, paragraph 82 and M.8421 –Westrock/MPS, paragraph 28.
30 Form CO, paragraph 183.
31 Form CO, paragraph 188.
32 Form CO, paragraph 185.
                                                       6
 ---pagebreak--- 4.1.2.3. The Commission’s assessment
(32)    The Commission’s market investigation supported the findings in the Commission’s
        recent M.10122 MM/Kotkamills decision. In particular, the vast majority of
        customers confirmed that their suppliers were located in the EEA or worldwide,33
        with a majority of competitors also confirming that their customers were located at
        either EEA or worldwide level.34 Similarly, the majority of both customers and
        competitors indicated that they either requested bids, or participated in bids, at least
        at EEA level, if not worldwide.35 While a majority of respondents confirmed that
        transport costs were however significant in the EEA,36 the results of the market
        investigation indicate that this has not prevented customers from sourcing, and
        competitors from supplying, across the EEA and beyond.
(33)    For the purpose of this decision, as in M.10122 MM/Kotkamills, the exact
        geographic market definition can be left open between EEA-wide and worldwide as
        the Transaction does not raise serious doubts as to its compatibility with the internal
        market or the functioning of the EEA Agreement under any of these two plausible
        market definitions.
(34)    In conclusion, the Commission will analyse the effects of the Transaction on the
        basis that the market for FBB is EEA-wide. No affected markets arise at worldwide
        level so this will not be analysed further in this decision.
4.2.    Pulp
4.2.1. Product market
4.2.1.1. The Commission’s decisional practice
(35)    The Commission has in the past considered different markets based on distinctions
        between “virgin fibre vs recycled fibre pulp”, “chemical vs mechanical pulp”,
        “dissolving pulp vs other types of chemical wood pulp”, “Fluff pulp vs other types
        of chemical wood pulp”, “bleached vs unbleached wood pulp”, “hardwood vs
        softwood pulp”, and “Bleached Eucalyptus Kraft Pulp (“BEKP”) vs other types of
        hardwood pulp”. The exact market definition was ultimately left open.37
4.2.1.2. The Notifying Party’s view
(36)    The Parties submit that the exact definition of the relevant pulp market can be left
        open in the present case since the Transaction does not give rise to competition
        concerns under any plausible market definition.
33  Replies to questions 6 and 17 of Questionnaire to customers.
34  Replies to questions 8 and 17 of Questionnaire to competitors.
35 Replies to questions 8 and 18 of Questionnaire to competitors and replies to questions 6 and 18 of
    Questionnaire to customers.
36 Replies to questions 8 and 19 of Questionnaire to competitors and replies to questions 6 and 19 of
    Questionnaire to customers.
37 M.6682 - Kinnevik/Billerud/Korsnäs, M.8951 – Suzano Papel e Celulose/Fibria Celulose.
                                                          7
 ---pagebreak--- 4.2.1.3. The Commission’s assessment
(37)    The Commission considers that the exact market definition can be left open since no
        competition concerns arise under any plausible market definition. For the purpose of
        this Decision, the Commission will analyse the effects of the Transaction on the
        plausible markets for (i) pulp, (ii) chemical pulp, (iii) mechanical pulp, (iv) bleached
        pulp, (v) unbleached pulp, (vi) hardwood pulp, and (vii) softwood pulp.38
4.2.2. Geographic market
4.2.2.1. The Commission’s decisional practice
(38)    The Commission has in the past considered it to be at least EEA-wide in scope, but
        ultimately left the exact definition of the relevant geographic market open.39
4.2.2.2. The Notifying Party’s view
(39)    The Parties submit that the exact definition of the relevant geographic market can be
        left open also in the present case.
4.2.2.3. The Commission’s assessment
(40)    The Commission considers that the exact market definition can be left open since no
        competition concerns arise under any plausible market definition. For the purpose of
        this Decision, the Commission will analyse the effects of the Transactions on an
        EEA-wide and a worldwide market.
4.3.    Folding boxes
4.3.1. Product market
4.3.1.1. The Commission’s decisional practice
(41)    In previous cases, the Commission has defined folding boxes as multi-layered
        paperboard cartons which are printed/coated and cut into carton blanks. The carton
        blanks also incorporate creases, which enable the carton to be formed for packaging
        the customer's product. Folding boxes can be used to pack a wide range of products,
        such as cosmetics, tobacco, pharmaceuticals, etc. The Commission established that
        these products have different requirements for packaging, therefore the folding box
        market could be further subdivided by end-use application.40 In its most recent
        decision, the Commission ultimately left open whether the market for folding boxes
        should be further segmented by end-use and considered separate markets for
        packaging for (i) food, (ii) beverages, (iii) tobacco, (iv) cosmetics and personal
        hygiene, (v) pharmaceuticals, and (vi) household.41
38  The Parties are not active in other types of pulp. Form CO, Table 16.
39  M.8951 – Suzano Papel e Celulose/Fibria Celulose, paras.67 et seq.
40 M.8421 – Westrock/MPS, para 6 and cases cited therein.
41 M.10122 – MM/Kotkamills, para 39.
                                                           8
 ---pagebreak--- 4.3.1.2. The Notifying Party’s view
(42)    The Notifying Party submits that the exact definition of the product market can be
        left open in the present case since the Transaction does not give rise to competition
        concerns based on any plausible market definition.42
4.3.1.3. The Commission’s assessment
(43)    The Commission’s market investigation supported the findings in the Commission’s
        recent M.10122 MM/Kotkamills decision. In particular, in the market investigation,
        a majority of respondents replied that production processes of folding boxes differ
        depending on the end-application.43 However, a majority of respondents also replied
        that it is feasible both economically and technically to switch production of folding
        boxes for one end-application to another end-application.44 There are some
        exceptions where switching is not possible in the short-term. Notably, several
        respondents mentioned that this is the case when producing folding boxes for the
        food and pharmaceutical sectors where special certification and approval systems
        require time (in addition to switching the production process, where required).
        Overall, the market investigation did not provide clear evidence for the definition of
        an overall market for folding boxes, nor for separate markets for folding boxes per
        end-use.
(44)    In case the folding box market was further segmented by end-use, the relevant end-
        uses appear to be (i) food, (ii) beverages, (iii) tobacco, (iv) cosmetics and personal
        hygiene, (v) pharmaceuticals, and (vi) household. These segments account for
        [share]% of MM’s folding carton sales.45 The respondents in the market
        investigation also mentioned these sub-segments when asked for which end-
        applications they produce folding boxes.46
(45)    Overall, the market investigation did not provide clear evidence for the definition of
        an overall market for folding boxes, nor for separate markets for folding boxes per
        end-use.
