CELEX: 32016M8068
Language: en
Date: 2016-09-20 00:00:00
Title: Commission Decision of 20/09/2016 declaring a concentration to be compatible with the common market (Case No COMP/M.8068 - BUNGE / WALTER RAU NEUSSER ÖL UND FETT) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 20.09.2016
                                                                 C(2016) 6094 final
  In the published version of this decision,
  some information has been omitted                                         PUBLIC VERSION
  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  possible the information omitted has been
  replaced by ranges of figures or a general                           MERGER PROCEDURE
  description.
                                                                 To the notifying party
Dear Sir/Madam,
Subject:        Case M.8068 - Bunge/ Walter Rau Neusser Öl und Fett
                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
(1)         On 16 August 2016, the European Commission received notification of a proposed
            concentration pursuant to Article 4 of the Merger Regulation by which the
            undertaking Bunge Deutschland GmbH (‘Bunge Deutschland’, Germany), a
            subsidiary of Bunge Limited (‘Bunge’, USA), acquires within the meaning of
            Article 3(1)(b) of the Merger Regulation sole control over the whole of the
            undertaking Walter Rau Neusser Öl und Fett AG (‘WRAG’, Germany) by way of
            purchase of shares3 ("the Transaction"). Bunge and WRAG are designated
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 306, 23.8.2016, 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---     hereinafter as 'the Parties', while the undertaking resulting from the Transaction is
    referred to as "the merged entity".
1.  THE PARTIES
(2) Bunge is a food and agribusiness group active in the purchase, storage and
    processing of grains and oilseeds, the production and sale of sugar and bioenergy,
    edible oils and fats, the production of milled wheat, corn and rice products for
    consumers and the production, blend and distribution of fertiliser products for
    agriculture. Bunge’s EEA facilities, including for the processing of oil seeds, are
    located in Germany, Austria, Hungary, Romania, Poland, Spain and Italy.
(3) WRAG is a company incorporated under German law active in the processing and
    blending of vegetable oils and fats primarily for industrial food processors and
    production and marketing of edible oils. WRAG's sole facility is located in Neuss,
    Germany.
2.  THE CONCENTRATION
(4) On 19 April 2016, Bunge and CREMER OLEO GmbH & Co. KG signed a sale
    and purchase agreement according to which Bunge, via its subsidiary Bunge
    Deutschland, will acquire shares representing 62.84% of the registered share
    capital of WRAG. The remaining 37.16% will be held by a natural person and
    Walter Rau Wohlfahrtsstiftung. Through the Transaction, Bunge will acquire sole
    control over WRAG as (i) Bunge will be able to select the supervisory board,
    which in turn selects the management of WRAG and (ii) the remaining
    shareholders will have neither rights granting decisive influence over WRAG nor
    power to take or block actions which determine the strategic commercial behaviour
    of WRAG.
(5) Therefore, the Transaction constitutes a concentration within the meaning of
    Article 3(1)(b) of the Merger Regulation.
3.  UNION DIMENSION
(6) The undertakings concerned have a combined aggregate world-wide turnover of
    more than EUR 5 000 million (Bunge: EUR 39 166 million, WRAG:
    EUR 301 million). Each of them has an Union-wide turnover in excess of
    EUR 250 million (Bunge: EUR 6 468 million, WRAG: EUR 278 million), but they
    do not achieve more than two-thirds of their aggregate Union-wide turnover within
    one and the same Member State. The notified operation therefore has an Union
    dimension.
4.  RELEVANT MARKETS AND COMPETITIVE ASSESSMENT
(7) Crude oil is produced by crushing and pressing oil bearing crops. It is then further
    processed to produce refined seed oil which can be sold in bulk (BRSO) or packed
    for sale to end-users (PRSO). Refined seed oil is also further refined to produce
    vegetable fats. Vegetable oils and fats are used by the food processing industry as a
    component in food products.
                                              2
 ---pagebreak--- (8)     In previous decisions, the Commission distinguished within edible oils and fats the
        following segments: (i) crude seed oil; (ii) BRSO; (iii) PRSO, and (iv) bakery fats4.
        It also considered that olive oils are distinct from seed oils5.
(9)     The Parties' activities in the EEA overlap horizontally regarding the production and
        sale of (i) BRSO and (ii) PRSO for the foodservice channel. However, whereas
        both companies sell mono-oil refined seed oil products, WRAG’s business mainly
        focuses on specialised blended seed oils which are tailor made to suit particular
        functional applications and customers ("functional oils").
