CELEX: 32019M9239
Language: en
Date: 2019-06-04 00:00:00
Title: Commission Decision of 04/06/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9239 - Evonik Industries AG / PeroxyChem Holdings L.P.) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 4.6.2019
                                                                C(2019) 4255 final
                                                                               PUBLIC VERSION
                                                                  In the published version of this decision,
                                                                  some information has been omitted
                                                                  pursuant to Article 17(2) of Council
                                                                  Regulation      (EC)      No     139/2004
                                                                  concerning non-disclosure of business
                                                                  secrets     and      other     confidential
                                                                  information. The omissions are shown
                                                                  thus    […].     Where possible         the
                                                                  information omitted has been replaced by
                                                                  ranges of figures or a general description.
                                                                To the notifying party
Subject:            Case M.9239 – Evonik / PeroxyChem
                    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 24 April 2019, the European Commission received notification of a
          concentration pursuant to Article 4 of the Merger Regulation which would result
          from a proposed transaction by which Evonik Industries AG (“Evonik”,
          Germany), controlled by RAG Stiftung (Germany), intends to acquire sole
          control, within the meaning of Article 3(1)(b) of that regulation, over
          PeroxyChem Holdings L.P. (“PeroxyChem”, US), by way of a purchase of equity
          interests (the “Transaction”).3
(2)       In this Decision, Evonik is also referred to as “the Notifying Party”. Evonik and
          PeroxyChem are collectively referred to as “the Parties”. The undertaking that
          would result from the Transaction is referred to as “the Merged Entity”.
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 154, 06/05/2019, p. 5.
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
(3)   Evonik is headquartered in Germany and listed on the Frankfurt Stock Exchange.
      It is active in the production and marketing of specialty chemicals. Evonik has
      divided its activities into three business segments: Nutrition and Care, Resource
      Efficiency and Performance Materials.
(4)   PeroxyChem is a globally active manufacturer of hydrogen peroxide (“H2O2”),
      peracetic acid (“PAA”) and persulfates. In addition, PeroxyChem is active in the
      resale of sulphur derivatives.
(5)   In the EEA, PeroxyChem has one production plant in Spain (for H2O2 and PAA)
      and one in Germany (for persulfates). Outside the EEA, PeroxyChem operates
      four additional manufacturing facilities of which three are in the USA and one is
      in Canada.
2.    THE OPERATION AND THE CONCENTRATION
(6)   On 7 November 2018, the Parties signed an agreement and plan of merger
      pursuant to which Evonik will acquire sole control over PeroxyChem within the
      meaning of Article 3(1)(b) of the Merger Regulation.
(7)   It follows that the Transaction would result in a concentration within the meaning
      of Article 3(1)(b) of the Merger Regulation
3.    UNION DIMENSION
(8)   The concentration does not have a Union dimension under Article 1 of the Merger
      Regulation, since in 2018, PeroxyChem achieved a turnover of EUR […] million
      worldwide and [less than EUR 100] million in the EEA. For the same year,
      Evonik achieved a turnover of EUR 14 383 million worldwide and EUR […]
      million in the EEA.4
(9)   On 24 January 2019, the Commission received a referral request with respect to
      the Transaction, which was reviewable in Austria, Portugal and Spain.
(10)  As no Member State disagreed with the Parties’ referral request, the concentration
      is deemed to have a Union dimension pursuant to Article 4(5) of the Merger
      Regulation.
4.    MARKET DEFINITION
(11)  The Transaction combines the Parties’ global businesses in active oxygen
      chemical products. In the EEA, the Transaction gives rise to horizontal overlaps
      and vertical links exclusively with respect to the Parties’ activities in the
      production and marketing of H2O2 and PAA products.
4    Turnovers calculated in accordance with Article 5 of the Merger Regulation.
                                                      2
 ---pagebreak--- (12)    The remainder of the present Decision will therefore exclusively focus on H2O2
        and PAA products.