(46)    For the purpose of this decision the exact product market definition can be left open
        between an overall market for folding boxes and sub-segments for (i) food, (ii)
        beverages, (iii) tobacco, (iv) cosmetics and personal hygiene, (v) pharmaceuticals,
        and (vi) household, as the Transaction does not raise serious doubts as to its
        compatibility with the internal market or the functioning of the EEA Agreement
        under any plausible market definition.
(47)    In conclusion, the Commission will analyse the effects of the Transaction both for an
        overall market for folding boxes and separate segments by end-application, notably
        folding boxes for the end-uses (i) food, (ii) beverages, (iii) tobacco, (iv) cosmetics
        and personal hygiene, (v) pharmaceuticals, and (vi) household.
42  Form CO, paragraph 200.
43  Replies to question 6 and 15 of Questionnaire to customers.
44 Replies to question 6 and 15 of Questionnaire to customers.
45 Form CO, footnote 60.
46 Replies to question 14 of Questionnaire to customers.
                                                          9
 ---pagebreak--- 4.3.2. Geographic market
4.3.2.1. The Commission’s decisional practice
(48)    In the past, the Commission left open whether the market for folding boxes is
        national or EEA-wide, based on the level at which sourcing of folding cartons takes
        place.47
4.3.2.2. The Notifying Party’s view
(49)    The Notifying Party submits that customers source folding cartons from suppliers
        across Europe (and beyond) and there are no particular barriers to cross-border
        trading in folding cartons. Therefore, individual national markets would not
        adequately reflect the competitive dynamics in the folding cartons market.
        Consequently, the Transaction should be analysed on the basis of an (at least) EEA-
        wide market for folding cartons.48
4.3.2.3. The Commission’s assessment
(50)    The Commission’s market investigation supported the findings in the Commission’s
        recent M.10122 MM/Kotkamills decision. In particular, in the market investigation,
        a minority of suppliers replied that their customers of folding boxes are located in
        the same country as their folding box production. The largest group of customers
        supply folding boxes at cross-border regional level, i.e. beyond their own country,
        followed by several customers who supply in all EEA-countries and some who
        supply at worldwide level.49 Notably, none of the respondents who replied only
        participate in tenders in their own country. A vast majority of respondents participate
        in tenders at EEA-level and some at worldwide level, which indicates that the market
        for folding boxes has moved further towards an (at least) EEA-wide market.50
        Although a majority of respondents consider that transport costs for folding boxes
        are significant,51 this does not appear to limit sales to other national markets.
(51)    In any case, for the purpose of this decision the exact geographic market definition
        can be left open as the Transaction does not raise serious doubts as to its
        compatibility with the internal market or the functioning of the EEA Agreement
        under any plausible market definition.
(52)    In conclusion, the Commission will analyse the effects of the Transaction on the
        market for folding boxes at EEA and national level.
5.      COMPETITIVE ASSESSMENT
(53)    The Transaction gives rise to horizontally affected markets in the plausible markets
        for the overall supply of FBB ([20-30]%) and further possible sub-markets for food
        applications ([20-30]%), pharma applications ([20-30]%), cosmetic applications
        ([20-30]%) and graphical applications ([20-30]%) and one other affected market in
47  M.8421 - Westrock/MPS, paras 29 et seq.
48  Form CO, paragraph 202.
49 Replies to question 6 and 20 of Questionnaire to customers.
50 Replies to question 6 and 21 of Questionnaire to customers.
51 Replies to question 6 and 22 of Questionnaire to customers.
                                                         10
 ---pagebreak---         the plausible market for the supply of GC2 (a type of FBB) ([30-40]%) at EEA level.
        The Commission does not consider it necessary to analyse separately these plausible
        markets as the conditions of competition and the position of the Parties in all of these
        markets are similar.
(54)    Moreover, MM is active in the production and supply of folding boxes, which are
        made out of cartonboard. This vertical link gives rise to several vertically affected
        markets, as MM’s market share in the market for GC2 is [30-40]% at EEA level. As
        the Parties are also active in pulp (with a combined market shares of <15% at EEA
        level) which is an input for GC2, this results in further vertically affected markets.
        Moreover MM’s market shares in the downstream markets for folding boxes for the
        cosmetics and personal hygiene industry in Poland, folding boxes for the pharma
        industry in France and folding boxes for the tobacco industry in Germany exceed
        30% (with <35%, <40% and <50% respectively).
5.1.    Assessment of horizontally affected markets
(55)    According to the Commission’s Guidelines on the assessment of horizontal mergers
        under the Council Regulation on the control of concentrations between undertakings
        (“Horizontal Merger Guidelines”)52, mergers between actual or potential competitors
        can result in horizontal non-coordinated effects which are harmful to competition.53
        The Horizontal Merger Guidelines list a non-exhaustive number of factors which can
        influence whether or not significant horizontal non-coordinated effects are likely to
        result from a merger, such as the large market shares of the merging firms, the fact
        that the merging firms are close competitors and the limited possibilities for
        customers to switch suppliers.54
5.1.1. The Notifying Party’s view
(56)    The Notifying Party submits that the Transaction does not raise competition
        concerns with regard to the supply of FBB, its further possible sub-markets and the
        supply of GC2 in the EEA for the following reasons.
(57)    First, the Parties’ combined market shares remain moderate post-merger.55 The
        current market leaders (Stora Enso and Metsä Board) have higher market shares in
        terms of revenue in the market for the supply of FBB 56 and its submarkets for the
        supply of FBB for food applications, pharma applications and cosmetic
52  OJ C 31, 05.02.2004.
53  See Horizontal Merger Guidelines, paragraph 24: “A merger may significantly impede effective
    competition in a market by removing important competitive constraints on one or more sellers who
    consequently have increased market power. The most direct effect of the merger will be the loss of
    competition between the merging firms. For example, if prior to the merger one of the merging firms had
    raised its price, it would have lost some sales to the other merging firm. The merger removes this
    particular constraint. Non-merging firms in the same market can also benefit from the reduction of
    competitive pressure that results from the merger, since the merging firms’ price increase may switch
    some demand to the rival firms, which, in turn, may find it profitable to increase their prices. The
    reduction in these competitive constraints could lead to significant price increases in the relevant
    market”.