4.1.    Product market definition
4.1.1.  BRSO
(10)    In previous decisions, the Commission left open whether various types of refined
        seed oils sold in bulk constitute different markets6. It was found that whereas there
        is a certain degree of substitutability between the different types of seed oil, it is
        not complete neither from the demand nor the supply side.
(11)    The Parties do not contest the Commission's findings in previous decisions but
        submit that the limited overlap between the Parties activities makes it unnecessary
        to consider these distinctions further7.
(12)    The Commission inquired market participants about the appropriate market
        definition for BRSO products in the context of case M.7963 – ADM /Wilmar
        /Olenex JV which concerned the same products and was notified to the
        Commission on 4 August 2016. It resulted from that market investigation that
        vegetable refined oils, such as for example, rapeseed, sunflower or soy bean oils,
        are to be distinguished from tropical refined oils, such as palm and coconut oil8 due
        to differences in composition, intended use and price.
(13)    The Commission also investigated in that case whether further segmentation should
        be considered between different types of vegetable oils and, separately, between
        different types of tropical oils. It resulted from the investigation that there is only a
        limited degree of substitutability between different types of refined oils. This
        concerns both vegetable oils and tropical oils9.
(14)    In the present case whether the market for the sale and production of BRSO should
        be segmented according to the different types of seeds and vegetable oils can be
        left open since the Transaction would not give rise to serious doubts as to its
        compatibility with the internal market under the narrowest possible product market
        definition where the overlaps between the Parties are most pronounced. Therefore,
4      M.3044 – ADM/PURA, par. 8
5      M.1802 – Unilever/Amora,Naille par.17
6      Cases M.3044 – ADM/Pura, par. 10 and M.3188 ADM/VDBO, par.12-16.
7      Form CO, par.77.
8      Case M.7963 – ADM/Wilmar/Olenex JV, par. 25-26.
9      Case M.7963 – ADM/Wilmar/Olenex JV, par. 27-33.
                                                    3
 ---pagebreak---         the effects of the Transaction have been assessed on the basis of the narrowest
        product market for each of the different types of BRSO
4.1.2.  PRSO
(15)    As regards PRSO, previous markets investigations run by the Commission
        suggested that it may not be necessary to distinguish separate markets on the basis
        of different types of seeds. However, with respect to the different distribution
        channels, sales of food products (including oils) to the retail sector were considered
        separate from sales to the food service sector.
(16)    The Parties highlight the different characteristics of PRSO products sold to retailers
        or to the food service channel. As regards other possible sub-segmentations the
        Parties do not contest the Commission's findings in previous decisions but submit
        that the limited overlap between the Parties activities makes it unnecessary to
        consider these distinctions further10.
(17)    In the present case whether the market for the sale and production of PRSO should
        be segmented according to the different types of seeds or the different distribution
        channels can be left open since the Transaction would not give rise to serious
        doubts as to its compatibility with the internal market under the narrowest possible
        product market definition where the overlaps between the Parties are most
        pronounced. Therefore, the effects of the Transaction have been assessed on the
        basis of the sale of the different types of PRSO to the foodservice channel.
4.2.    Geographic market definition
4.2.1.  BRSO
(18)    In two previous cases, the Commission left open the exact geographic scope of the
        BRSO markets and analysed both EEA-wide and national markets11. In other cases,
        the Commission found that these markets were EEA-wide in scope12 .
(19)    The Parties argue that the market should be considered wider than national or
        regional and put forward that customers source these products from producers
        across the EEA, and that suppliers can easily ship the products to different
        countries or regions in response to demand13.
(20)    The Commission's investigation in the above-mentioned parallel case M.7963 –
        ADM /Wilmar /Olenex JV appears to indicate that the geographic scope for the
        markets of BRSO is regional, covering nearby countries14.
(21)    For the purpose of the present case, BRSO markets will be analysed at both EEA
        and national level taking into account potential cross-border trade.