4.1.    H2O2
4.1.1. Introduction
(13)    H2O2, also known as oxygenated water, is a powerful oxidant sold as a bulk
        commodity in a broad range of concentrations and grades. It has a wide range of
        industrial and commercial applications in the manufacture of pulp and paper,
        textiles, electronics and semi-conductors, in the chemical synthesis or for metal
        extraction, disinfection, water and sewage treatment. H2O2 is also used as a raw
        material input product for the production of other peroxygen products, such as
        PAA products.
(14)    In the EEA, each of Evonik and PeroxyChem is active in the production and sale
        of H2O2 products for use in the complete range of typical end-use applications.
(15)    In the EEA, Evonik produces H2O2 in Antwerp (Belgium), Rheinfelden
        (Germany), Weissenstein (Austria) and Delfzijl (Netherlands). PeroxyChem
        produces its H2O2 products exclusively in La Zaida (Spain).
4.1.2. Relevant Product Market
(16)    The Notifying Party submits that in its most recent decisional practice related to
        H2O2, the Commission concluded on a distinct product market for H2O2, without
        the need for any further segmentation.5 The Notifying Party agrees with that
        precedent and proposes to follow the same product market definition for the
        purpose of the present case.
(17)    During its market investigation, the Commission investigated whether any further
        market segmentations of the product market for H2O2, on the basis of its
        concentration, purity levels and/or BPR6 product type would be appropriate.
(18)    The results of the market investigation confirmed that H2O2 constitutes a distinct
        product market, without any need for further segmentations. In fact, competitors
        overall confirmed that they produce all typical concentration levels7 and purity
        levels8 of H2O2 and that their product portfolio covers the complete range of
        typical end-use applications.9 An exception to this was ultra-high concentrations
        (above 90%) for use in rocket propulsion purposes, for which none of the
5     M.6230 Solvay/Rhodia, European Commission decision of 5 August 2011, paragraphs 20-23.
6     European Biocide Products Regulation (BPR). Regulation (EU) No 528/2012 of the European
      Parliament and of the Council of 22 May 2012 concerning the making available on the market and
      use of biocidal products, OJ L 167/1 [2012]. The BPR concerns the placing on the market and use
      of biocidal products, which are used to protect humans, animals, materials or articles against
      harmful organisms like pests or bacteria, by the action of the active substances contained in the
      biocidal product. According to the European Chemicals Agency (ECHA), this regulation aims to
      improve the functioning of the biocidal products market in the EU, while ensuring a high level of
      protection for humans and the environment.
7     See non-confidential replies to question 5 to Q4 Competitors – H2O2.
8     See non-confidential replies to question 6 to Q4 Competitors – H2O2.
9     See non-confidential replies to questions 4 and 8 to Q4 Competitors – H2O2.
                                                         3
 ---pagebreak---        competitors confirmed its presence and for which some explicitly stated that their
       portfolio “does not include super high concentrations such as 90-99%”.10 In
       addition, in the EEA, none of the Parties has generated any sales relating to that
       specific end-use application. This Decision will therefore not assess the relevance
       of a potential sub-market with respect to H2O2 of ultra-high concentrations levels.
(19)   In general, competitors active in the manufacture of H2O2 confirmed that they
       could easily and readily change production between H2O2 products for use in
       different applications.11 Customers, in general, did not recognize any specific
       end-use application of H2O2 for which products would only be manufactured or
       registered by fewer suppliers.12
(20)   The Commission further notes that H2O2 is typically delivered in bulk, but may
       also, under particular circumstances and for particularly large volume orders, be
       supplied via pipeline. The Commission understands that the vast majority of
       merchant sales are realised in bulk, and only has knowledge of one instance in
       which H2O2 is delivered by pipeline, in Antwerp, Belgium13. While these two
       delivery modes could possibly seem to constitute separate product markets, the
       Commission does not need to conclude on this question for the purpose of the
       present case as, irrespective of whether the bulk supply and tonnage supply
       modes of H2O2 constitute separate product markets, the Transaction does not raise
       any competition concerns, given the low combined market shares of the Parties
       under either scenario, as will be demonstrated in section 5.2.1 below.