54 Horizontal Merger Guidelines, paragraph 26 et seq.
55 Form CO, paragraph 221.
56 Form CO, paragraph 216.
                                                       11
 ---pagebreak---          applications.57 In the submarket for the supply of FBB for graphical applications,
         Stora Enso would have slightly lower market shares;58 in the submarket for the
         supply of GC2, Stora Enso and Metsä Board would have slightly lower market
         shares.59
(58)     Second, the Parties are not close competitors since (i) they offer different FBB
         product portfolios;60 (ii) they do not compete closely in tenders organised by
         customers;61 and they consider Metsä Board and Stora Enso as their real rivals and
         close substitutes.62
(59)     Third, the Transaction does not result in the elimination of an important competitive
         force, as IP Poland does not influence the competitive process to a greater extent
         than their respective market shares would suggest. The competitive constraints on
         the Parties come primarily from Metsä Board and Stora Enso.63
(60)     Fourth, switching costs/times are generally low/short in the market, as contract
         durations are usually short, namely in the range of three months for converters and
         one year for end-users.64
(61)     Finally, suppliers in the EEA have spare capacity and there are various other sources
         for significant additional (potential) capacity in the market. Any attempt of
         increasing prices by reducing supply post-merger would, therefore, immediately be
         met by an increase in supply by competitors.65
5.1.2. The Commission’s assessment
(62)     On the basis of the information available to it and in the light of the results of the
         market investigation, the Commission considers that the Transaction is unlikely to
         raise competition concerns for the following reasons.
(63)     First, the Parties have combined market shares below or only slightly above [20-
         30]% in all plausible markets except GC2, as shown in Tables 1 – 6 below.66 Post-
         Transaction, the Parties’ combined market share will be [20-30]% in the overall FBB
         market in the EEA, between [20-30]% in the production and supply of FBB for food,
         pharmaceutical, cosmetic and graphical applications in the EEA. The Parties’
         combined market share would be [30-40]% in the production and supply of GC2 in
         the EEA.
57  Form CO, Annex 6.4-1.
58  Form CO, Annex 6.4-1.
59  Response to RFI 3 of 24 June 2021.
60  Form Co, paragraph 224.
61  Form CO, paragraph 227.
62  Form CO, paragraph 235.
63  Form CO, paragraph 239.
64  Form CO, paragraph 242.
65  Form CO, paragraph 244 et seq.
66  All the market shares presented in this Decision are calculated by volumes sold. The Commission notes
    that, given the high capacity utilisation rates of most of the FBB suppliers (including the Parties) and
    Metsä Board’s plans to expand capacity in the short term (see recital (68)), the Parties’ combined capacity
    market shares would not be materially higher than their sales market shares.
                                                         12
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---         indicated that there would be sufficient suppliers should the merged entity stop
        supplying FBB.73
(66)    Fourth, although there is a qualification process required to switch FBB suppliers,74
        the vast majority of the customers who replied to the market investigation indicated
        that they already multisource from various FBB suppliers, mostly in order to secure
        supply and not to depend on a single supplier.75 Therefore, if a given customer were
        to stop sourcing from one of its suppliers, it could start the qualification process with
        a new supplier while sourcing from existing qualified suppliers.
(67)    Fifth, although half of the competitors who replied to the market investigation
        indicated that there are significant barriers to enter the FBB market, such as
        environmental permits, building a new mill and building customer relationships
        (including the qualification process),76 the majority of competitors identified market
        players having entered the FBB market in the previous years such as Kotkamills and
        Sappi.77 Moreover, KAMA (Russia) confirmed that it is entering the market in
        2021.78
(68)    Sixth, although the market investigation revealed that most of the FBB suppliers
        have high capacity utilisation rates,79 competitors indicated that new capacity would
        come to the market in the short term. In addition to KAMA in Russia, Dobrush
        (Belarus) will start operating a new machine later in 2021.80 Moreover, several
        competitors replied that the market is balanced or there is over capacity. 81 The
        majority of respondents submitted that the market for the supply of FBB is expected
        to grow steadily in the coming years.82 In this regard, there are some plans by
        competitors to expand capacity in the short term, including Metsä Board by 2023.83
(69)    Seventh, as regards the impact of the Transaction, although a number of customers
        indicated that prices might rise and competition might decrease post-Transaction,84
        these concerns were not justified and were not supported by other elements derived
        from the market investigation since the Parties are not close competitors and there
        are a number of credible alternative suppliers.
5.1.3. Conclusion
(70)    In view of the above, the Commission concludes that the Transaction does not raise
        serious doubts as to its compatibility with the internal market and the functioning of
        the EEA Agreement in relation to the overall supply of FBB, the supply of FBB for
        food applications, the supply of FBB for pharma applications, the supply of FBB for
73  Replies to question 43 of Questionnaire to customers.
74  Replies to question 29 of Questionnaire to customers.
75  Replies to question 26 of Questionnaire to customers.
76  Replies to question 25 of Questionnaire to competitors.
77  Replies to question 26 of Questionnaire to competitors.
78  Replies to question 1 of Questionnaire to competitors.
79  Replies to question 28 of Questionnaire to competitors.
80  Replies to question 27.1 of Questionnaire to competitors.
81  Replies to question 28 of Questionnaire to competitors.
82  Replies to question 33 of Questionnaire to competitors.
83  Replies to question 29 of Questionnaire to competitors.
84  Replies to question 44 of Questionnaire to customers.
                                                          17
 ---pagebreak---        cosmetic applications and the supply of FBB for graphical applications and the
       supply of GC2 in the EEA.
5.2.   Assessment of vertically affected markets
(71)   According to the Commission’s Guidelines on the assessment of non-horizontal
       mergers under the Council Regulation on the control of concentrations between
       undertakings (“Non-horizontal Merger Guidelines”), foreclosure effects may occur
       where 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.85
(72)   In assessing the likelihood of an anticompetitive customer foreclosure scenario, the
       Commission examines: first, whether the merged entity would have the ability to
       foreclose access to downstream markets by reducing its purchases from its upstream
       rivals; second, whether it would have the incentive to reduce its purchases upstream;
       and third, whether a foreclosure strategy would have a significant detrimental effect
       on consumers in the downstream market.86
(73)   In assessing the likelihood of an anticompetitive input foreclosure scenario, the
       Commission examines: first, whether the merged entity would have, post-merger,
       the ability to substantially foreclose access to inputs; second, whether it would have
       the incentive to do so; and third, whether a foreclosure strategy would have a
       significant detrimental effect on competition downstream.