10     Form CO, par.78-82.
11     M.3188 – ADM/VDBO, par.30. M.7625 – ADM/AOR, par.31.
12     M.2980 – Cargil/AOP. M.3044 –-ADM/PURA.
13     Form CO, par.92.
14     Case M.7963 – ADM/Wilmar/Olenex JV, par.40-43.
                                                   4
 ---pagebreak--- 4.2.2.   PRSO
(22)     The Commission in previous decisions left open the precise definition of the
         geographic scope of the PRSO markets. However, the market investigation in
         previous cases revealed elements indicating that supply of PRSO to the retail
         channel can be regarded as national in scope with possible cross-border effects. For
         instance, the competitive assessment carried out in Cargil/Vandemoortele15, related
         not only to Belgium, but also neighbouring areas where bottling plants within a
         reasonable distance (at least 300km) were located.
(23)     The Parties argue that the market for PRSO should also be considered wider than
         national or regional and put forward that customers source these products from
         producers across the EEA, and that suppliers can easily ship the products to
         different countries or regions in response to demand16.
(24)     In the present case, and for the purposes of this decision, whether the relevant
         geographical market for the production and sale of PRSO is national or wider in
         scope can be left open since the Transaction would not give rise to serious doubts
         as to is compatibility with the internal market under the narrowest possible
         geographical market where the overlaps between the Parties are most pronounced.
         Therefore, the effects of the Transaction have been assessed at national level taking
         into account potential cross-border trade.
4.3.     Competitive assessment
(25)     The Transaction will lead to the following potentially affected markets:
         (i) the EEA-wide market for BRSO made from sunflower seed oil. An analysis on
         the basis of the different types of BRSOs and PRSOs shows that, with the
         exception of the market for BRSO produced from sunflower, the Transaction
         would not lead to any potentially affected markets when considering EEA-wide
         markets.
         (ii) the markets for the supply of BRSO in Austria, Hungary and Poland and
         (iii) the market for the supply of PRSO to the foodservice channel in Bulgaria.
4.4.     EEA-wide market for BRSO produced from sunflower
(26)     As regards the market for BRSO produced from sunflower, competition issues
         appear unlikely to arise as the combined market share of the Parties is not
         high ([20-30]%) and would therefore not exceed [20-30]% post-transaction with an
         increment of below [10-20]% ( Bunge [10-20]% and WRAG [5-10]%).
         Furthermore, several important competitors will remain present and exercise
         competitive pressure on the merged entity. These include most notably the
         international competitors Cargill, Olenex, Lesieur/Sofiproteol and Glencore.
15     Case COMP/M.1227 – Cargil/Vandemoortele. The market delineation used in the assessment covered
       therefore Belgium and several transborder regions of France, Germany, the Netherlands, Luxembourg
       as well as the United Kingdom.
16     Form CO, par.92 and 98.
                                                       5
 ---pagebreak--- 4.5.   National markets - BRSO
(27)   When considering the geographic scope of the relevant markets to be national or
       regional, the Transaction would lead to potentially affected markets for BRSO in:
       (i) Austria, (ii) Poland and (iii) Hungary.
(28)   The combined market share of the Parties are as follows: in Austria [70-80]%
       (Bunge: [70-80]%, WRAG: [5-10]%), in Poland: [30-40]% (Bunge: [30-40]%,
       WRAG: [0-5]%) and in Hungary up to [20-30]% (Bunge: up to [20-30]%,
       WRAG: up to [5-10]%).
(29)   Yet, competition concerns are unlikely to arise as a result of the Transaction for the
       following reasons:
(30)   First, the increment to Bunge's market share brought about by the Transaction with
       respect to those national markets is limited and remains in any case below
       [10-20]%.
(31)   Second, in view of the information provided by the Parties17 and the market
       assessment in previous cases, it appears likely that national market shares are only
       of limited significance to measure the market power of the Parties on the respective
       oils markets as customers seem to procure cross-border.
(32)   In this respect, the assumption that BRSO products travel at least to a certain extent
       across the borders is supported by the fact that WRAG owns only one production
       facility in Germany but sells outside Germany [50-60]% of its production. Yet,
       when considering a regional market the combined market shares of the Parties
       differ substantially from the national market shares. For instance, in a regional
       market comprising Austria and neighbouring countries the combined market share
       of the Parties would be approximately [50-60]% for the region comprising Austria,
       Slovenia, Slovakia and Hungary, [40-50]% for the region Austria and Hungary and
       even only [10-20]% for the region Austria and Germany.