4.1.3. Relevant Geographic Market
(21)   The Notifying Party also submits that in its prior decisional practice14, the
       Commission concluded that the relevant geographic market for H2O2 is EEA-
       wide in scope. The Notifying Party proposes to follow the same approach for the
       purpose of the present case.
(22)   The results of the market investigation confirmed that the H2O2 market is EEA-
       wide in scope. In fact, while a majority of responding customers indicated that the
       location of a H2O2 supplier’s plants is an important criterion because of related
       lead times and transport costs15, they also confirmed their ability to source H2O2
       from all over the EEA.16 More specifically, the majority of customers consider
       that a H2O2 supplier can serve them efficiently and at competitive terms within a
       radius of approximately 1 000 kilometers around a production plant.17 Several
       respondents indicated that the relevant geographic market would be EEA-wide in
       scope, with a maximum distance from a supplier’s plant of up to
       3 000 kilometers.18 Similarly, competitors active in the production and sale of
10    See non-confidential replies to question 7 to Q4 Competitors – H2O2.
11    See non-confidential replies to question 9 to Q4 Competitors – H2O2.
12    See non-confidential replies to question 12 to Q4 Competitors – H2O2.
13    According to the Parties, this situation occurs in Antwerp where Solvay supplies H2O2 to BASF
      DOW HPPO Production B.V.B.A (“BASF/Dow joint venture”).
14    M.6230 Solvay/Rhodia, European Commission decision of 5 August 2011, paragraphs 24-25.
15    See non-confidential replies to question 14 and 14.1 to Q2 Customers – H2O2.
16    See non-confidential replies to question 6 to Q2 Customers – H2O2.
17    See non-confidential replies to question 13 to Q2 Customers – H2O2.
18    See non-confidential replies to question 13 to Q2 Customers – H2O2.
                                                        4
 ---pagebreak---        H2O2 confirmed that they do not tend to import H2O2 into the EEA19 and the
       Commission observes that H2O2 suppliers typically rely on a network of
       European production sites to cover the EEA demand.20
4.1.4. Conclusion
(23)   In light of the above considerations and taking into account the result of the
       market investigation and all the evidence available to it, the Commission
       concludes that, for the purpose of the present case, the EEA market for H2O2
       constitutes the relevant market, without the need for any further product or
       geographic market segmentation. In particular, given that the Transaction would
       not raise serious doubts as to its compatibility with the internal market even under
       the narrowest product market definition, the Commission leaves open the
       question whether separate product markets for H2O2 should be defined with
       respect to the bulk or pipeline delivery mode of H2O2.
4.2.   PAA
4.2.1. Introduction
(24)   PAA is manufactured following a chemical reaction between acetic acid and
       H2O2. It is sold in various concentrations for use in the paper industry, medicine,
       animal health, water treatment, disinfectant for the food and beverage industry.
       Concentrations of typically up to 15% are used as sanitizers, disinfectants and
       sterilants in the food and beverage industry, for water treatment, in laundries and
       for medical applications, while grades of concentrations of typically 35% or 40%
       can be used for oxidation reactions in chemical synthesis (for cosmetics,
       chemicals, fragrances and pharmaceutical end-use applications) and in the paper
       industry (for pulp bleaching).
(25)   In the EEA, the Parties commercialize PAA products of various concentrations.
       More specifically, Evonik commercializes several grades of 11 different
       concentrations ranging from 0.4% to 40%, the bulk of which correspond to
       15%-concentrated PAA ([…]% of Evonik’s 2018 sales in the EEA) and
       5%-concentrated PAA ([…]% of sales). Similarly, PeroxyChem is active in the
       EEA with PAA products of 1.5%, 5%, 15% and 35% concentrations, the quasi-
       totality of which is represented, as for Evonik, by 5%-concentrated PAA ([…]%)
       and 15%-concentrated PAA ([…]% of sales) products.