(74)   In addition to the Parties’ activities in the FBB market, MM is active in the
       production and sale of folding boxes, which are made of FBB and other types of
       cartonboard. This vertical link thus gives rise to the following vertically affected
       markets as set out in Table 7 below.
       Table 7: Overview of vertically affected markets
       Market where the Combined market Relevant                           Combined market
       Parties’       shares shares in the upstream/downstr                shares in the
       exceed 30%               market          where eam market(s)        relevant
                                market         shares                      upstream/downstr
                                exceed 30%                                 eam market
       GC2 (EEA)                [30-40]%                Downstream:
                                                        Folding      boxes [10-20]%
                                                        (EEA)
                                                        Folding boxes for
                                                        food packaging     [10-20]%
                                                                           [0-5]%
                                                        Folding boxes for
85  Non-horizontal Merger Guidelines, paragraph 18.
86  Non-horizontal Merger Guidelines, para.59.
                                                     18
 ---pagebreak--- Market where the Combined market Relevant                Combined market
Parties’   shares shares in the upstream/downstr         shares in the
exceed 30%        market     where eam market(s)         relevant
                  market     shares                      upstream/downstr
                  exceed 30%                             eam market
                                      beverage
                                      packaging
                                                         [5-10]%
                                      Folding boxes for
                                      cosmetics      and
                                      personal hygiene
                                      packaging
                                      Folding boxes for [5-10]%
                                      pharmaceuticals
                                      packaging          [20-30]%
                                      Folding boxes for
                                      tobacco packaging
                                                         [10-20]%
                                      Folding boxes for
                                                         <30% in all 99
                                      household
                                                         national markets
                                      packaging
                                      Sub-segments for
                                      national markets
                                      (see Annex I)
GC2               [30-40]%            Upstream:
                                      Pulp (EEA       or <15%
                                      worldwide)
                                      Chemical      pulp
                                      (EEA            or <5%
                                      worldwide)
                                      Mechanical    pulp
                                      (EEA            or <15%
                                      worldwide)
                                      Bleached      pulp
                                      (EEA            or <20%
                                      worldwide)
                                      Unbleached    pulp
                                                         <20%
                                      (EEA            or
                                      worldwide)
                                      Softwood      pulp <20%
                                      (EEA            or
                                   19
 ---pagebreak---         Market where the Combined market Relevant                                        Combined market
        Parties’         shares shares in the upstream/downstr                           shares in the
        exceed 30%                 market         where eam market(s)                    relevant
                                   market        shares                                  upstream/downstr
                                   exceed 30%                                            eam market
                                                            worldwide)
                                                            Hardwood           pulp <20%
                                                            (EEA                   or
                                                            worldwide)
        Folding boxes for <35%                              Upstream:
        cosmetics           and
        personal hygiene                                    FBB (EEA)                    [20-30]%
        industry in Poland
                                                            FBB for cosmetic [20-30]%
                                                            applications (EEA)
                                                                                         [30-40]%
                                                            GC2 (EEA)
        Folding boxes for <40%                              Upstream:
        pharmaceuticals
        packaging             in                            FBB (EEA)                    [20-30]%[20-30]%
        France
                                                            FBB for pharma [30-40]%
                                                            applications (EEA)
                                                            GC2 (EEA)
        Folding boxes for <50%                              Upstream:
        tobacco packaging
        in Germany87                                        FBB (EEA)                    [20-30]%
                                                            GC2 (EEA)                    [30-40]%
        Source: Form CO, Annex 6.4-1, Response to RFI 3 of 24 June, Response to RFI 4 of 28 June,
        Response to RFI 5 of 13 July.
(75)    Table 8 below illustrates the competitive landscape in the downstream market for the
        sale of folding boxes in the EEA, as well as the segments by end-application in
        Tables 9-14:
87 As IP Poland does not produce FBB for the tobacco industry, the vertical relationship of this segment is
   pre-existing and does not change as a result of the Transaction. This vertical link is therefore not analysed
   further as it is not merger-specific.
                                                         20
 ---pagebreak---         Table 8: Folding boxes – EEA (2018-2020)
                                  2018                        2019                           2020
                        Revenue        Market        Revenue         Market        Revenue         Market
                       (m EUR)          share       (m EUR)           share        (m EUR)          share
        MM             […]            [10-20]%     […]             [10-20]%       […]             [10-20]%
        Graphic        […]            [5-10]%      […]             [5-10]%        […]             [5-10]%
        Packaging
        AR             […]            [5-10]%      […]             [5-10]%        […]             [5-10]%
        Packaging
        Westrock       […]            [5-10]%      […]             [5-10]%        […]             [5-10]%
        van            […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        Genechte
        n
        Amcor          […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        Edelmann       […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        DS Smith       […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        Essentra       […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        Autajon        […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        STI            […]            [0-5]%       […]             [0-5]%         […]             [0-5]%
        Others88       […]            [50-60]%     […]             [50-60]%       […]             [50-60]%
        Estimated      […]            100%         […]             100%           […]             100%
        total
        Source: Response to RFI 4 of 28 June 2021
88 According to the Notifying Party, a large portion of the market is accounted for by a very high number of
   medium-sized or smaller players. These are consolidated in the “others” category in the table below and
   include (but are not limited to) Hammer Verpackungswerke (GE), Baypack (GE), Cardbox (AT), FP Pack
   (FR), Posson Packaging (FR), Glossop Cartons (UK), Qualvis (UK), Dot2dot (PL), Dako (PL), and
   Bestprint (RO), each with market shares below -[0-5]%. Reply to RFI 4 of 28 June 2021.