(33)   This was confirmed in the course of the market investigation conducted by the
       Commission. The large majority of the customers that responded to the market
       investigation indicated that they would be able to source BRSO from producers
       located in countries other than the ones where their company's facilities are
       located18. Potential alternative suppliers were named by customers: "there are
       medium-sized, mostly regional suppliers as well regional suppliers as well in
       France, Southern and Eastern Europe or even Black Sea (e.g. Coppini, Speroni,
       Lipidos, Florin, Lamotte, Toledo, Sabo Oleificio, Fabio etc.)"19. Supplies from
       ADM locations in the Czech Republic, Germany and Poland as well as from
       Glencore in Germany were also indicated by customers20. Generally, no concerns
17   The Parties have submitted in this regard that tenders for refined seed oil products usually take place
     at least on an EEA-wide basis.
18   See emails from customers consulted of 23 August 2016, 9.59am.; 23 August 2016 10.48am;
     23 August 2016, 5.02pm; 24 August 2016 12.04pm; 23 August 2016 1.19pm; August 25,
     2016 3:04 pm; 25 August 2016, 4.28pm.
19   See email from a customer consulted of 17 August 2016, 9.06am.
20   See email from a customer consulted of 23 August 2016, 5.02pm.
                                                       6
 ---pagebreak---        were raised by the customers consulted as to the potential impact that the
       Transaction could have on the procurement of BRSO.
(34)   Concerns were neither expressed by customers located in Austria, where national
       market shares are highest. A customer sourcing BRSO for Austria and Hungary
       indicated that it could turn to suppliers located in Czech Republic, Hungary,
       Germany and a number of other countries and in relation to alternative suppliers it
       indicated that "supplyers are all big ADM(Olenex), Glencore, Bunge, Cargill, but
       also manny smaller supplyers like Tywissen, Brökelmann, Bimal, Ardealul, NT,
       Banat, Tampieri".21
(35)   This is corroborated by an analysis of the refining plants active in the production of
       BRSO within Austria or in the neighbouring countries within a maximum distance
       of 500km. A large number of plants are active within that territory, including, inter
       alia, in Austria itself (BAG Ölmühle, Olea Rauch), Czech Republic (ADM,
       Agrofert, Glencore, Slavia Capital), Germany (Cargill), Hungary (NT, Öko-Line),
       Italy (Cereal Docks, Deoleo, Tampieri, Unigrà), Poland (Bielmar, Komagra) and
       Romania (Ardealul).22
(36)   Third, the Parties' products do not appear to be close competitors as WRAG is
       specialised in the production of functional oils while Bunge produces and sells
       almost exclusively standard mono-oil23. Indeed production of functional BRSOs
       constituted [80-90]% of WRAG's overall production in 2015. Moreover, WRAG
       sales of BRSO in Austria were 90-100% functional oils24.
(37)   Finally, the merged entity will continue facing competition from other large
       international agribusiness groups such as Cargill, Olenex, Lesieur/Sofiproteol and
       Glencore.
(38)   In the light of the above and in view of the information available to it and the
       outcome of the market investigation, the Commission considers that the
       Transaction dos not give rise to serious doubts as to its compatibility with the
       internal market with respect to the production and sale of BRSO.
4.6.   National markets - PRSO
(39)   The Transaction leads to an affected market in the market for PRSO to the
       foodservice sector in Bulgaria. However, the combined market share of the Parties
       of [20-30]% (Bunge: [10-20]%, WRAG: [5-10]%) remains below [20-30]% with
       an increment below [10-20]%. Therefore, also in respect of the market for the
21   See email from a customer consulted of 15 September 2016, 11.14 am.
22   See annex 564662673-1 submitted by Bunge representatives by email of 14 September, 6.52pm.
23   Functional blends are blends developed and produced especially for the customer’s individual needs
     and demands. Functional monos are oils of a single type which are not blended but have a certain
     function, or a special modification such as a defined melting point or a certain demanded level of
     sustainable sourcing. Non-functional oils are pure commodity oils (for example, standard sunflower
     oil, standard rapeseed oil, standard palm oil). See email of Bunge representatives of
     15 September 2016, 11.31am.
24   See Annex "Functional and non functional oils 2015" submitted by Bunge representatives by email of
     14 September 2016, 2.16pm.
                                                      7
 ---pagebreak---      production and sale of PRSO, competition concerns are unlikely to arise from the
     Transaction.
5.   CONCLUSION
(40) 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)
                                                  Neven MIMICA
                                                  Member of the Commission
                                             8