(26)   Consequently, the Parties’ activities in PAA products of higher concentrations
       and designed for oxidation purposes do not overlap in the production and sale of
       40%-concentrated PAA products ([0-5]% of Evonik’s EEA sales in 2018) but
       only with respect to 35%-concentrated PAA products, which represent
       respectively [0-5]% and [0-5]% of Evonik’s and PeroxyChem’s sales in the EEA.
(27)   Evonik produces all its PAA products in Weisenstein (Austria). PeroxyChem
       produces all its PAA products in La Zaida (Spain).
19    See non-confidential replies to question 12 to Q4 Competitors – H2O2.
20    See non-confidential replies to question 11 to Q4 Competitors – H2O2.
                                                        5
 ---pagebreak--- 4.2.2. Relevant Product Market
(28)    The Notifying Party submits that in previous cases21, the Commission considered
        that there is no need to further delineate the PAA market according to end-use
        applications, except for medical and animal health applications.22 It proposes to
        follow the same approach.
(29)    During calls the Commission held with market participants, it was indicated that a
        separate product market may exist in relation to 35%-concentrated PAA products.
        Market participants indicated that PAA of such concentrations cannot be
        substituted by different materials, lower-concentration PAA or 40%-concentrated
        PAA products, and that they could recognise only Evonik and PeroxyChem as
        manufacturers of 35%-concentrated PAA products in the EEA.
(30)    During the formal market investigation, both customers and competitors of the
        Parties overwhelmingly confirmed that the 35%-concentrated PAA products of
        Evonik and PeroxyChem cannot be substituted by PAA products of either lower
        concentrations23 or higher (40%) concentration.24
(31)    Moreover, while the production process and necessary inputs remain overall the
        same for PAA products of different concentrations, the market investigation
        indicated that 35%-concentrated PAA products require the adoption of different
        handling and safety measures during the manufacturing and transport phases,
        compared to PAA products of lower concentration.25
(32)    For the purpose of the present case, however, the Commission does not need to
        conclude as to whether the product market definition for PAA needs to be further
        segmented with respect to 35%-concentrated PAA as, irrespective of whether the
        market for 35%-concentrated PAA products constitutes a separate relevant sub-
        market or belongs to the broader product market for overall PAA products, the
        Transaction would not raise serious doubts as to its compatibility with the internal
        market
4.2.3. Relevant Geographic Market
(33)    The Notifying Party notes that in the pre-cited case26, the Commission concluded
        that the relevant geographic market for PAA was a collection of national or
        regional markets. At the time, the Commission noted a tendency towards an EEA-
21    M.2690 -SOLVAY / MONTEDISON-AUSIMONT European Commission decision of 9 April 2002
      paragraphs 101-105.
22    For the purpose of the present case, however, no horizontal overlap arises with respect to PAA
      products for use in medical and health applications.
23    See non-confidential replies to question 11 Q1 Customers – PAA, and non-confidential replies to
      questions 6, 7 & 8 Q3 Competitors – PAA.
24    See non-confidential replies to question 11 Q1 Customers – PAA and replies to question 7 Q3
      Competitors PAA.
25    See non-confidential replies to questions 8 & 11 Q3 Competitors PAA.
26    M.2690 Solvay/Montedison-Ausimont, European Commission decision of 9 April 2002, par. 106-109.
                                                        6
 ---pagebreak---        wide geographic market, which would be reinforced by the adoption of the
       European Biocide Products Directive27).
(34)   In particular, the Notifying Party notes that the BPR enables PAA producers to
       seek one single regulatory approval to obtain a market authorisation for their
       products in the whole EEA. According to the Notifying Party, this has stimulated
       intra-EEA trade and removed regulatory barriers. The Notifying Party concludes
       that since the Parties each sell their PAA cross-border throughout the EAA, from
       one production plant in Austria (Evonik) and Spain (PeroxyChem), and as there
       are common standards for transportation of PAA, the geographic market is EEA-
       wide in scope.