                                                         21
 ---pagebreak--- Table 9: Folding boxes for tobacco packaging – EEA (2018-2020)
                             2018                2019               2020
                   Revenue        Market   Revenue   Market   Revenue    Market
                   (m EUR)         share   (m EUR)     share (m EUR)      share
MM                 […]           [30-      […]      [20-     […]        [20-
                                 40]%               30]%                30]%
Amcor              […]           [30-      […]      [30-     […]        [30-
                                 40]%               40]%                40]%
AR Packaging […]                 [20-      […]      [20-     […]        [20-
                                 30]%               30]%                30]%
Persiehl           […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
PMI        own […]               [0-5]%    […]      [0-5]%   […]        [0-5]%
production
Yuri Gagarin       […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Gundlach           […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Grafobal           […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Right Pack         […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Unipack            […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Bernholz           […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Verpackungen
Others             […]           [0-5]%    […]      [0-5]%   […]        [0-5]%
Estimated          […]           100%      […]      100%     […]        100%
total
Source: Response to RFI 4 of 28 June 2021
Table 10: Folding boxes for pharmaceuticals packaging – EEA (2018-2020)
                           2018                 2019                2020
                 Revenue         Market   Revenue   Market   Revenue    Market
                     (m           share   (m EUR)     share     (m        share
                   EUR)                                        EUR)
MM               […]           [5-10]%    […]      [5-10]%   […]       [5-10]%
Faller           […]           [5-10]%    […]      [5-10]%   […]       [5-10]%
                                            22
 ---pagebreak---                                   2018                  2019              2020
                        Revenue         Market   Revenue    Market  Revenue   Market
                            (m           share   (m EUR)     share    (m       share
                          EUR)                                       EUR)
       Edelmann         […]           [5-10]%    […]       [5-10]%  […]      [5-10]%
       Essentra         […]           [5-10]%    […]       [5-10]%  […]      [5-10]%
       LGR              […]           [5-10]%    […]       [5-10]%  […]      [5-10]%
       Westrock         […]           [5-10]%    […]       [5-10]%  […]      [5-10]%
       AR               […]           [0-5]%     […]       [0-5]%   […]      [5-10]%
       Packaging
       Autajon          […]           [0-5]%     […]       [0-5]%   […]      [0-5]%
       Kroha            […]           [0-5]%     […]       [0-5]%   […]      [0-5]%
       Graphic          […]           [0-5]%     […]       [0-5]%   […]      [0-5]%
       Packaging
       Rattpack         […]           [0-5]%     […]       [0-5]%   […]      [0-5]%
       Others89         […]           [50-60]%   […]       [50-60]% […]      [50-60]%
       Estimated        […]           100%       […]       100%     […]      100%
       total
       Source: Response to RFI 4 of 28 June 2021
       Table 11: Folding boxes for beverage packaging – EEA (2018-2020)
                                  2018                  2019              2020
                        Revenue         Market   Revenue    Market  Revenue   Market
                        (m EUR)          share       (m      share    (m       share
                                                  EUR)               EUR)
       MM               […]            [0-5]%    […]       [0-5]%   […]      [0-5]%
       Graphic          […]            [40-50]%  […]       [40-50]% […]      [40-50]%
       Packaging
       Westrock         […]            [30-40]%  […]       [30-40]% […]      [30-40]%
89 See footnote 88.
                                                  23
 ---pagebreak---                            2018                     2019              2020
                 Revenue         Market     Revenue     Market  Revenue    Market
                 (m EUR)          share         (m       share     (m       share
                                             EUR)                EUR)
Van              […]            [5-10]%     […]        [5-10]%  […]      [5-10]%
Genechten
STI              […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
DS Smith         […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
Seda             […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
AR               […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
Packaging
Model            […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
Smurfit          […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
Mondi            […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
Others           […]            [0-5]%      […]        [0-5]%   […]      [0-5]%
Estimated        […]            100%        […]        100%     […]      100%
total
Source: Response to RFI 4 of 28 June 2021
Table 12: Folding boxes for food packaging – EEA (2018-2020)
                        2018                       2019               2020
              Revenue         Market      Revenue      Market   Revenue    Market
              (m EUR)          share      (m EUR)       share   (m EUR)     share
MM            […]            [10-20]%     […]        [10-20]%  […]        [10-
                                                                          20]%
Graphic       […]            [5-10]%      […]        [5-10]%   […]        [5-10]%
Packaging
Westrock      […]            [5-10]%      […]        [5-10]%   […]        [5-10]%
AR            […]            [0-5]%       […]        [5-10]%   […]        [5-10]%
Packaging
Van           […]            [0-5]%       […]        [5-10]%   […]        [5-10]%
Genechten
                                             24
 ---pagebreak---                                2018                      2019                 2020
                     Revenue         Market       Revenue     Market    Revenue    Market
                     (m EUR)          share       (m EUR)      share    (m EUR)     share
       DS Smith      […]               [0-5]%     […]         [0-5]%   […]        [0-5]%
       STI           […]               [0-5]%     […]         [0-5]%   […]        [0-5]%
       Autajon       […]               [0-5]%     […]         [0-5]%   […]        [0-5]%
       Model         […]               [0-5]%     […]         [0-5]%   […]        [0-5]%
       Persiehl      […]               [0-5]%     […]         [0-5]%   […]        [0-5]%
       Grafobal      […]               [0-5]%     […]         [0-5]%   […]        [0-5]%
       Others90      […]               [60-       […]         [60-     […]        [50-
                                       70]%                   70]%                60]%
       Estimated     […]               100%       […]         100%     […]        100%
       total
       Source: Response to RFI 4 of 28 June 2021
       Table 13: Folding boxes for household packaging – EEA (2018-2020)
                               2018                     2019                 2020
                     Revenue        Market       Revenue    Market    Revenue     Market
                         (m          share       (m EUR)      share   (m EUR)      share
                       EUR)
       MM            […]           [10-20]%      […]       [10-20]%  […]         [10-20]%
       Graphic       […]           [0-5]%        […]       [5-10]%   […]         [5-10]%