(35)   Customer replies to the Commission’s market investigation confirmed that PAA
       is transported within the EEA rather easily.28 The Commission also observes that
       Evonik supplies the market from its single plant in Austria to distances of more
       than 1 500 to 2 000 kilometers.
(36)   Similarly, the Parties’ competitors indicated that transport distances do not
       constitute a barrier to commercial opportunities vis-à-vis potential PAA
       customers around the EEA, irrespective of the precise location of their PAA
       manufacturing plants.29
(37)   The Commission therefore concludes that the geographic scope of the overall
       market for PAA products and of its potential sub-market restricted to 35%-
       concentrated PAA products is EEA-wide.
4.2.4. Conclusion
(38)   In light of the above considerations and taking into account the result of the
       market investigation and all the evidence available to it, the Commission
       concludes that, for the purpose of the present case, the EEA market for overall
       PAA products and its potential, separate, sub-market for 35%-concentrated PAA
       products constitute the relevant markets. In particular, given that the Transaction
       would not raise serious doubts as to its compatibility with the internal market
       even under the narrowest product market definition, the Commission leaves open
       the question whether a separate market for PAA should be defined with respect to
       35%-concentrated PAA products.
5.     COMPETITIVE ASSESSMENT
(39)   Within the EEA, the Transaction gives rise to two horizontally affected markets,
       first, with respect to H2O2 delivered in bulk (see section 5.2.1.2) and, second, with
       respect to PAA under the alternative of a narrower product market definition for
       35%-concentrated PAA products (see section 5.2.2.2). Moreover, the existing link
       between this latter market and the overall market for H2O2 is vertically affected
       by the Transaction (see section 5.3).
27    Which has been adopted since 2012-2013 as the European Biocide Products Regulation (“BPR”).
28    See non-confidential replies to questions 12 & 13 Q1 - Customers PAA.
29    See non-confidential replies to questions 13, 14 & 15 Q3 - Competitors – PAA.
                                                        7
 ---pagebreak--- (40)  Conversely, the EEA market for H2O2 products in general (irrespective of the
      delivery mode) (see section 5.2.1.1) as well as the EEA market for overall PAA
      products (see section 5.2.2.1) are not affected markets.
5.1.  Legal Framework
(41)  Article 2 of the Merger Regulation requires the Commission to examine whether
      notified concentrations are compatible with the internal market, by assessing
      whether they would significantly impede effective competition in the internal
      market or in a substantial part of it.
(42)  The Commission Guidelines on the assessment of horizontal mergers under the
      Merger Regulation (the "Horizontal Merger Guidelines") distinguish two main
      ways in which mergers between actual or potential competitors on the same
      relevant market may significantly impede effective competition, namely non-
      coordinated effects and coordinated effects.30
(43)  Non-coordinated effects may significantly impede effective competition by
      eliminating the competitive constraint imposed by one merging party on the other,
      as a result of which the merged entity would have increased market power
      without resorting to coordinated behaviour. According to recital (25) of the
      preamble of the Merger Regulation, a significant impediment to effective
      competition can result from the anticompetitive effects of a concentration even if
      the merged entity would not have a dominant position on the market concerned.
      In this regard, the Horizontal Merger Guidelines consider not only the direct loss
      of competition between the merging firms, but also the reduction in competitive
      pressure on non-merging firms in the same market that could be brought about by
      the merger.31
(44)  Indeed, the Horizontal Merger Guidelines list a number of factors which may
      influence whether or not significant 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, the limited possibilities for customers to
      switch suppliers, or the fact that the merger would eliminate an important
      competitive force. Not all of these factors need to be present for significant non-
      coordinated effects to be likely. The list of factors, each of which is not
      necessarily decisive in its own right, is also not an exhaustive list.32
(45)  In addition, the Commission Guidelines on the assessment of non-horizontal
      mergers under the Merger Regulation (the "Non-Horizontal Merger Guidelines")