       Packaging
       Westrock      […]           [0-5]%        […]       [0-5]%    […]         [0-5]%
       AR            […]           [0-5]%        […]       [0-5]%    […]         [5-10]%
       Packaging
       Van           […]           [0-5]%        […]       [0-5]%    […]         [0-5]%
       Genechten
       DS Smith      […]           [0-5]%        […]       [0-5]%    […]         [0-5]%
       STI           […]           [0-5]%        […]       [0-5]%    […]         [0-5]%
90 See footnote 88.
                                                     25
 ---pagebreak---                                2018                     2019               2020
                     Revenue        Market       Revenue    Market  Revenue     Market
                         (m          share       (m EUR)     share  (m EUR)      share
                       EUR)
       Autajon       […]           [0-5]%        […]      [0-5]%   […]         [0-5]%
       Model         […]           [0-5]%        […]      [0-5]%   […]         [0-5]%
       Persiehl      […]           [0-5]%        […]      [0-5]%   […]         [0-5]%
       Grafobal      […]           [0-5]%        […]      [0-5]%   […]         [0-5]%
       Others91      […]           [60-70]%      […]      [60-     […]         [60-
                                                          70]%                 70]%
       Estimated     […]           100%          […]      100%     […]         100%
       total
       Source: Response to RFI 4 of 28 June 2021
       Table 14: Folding boxes for cosmetics and personal hygiene packaging – EEA
       (2018-2020)
                               2018                     2019              2020
                     Revenu         Market       Revenue    Market Revenue     Market
                       e (m          share          (m       share    (m        share
                      EUR)                        EUR)               EUR)
       MM            […]         [5-10]%         […]      [5-10]%  […]       [5-10]%
       Edelmann      […]         [5-10]%         […]      [5-10]%  […]       [5-10]%
       AR            […]         [5-10]%         […]      [5-10]%  […]       [5-10]%
       Packaging
       Essentra      […]         [5-10]%         […]      [5-10]%  […]       [5-10]%
       Autajon       […]         [5-10]%         […]      [5-10]%  […]       [5-10]%
       DS Smith      […]         [0-5]%          […]      [0-5]%   […]       [0-5]%
       Graphic       […]         [5-10]%         […]      [5-10]%  […]       [5-10]%
       Packaging
       Westrock      […]         [0-5]%          […]      [0-5]%   […]       [0-5]%
91 See footnote 88.
                                                     26
 ---pagebreak---                                 2018                        2019                           2020
                      Revenu         Market       Revenue         Market        Revenue         Market
                        e (m          share          (m            share            (m           share
                       EUR)                        EUR)                           EUR)
        STI           […]         [0-5]%          […]           [0-5]%          […]           [0-5]%
        Van           […]         [0-5]%          […]           [0-5]%          […]           [0-5]%
        Genechte
        n
        Others92      […]         [40-50]%        […]           [40-50]%        […]           [40-50]%
        Estimated     […]         100%            […]           100%            […]           100%
        total
        Source: Response to RFI 4 of 28 June 2021
(76)    As the tables indicate, the transaction gives rise to 22 vertically affected markets at
        EEA level, and an additional 99 vertically affected when considering national
        markets for the downstream market for folding boxes (see Annex I).
(77)    The Parties’ combined market shares in FBB overall, as well as for potential sub
        segments of the FBB market, remain below 30%, with the exception of GC2 where
        the Parties’ combined market shares is [30-40]%. For any other plausible definition
        of the FBB market, the Parties’ market shares do not reach 30%. 93 Therefore, input
        foreclosure seems unlikely for FBB or any sub-segment of FBB, as the Parties do
        not represent a sufficiently important source of inputs. This Decision will discuss in
        more detail why input foreclosure also does not seem likely in the market for GC2 in
        the EEA, where the Parties’ combined market share is [30-40]%.
(78)    As for the downstream markets for folding boxes, MM’s market shares in all
        plausible markets for folding boxes remain below 30%, with the exception of three
        markets in which MM’s market share exceeds 30% on a national level if segmented
        by end-application. For the remaining downstream markets, MM’s market shares
        remain below 30% even under the narrowest plausible product and geographic
        market definition. Therefore, customer foreclosure does not seem likely, as MM
        does not represent a sufficiently important customer in the downstream market. This
        Decision will discuss in more detail why customer foreclosure also does not seem
        likely in the markets for folding boxes for cosmetics and personal hygiene packaging
        in Poland, for pharmaceuticals packaging in France and for tobacco packaging in
        Germany, where market shares of MM exceed 30% in these downstream markets.
(79)    As the Parties are also active in pulp, an input to GC2 where the Parties’ combined
        market shares reach [30-40]%, this Decision will also discuss customer foreclosure
        for this vertical relationship. In the market for pulp, the Parties’ combined market
92 See footnote 88.
93 The Non-Horizontal Merger Guidelines note that Commission is unlikely to find concern in non-
   horizontal mergers where the market share post-merger of the new entity in each of the markets concerned
   is below 30% (Non-Horizontal Merger Guidelines, para 25).
                                                      27
 ---pagebreak---         shares for pulp remain below 20% under any plausible product and geographic
        market definition. Therefore, input foreclosure does not seem likely, as the merged
        entity does not represent a sufficiently important source of inputs.
5.2.1. No input foreclosure for folding box producers as a result of the Parties’ activity in
        GC2
5.2.1.1. The Notifying Party’s view
(80)    The Notifying Party submits that input foreclosure concerns as a result of the
        Transaction can be excluded, given that the merged entity will not have market
        power in the FBB market and will lack the ability to foreclose competitors from
        access to FBB. The Parties' combined market share in FBB will remain below 25%
        and large competitors with much broader capacity and product offering, especially
        Metsä Board and Stora Enso, will remain in the market. In contrast, IP Poland only
        offers a limited product offering which other FBB suppliers could easily replicate.94
5.2.1.2. The Commission’s assessment
(81)    The Commission considers that input foreclosure for folding box producers as a
        result of the Parties’ activity in GC2 appears unlikely to arise, for the following
        reasons.
(82)    First, the Parties do not have the ability to foreclose access to GC2, as this would
        require a significant degree of market power in the upstream market. 95 However, the
        Parties’ market shares in the upstream markets for GC2 only just reach [30-40]% and
        a number of strong competitors are active in GC2 production (see table 6), limiting
        the Parties’ ability to succeed with an input foreclosure strategy. In the market
        investigation, a majority of customers replied that in case MM stopped supplying
        GC2 to them, they would still have sufficient alternative suppliers to source GC2.96
        As customers multisource (see paragraph (66)), they could react to price increases by
        increasing their orders from their other suppliers. While the market for FBB in the
        EEA is currently operating at close to full capacity, the market investigation
        indicated that new capacity will come to the market in the short term (see paragraph
        (68)). Moreover, as explained in paragraph (23), there is a high degree of supply-side
        substitutability, so that not only the current competitors active in GC2 could supply
        customers, but also some GC1 suppliers could switch their production to produce
        more GC2.
(83)    Second, the Parties do not have the incentive to foreclose access to GC2 in the
        downstream market, as MM would give up its sales to customers for FBB in case it
        stopped supplying competing firms downstream, which are an essential part of
        business strategy. Customers could also retaliate and stop buying other types of FBB
        or cartonboard from MM in case it stopped supplying GC2. Given that MM has sold
        more than [share]% of its FBB to third parties in the past three years,97 it seems
        unlikely that MM would give up these sales.