      distinguish between two main ways in which vertical mergers may significantly
      impede effective competition, namely input foreclosure and customer
      foreclosure.33
30   OJ C 31, 05.02.2004, p. 5. The remainder of this decision focuses on non-coordinated effects.
31   Horizontal Merger Guidelines, paragraphs 24-38.
32   Horizontal Merger Guidelines, paragraphs 24-38.
33   OJ L 24, 29.1.2004, p. 1.
                                                      8
 ---pagebreak--- (46)    For a transaction to raise input foreclosure competition concerns, the merged
        entity must have a significant degree of market power upstream.34 In assessing the
        likelihood of an anticompetitive input foreclosure strategy, the Commission has to
        examine whether (i) the merged entity would have the ability to substantially
        foreclose access to inputs; (ii) whether it would have the incentive to do so; and
        (iii) whether a foreclosure strategy would have a significant detrimental effect on
        competition downstream.35
(47)    For a transaction to raise customer foreclosure competition concerns, the merged
        entity must be an important customer with a significant degree of market power in
        the downstream market.36 In assessing the likelihood of an anticompetitive
        customer foreclosure strategy, the Commission has to examine whether (i) the
        merged entity would have the ability to foreclose access to downstream markets
        by reducing its purchases from upstream rivals; (ii) whether it would have the
        incentive to do so and (iii) whether a foreclosure strategy would have a significant
        detrimental effect on consumers in the downstream market.37
5.2.    Horizontal assessment
5.2.1. H2O2
5.2.1.1.         Overall market for H2O2
(48)    The Parties provided market shares by volume based on their own production and
        their best estimates for the competitors’ production. Regarding market shares in
        value, the Parties’ best estimate assumed that the average sales price of all market
        participants is equal to the Parties’ own average sales prices. This approach leads
        to value-based market shares that are very similar to the volume-based ones. In
        order to capture value market shares, the Commission carried out its own market
        reconstruction on the basis of the information it obtained during the market
        investigation.38
(49)    Under the assumption that H2O2 deliveries via pipeline belong to the same
        product market as bulk H2O2 deliveries, the Transaction does not give rise to a
        horizontally affected market (see Table 1).
34    Non-horizontal Merger Guidelines, paragraph 35.
35    Non-horizontal Merger Guidelines, paragraph 32.
36    Non-horizontal Merger Guidelines, paragraph 61.
37    Non-horizontal Merger Guidelines, paragraph 59.
38    During the market investigation, the Commission obtained information from each of the Parties’
      major competitors about their own sales figures on a volume and value basis. The Commission was
      therefore able to obtain an overall picture of the market.
                                                          9
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- (63)    The market reconstruction resulting from the market investigation broadly
        confirmed the Parties’ market share estimates and, in particular, the fact that the
        Transaction does not give rise to a horizontally affected market (both in terms of
        volume and value market shares) with respect to the EEA market for overall PAA
        products.
(64)    According to the Parties’ estimated market shares, the Merged Entity would have
        a post-merger combined market share of [10-20]%, with an increment brought
        about by PeroxyChem of [0-5]%. Post-transaction, each of Solvay and Ecolab
        would remain larger than the Merged Entity with respective market shares of
        [30-40]% and [20-30]%.
(65)    As explained in section 5.2.1.1, the Commission is unlikely to identify horizontal
        competition concerns in a merger with a post-merger HHI above 2 000 and a delta
        below 150, except where special circumstances are present.51 With respect to the
        EEA market for overall PAA products, none of the special circumstances are met
        and the post-merger HHI is, potentially, above 2 000 (< [2000-3000]) while the
        associated delta remains in any event below 150 ([…]).
(66)    Moreover, the results of the market investigation did not indicate any concerns,
        neither from customers, nor from competitors.52
(67)    Based on the above considerations and in light of all the evidence available to it,
        the Commission considers that the Transaction would not raise any serious doubts
        as to its compatibility with the internal market with regard to the Parties’
        activities in the EEA market for overall PAA.