94  Form CO, paragraph 264.
95  Non-horizontal Merger Guidelines, paragraph 35.
96 Replies to question 43 of Questionnaire to competitors.
97 Form CO, paragraph 11.
                                                        28
 ---pagebreak--- (84)    In view of the above, the Commission considers that the Parties will likely have
        neither the ability, nor the incentive to foreclose access to GC2. Even if MM stopped
        supplying GC2 to other folding box manufacturers or converters downstream, a
        foreclosure strategy would have no detrimental effects on competition in these
        downstream markets, as a number of strong competitors remain active in the
        upstream GC2 market (see Section 5.1.2).
5.2.2. No customer foreclosure for competing FBB producers as a result of MM’s activity
        in national folding box markets
5.2.2.1. The Notifying Party’s view
(85)    The Notifying Party further submits that customer foreclosure concerns as a result of
        the Transaction can be excluded, given the intense competition in the folding box
        market in the EEA. MM accounts for a limited share of FBB demand with a market
        share of [10-20]% in the EEA folding box market in 2020. FBB suppliers have and
        will continue to have the ability to sell cartonboard to a large number of converters,
        brand owners and merchants.98
(86)    Moreover, the Transaction will enable MM to supply FBB to brand-owners, which
        request large back-up machines or have other specific needs and therefore
        predominantly source from the two industry leaders, Stora Enso and Metsä Board.
        According to the Notifying Party, the Transaction will therefore increase competition
        in deliveries to brand-owners.99
5.2.2.2. The Commission’s assessment
(87)    The Commission considers that customer foreclosure for competing FBB producers
        as a result of MM’s activity in national folding box markets appears unlikely to
        arise, for the following reasons.
(88)    First, the Parties do not have the ability to foreclose access to customers in the
        downstream markets for folding boxes for cosmetics and personal hygiene
        packaging in Poland, for pharmaceuticals packaging in France and for tobacco
        packaging in Germany, as this would require a significant degree of market power in
        the downstream market.100 Although MM’s market shares exceed 30% in these three
        markets, MM faces competition from numerous strong competitors active in the
        folding box market in other countries and sub-segments (see tables 8-14). Given that
        FBB producers sell throughout the EEA (see paragraph (32)), they do not depend on
        sales in a particular country or sub-segment. Also most folding box producers who
        replied to the market investigation are active in all sub-segments and participate in
        tenders throughout the EEA (see paragraph (50)), so significant competitive
        constraints exist which limit MM’s ability to successfully engage in customer
        foreclosure. Finally, in the market investigation, a vast majority stated that in case
        MM stopped buying from them, they would still have sufficient customers for all
        types of FBB.101 According to one competitor “The European converter industry is
98  Form CO, paragraph 265.
99  Form CO, paragraph 266.
100 Non-horizontal Merger Guidelines, paragraph 61.
101 Replies to question 37 of Questionnaire to competitors.
                                                         29
 ---pagebreak---        still very fragmented and there would be several alternative sources of demand
       left.”102
(89)   Second, the Parties also do not have the incentive to foreclose access to customers in
       the downstream markets for folding boxes for cosmetics and personal hygiene
       packaging in Poland, for pharmaceuticals packaging in France and for tobacco
       packaging in Germany. In the unlikely event that MM stopped buying inputs from
       other FBB producers for its production of folding boxes for cosmetics and personal
       hygiene packaging in Poland, for pharmaceuticals packaging in France and for
       tobacco packaging in Germany, it would be at risk of supply interruptions, as it
       would depend on one supply source. As explained in paragraph 17(66), customers of
       FBB multi-source to prevent such dependency. In view of the above, the
       Commission considers that the Parties will likely have no ability, nor an incentive, to
       foreclose access to customers in the downstream markets for folding boxes for
       cosmetics and personal hygiene packaging in Poland, for pharmaceuticals packaging
       in France and for tobacco packaging in Germany. Even in case MM stopped
       sourcing FBB for its production of folding boxes for cosmetics and personal hygiene
       packaging in Poland, for pharmaceutical packaging in France and for tobacco
       packaging in Germany from other competitors upstream, a foreclosure strategy
       would have no detrimental effects on competition in the downstream folding box
       market. Upstream FBB suppliers could locate alternative customers in Poland,
       France and Germany (not only in cosmetics and hygiene packaging, pharmaceuticals
       packaging and tobacco packaging but other sectors) and also in other EEA countries.
5.2.3. No customer foreclosure for competing pulp producers as a result of the Parties’
       activity in GC2
(90)   The Commission considers that customer foreclosure concerns appear unlikely to
       arise even under the narrowest plausible product and geographic market definition,
       as the Parties do not have the ability to foreclose access to customers in the
       downstream markets for GC2, as this would require a significant degree of market
       power in the downstream market.103 Although MM’s market shares reach [30-40]%
       in the market for GC2, MM faces competition from numerous strong competitors
       active in GC2 production (see table 6) to which pulp producers can sell. Moreover,
       pulp suppliers do not depend on sales to GC2 producers, but can sell to cartonboard
       manufacturers producing products other than GC2. In an overall cartonboard market,
       the Parties’ market share remains below 20%,104 indicating that they do not have the
       required market power to foreclose pulp manufacturers from access to the
       cartonboard market.
5.2.4. Conclusion on customer and input foreclosure in relation to folding boxes and FBB
(91)   In view of the above, the Commission concludes that the Transaction does not raise
       serious doubts as to its compatibility with the internal market and the functioning of
       the EEA Agreement in relation to the vertical links between markets for FBB
       upstream and markets for folding boxes downstream, under any plausible geographic
       and product market definition.
102 Non-confidential reply to question 37.1 of Questionnaire to competitors.
103 Non-horizontal Merger Guidelines, paragraph 61.
104 Form Co, Table 14.
                                                        30
 ---pagebreak--- 5.3.    Assessment of coordinated effects
(92)    A merger in a concentrated market may significantly impede effective competition,
        through the creation or a strengthening of a collectively dominant position, by
        increasing the likelihood that firms are able to coordinate their behaviour and raise
        prices, without entering into an agreement or concerted practice within the meaning
        of Article 101 TFEU. A merger may also make coordination easier, more stable or
        more effective for firms which were coordinating prior to the merger, either by
        making the coordination more robust or by permitting firms to coordinate on even
        higher prices.105
5.3.1. The Notifying Party’s view
(93)    The Notifying Party submits that the conditions for coordinated effects are not met,
        in particular due to the characteristics of the FBB market. 106 It argues that FBB is a
        highly competitive product segment which is undergoing significant growth, driven
        primarily by the switch from plastic to cartonboard for consumer packaging and
        cannot therefore lead to a stable economic environment.107 The Notifying Party also
        submits that there is a lack of symmetry between the players in the market: MM
        Group and IP Poland are very different to the market leaders Stora Enso and Metsä
        Board in terms of capacity, capacity utilisation, cost structure, level of vertical
        integration, product range and the geographic presence, amongst other factors.108
        There is a lack of market transparency, due to the fact that supply contracts in the
        FBB industry are typically concluded on the basis of bilateral negotiations.
        Cartonboard producers do not know their competitors’ prices and in any event,
        cartonboard producers charge different prices to different customers, depending also
        on the particular product specifications. The methodology for applying discounts
        also varies depending on the customer or size of the contract.109 Finally, the
        Notifying Party submits that IP Poland is not an industry “maverick” with a history
        of preventing or disrupting coordination.110
5.3.2. The Commission’s assessment
(94)    The Commission does not consider that the Transaction gives rise to serious doubts
        on the basis of horizontal coordinated effects for the reasons set out below.
(95)    First, the Commission observes that the FBB market has been subject to relatively
        recent new entry and, due in particular to the shift from plastic to more sustainable
        sources of packaging, has been growing and will continue to grow. For example, one
        respondent in the market investigation noted that: “FBB is the most common
        paperboard used in Europe and its consumption, according to CEPI public
        statistics, has been steadily increasing year by year in the last 10 years. It is
        generally expected that it will grow even further. This is felt not only in the order
        inflow from our customers but also, in a much wider perspective, for example from
        EU Green Deal initiative and increasing public awareness for more sustainable
105 Horizontal Merger Guidelines, paragraph 39.
106 Form CO, paragraph 251.
107 Form CO, paragraph 252.
108 Form CO, paragraph 253.
109 Form CO, paragraph 254.
110 Form CO, paragraph 255.
                                                   31
 ---pagebreak---         packaging solutions. Discussions regarding replacing plastic packaging with more
        environmental friendly alternatives has become also a political topic (for example,
        banning of Single-Use plastic straws & cutlery, plates & cups) , which is why, it is
        expected that in those segments where plastic foils & packaging are widely used,
        will be gradually replaced by paper & board, further facilitating the growth of
        FBB.”111 It is also in the context of the transition from plastic to cartonboard
        packaging that certain market players have been identified as particularly innovative,
        for example Kotkamills (part of MM) was observed to be “innovative with barrier
        coatings”112 which is used for example in the manufacture of paper cups. No
        evidence surfaced during the market investigation suggesting a particularly stable
        economic environment, which would render coordination more likely.
(96)    Second, there is no evidence in the Commission’s file showing that the market is
        particularly transparent, making it easier for market players to monitor deviations.
        For instance, contracts are normally negotiated on a bilateral basis with customers.113
        These negotiations are confidential and competitors do not therefore have insight
        regarding the terms concluded by their competitors.114
(97)    Third, in the market investigation no customer raised concerns based on actual or
        potential coordination. Moreover, there is no evidence in the file indicating that any
        deterrent strategy would be particularly effective.
(98)    In view of the above, the Commission concludes that the Transaction does not raise
        serious doubts as to its compatibility with the internal market and the functioning of
        the EEA Agreement in relation to horizontal coordinated effects.
6.      CONCLUSION
(99)    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
111 Reply to question 23 and question 30 of Questionnaire to customers.
112 Reply to question 35 of Questionnaire to customers.
113 Replies to question 28 of Questionnaire to customers and replies to question 21 of Questionnaire to
    competitors.
114 Replies to questions 20 and 22-24 of Questionnaire to competitors.
                                                         32
 ---pagebreak---    Annex I – MM’s market shares in the downstream markets for folding boxes
                             at national level (2020)
EEA         Folding    Folding     Folding      Folding Folding    Folding
country     boxes (all boxes for boxes for boxes for boxes for boxes for
            end-uses) food         tobacco      pharma  cosmetics household
                                                        and
                                                        personal
                                                        hygiene
Austria     [5-10]%    <20%        <30%         <5%     <5%        <10%
Belgium     [10-20]%   <15%        -            -       <15%       -
Bulgaria    <30%       <30%        -            -       <30%       -
Croatia     <30%       <30%        <10%         -       -          -
Czech       <30%       <30%        <30%         -       <30%       <30%
Republic
Denmark     <30%       <30%        -            -       -          <30%
Finland     <30%       -           -            -       -          -
France      [10-20]%   <15%        <30%         <40%    <30%       <10%
Germany     [10-20]%   <15%        <50%         <10%    <5%        <15%
Greece      <30%       <30%        <5%          -       -          -
Hungary     <30%       <30%        <30%         <30%    <30%       <30%
Ireland     <30%       <30%        -            <30%    -          <30%
Italy       [0-5]%     <5%         <30%         <5%     <5%        <10%
Lithuania   <30%       <30%        <30%         -       -          -
Luxembou    <30%       -           <30%         -       -          -
rg
Netherland  [0-5]%     <5%         <30%         -       <10%       <10%
s
Norway      <30%       -           -            -       -          -
Poland      [10-20]%   <20%        <30%         <5%     <35%       <20%
Portugal    <30%       -           <15%         -       -          <30%
Romania     <30%       <30%        <20%         -       <30%       <30%
Slovakia    <30%       <30%        -            -       <30%       <30%
                                       1
 ---pagebreak--- EEA          Folding       Folding        Folding        Folding Folding   Folding
country      boxes (all boxes for boxes for boxes for boxes for boxes for
             end-uses) food               tobacco        pharma  cosmetics household
                                                                 and
                                                                 personal
                                                                 hygiene
Slovenia     <30%          -              -              -       <30%      -
Spain        [5-10]%       <5%            <20%           <5%     <5%       <15%
Sweden       <30%          <30%           -              -       <30%      -
UK           [5-10]%       <10%           -              <5%     <5%       <30%
Source: Form CO, Annex 6.4-5, Reply to RFI 4 of 28 June 2021
                                               2