5.2.2.2.         Narrower market for 35%-concentrated PAA products
(68)    As a preliminary remark, the Commission notes that the Notifying Party provided
        market share figures in a hypothetical market for PAA products with
        concentration of 35% or above. Under this alternative, broader product market
        definition proposed by the Notifying Party and which would include any PAA
        products of concentration between 35% and 40%, Evonik’s volumes include
        […] t of its 40%-concentrated PAA products. PeroxyChem does not have any
        40%-concentrated PAA products. Kemira would compete with […]t of distilled
        40%-concentrated PAA products.53 Under this alternative, broader product
        market definition proposed by the Notifying Party, the Merged Entity’s market
        share would be reduced to [10-20]%, compared to Kemira’s leadership position
        with [70-80]%.
(69)    However, as explained in section 4.2.2., the results of the market investigation
        casted doubts on whether 35%-concentrated PAA products can be substituted by
51    Paragraph 20 of the Horizontal Merger Guidelines.
52    See, in particular, non-confidential replies to questions 31 to 34 Q1 – Customers - PAA and
      questions 32 to 37 Q3 -competitors – PAA.
53    The Commission does not need to conclude as to whether Kemira’s distilled 40%-concentrated
      PAA is an alternative to Evonik’s 40%-concentrated PAA, since no competition concerns arise in
      this hypothetical sub-market, in particular given the absence of any 40%-concentrated product in
      PeroxyChem’s product portfolio.
                                                       13
 ---pagebreak---  ---pagebreak---        35% concentration59 and is appropriate for oxidation purposes in the
       pharmaceutical and cosmetic industries.60 Under the very conservative
       assumption that Kesla did not achieve any sales of 35%-concentrated PAA
       products in the EEA in 2018, the Merged Entity’s market share would increase, at
       most, to [50-60]% and Promox to [40-50]%. In any event, irrespective of whether
       Kesla achieved commercial sales of 35%-concentrated PAA products in the EEA
       in 2018, data sheets of Kesla confirm that it manufactures competing products
       and will therefore continue to exert a competitive pressure on the Merged Entity
       post-transaction.
(72)   Some of the Parties’ customers of 35%-concentrated PAA products expressed
       concerns with respect to the Transaction, indicating that it would create a
       monopoly situation for the production and supply of 35%-concentrated PAA in
       the EEA. According to them, this could lead to price rises in the future.61 These
       replies are based, in particular on the premise that Evonik and Proxychem are the
       only two potential suppliers of 35%-concentrated PAA products in all of the
       EEA.62
(73)   However, first, some customers of the Parties indicated the presence of at least
       one alternative supplier, Promox, for 35%-concentrated PAA products.63 More
       specifically, Promox confirmed its presence in the EEA market for
       35%-concentrated PAA products.64 Moreover, as explained above, technical data
       sheets about Kesla’s PAA products further confirm the fact that Kesla
       manufactures 35%-concentrated PAA products in the EEA.
(74)   Second, the production process, equipment and necessary inputs remain overall
       the same for PAA products of different concentrations. Apart from investment
       costs necessary to handle and transport 35%-concentrated PAA products65, there
       are no specific technical barriers to entry for any PAA manufacturer to start
       producing 35%-concentrated PAA products.66 Therefore, if a market opportunity
       were to materialise in this narrower market, established players in the markets for
       lower-concentration PAA products could enter the EEA market for
       35%-concentrated PAA products.
(75)   Consequently, while the Merged Entity would become the largest player in
       35%-concentrated PAA products, other well-established players in the market for
       overall PAA will continue to constrain the Merged Entity post-transaction in the
       EEA market for 35%-concentrated PAA products. In fact, the Commission notes
59   See technical data sheet for Kesla’s “Wofasteril classic” product, page 6: “Zusammensetzung:
     Enthält Acetylhydroperoxid (“Peressigsäure”) ca. 35% (entspircht 40% G/V bzw. 400 g/l).”
     (Source: https://www.kesla.de/wp-content/uploads/Wofasteril-classic 0916 klein.pdf consulted on
     27 May 2019).
60   See safety sheet for Kesla’s “Wofasteril classic” product, page 1. (Source:
     https://www.mqd.de/handel/dokumente/kesla/SDBWofasterilClassic.pdf              consulted    on
     27 May 2019).
61   See non-confidential replies to questions 31 to 34 – Customers – PAA.
62   See non-confidential replies to question 32 of questionnaire Q1 to customers.
63   See non-confidential replies to question 8 – of questionnaire Q1 to Customers – PAA
64   Promox’s reply to Q3 to Competitors PAA.
65   See non-confidential minutes of 29 March 2019 with a PAA competitor.
66   See non-confidential minutes of 29 March 2019 with a PAA competitor.
                                                       15
 ---pagebreak---        that Solvay confirmed that in the past it “manufactured PAA up to 40% in the UK
       but a commercial decision was taken to exit this business”.67 It can be assumed
       that with the appropriate market incentives, Solvay could likely consider to re-
       enter the EEA market for 35%-concentrated PAA products.
(76)   Finally, the Commission observes that the Parties are unlikely to be close
       competitors        from a geographic point of view, as PeroxyChem’s sales of
       35%-concentrated PAA products exclusively occur in Spain, where Evonik does
       not have any sales of 35%-concentrated PAA products.
(77)   In fact, Evonik supplies the Spanish market with [concentration levels] PAA
       products, but not 35%, through one single distributor68 for a de minimis value of
       approximately EUR [<15 000]. While, as explained in section 4.2.3, the relevant
       geographic market for PAA products is EEA-wide in scope, PeroxyChem’s local
       presence in Spain provides it with a certain competitive advantage to serve the
       Spanish market thanks to reduced transport costs.
(78)   In conclusion, based on the above considerations and in light of all the evidence
       available to it, the Commission considers that the Transaction would not raise any
       serious doubts as to its compatibility with the internal market with regard to the
       Parties’ activities in the EEA market for 35%-concentrated PAA products, for the
       following reasons: (i) the presence of other alternative suppliers, Promox and
       Kesla, which exercise a competitive constraint on the Merged Entity in the EEA
       market for 35%-concentrated PAA products; (ii) the absence of technical entry
       barriers which enables the timely arrival of new entrants, such as Solvay, in case
       any commercial opportunity materialises and (iii) the fact that Evonik is not a
       close competitor of PeroxyChem in the EEA for 35%-concentrated PAA
       products.
5.3.   Vertical assessment
(79)   Given that H2O2 is an input product for the manufacture of PAA and that the
       Merged Entity would have an EEA-wide market share in 35%-concentrated PAA
       products of more than 30%, the Transaction gives rise to a vertically affected link
       between the upstream EEA market for H2O2 and the downstream market for
       35%-concentration PAA products.
5.3.1. Input foreclosure
(80)   Input foreclosure risks appear unlikely to arise in the present case as the Merged
       Entity would have a market share of only [10-20]% in the upstream EEA market
       for H2O2 and would therefore not enjoy any significant upstream market power so
       as to potentially deny access to H2O2 to its downstream competitors, Promox and
       Kesla, in the market for 35%-concentrated PAA products.
67    Solvay’s non-confidential reply to question 6 of questionnaire Q3 to Competitors PAA,
68    See non-confidential replies to question 8 of questionnaire Q1 to customers PAA.
                                                        16
 ---pagebreak--- (81)    While each of Evonik and PeroxyChem are suppliers of Promox69 for H2O2,
        alternative suppliers remain active in the upstream EEA market. More
        specifically, the particular H2O2 grades that Promox currently sources from the
        Parties correspond to 70%-concentrated H2O2 products70, which each of Solvay71
        and Arkema72 also produce. Consequently, the Merged Entity will not have the
        ability to input foreclose Promox from getting access to the 70%-concentrated
        H2O2 products it needs for the manufacture of 35%-concentrated PAA products,
        as alternative producers of similar H2O2 grades remain active in the EEA.
        Moreover, the Merged Entity will not have any incentive to foreclose Promox, as
        the majority of input H2O2 products sold by the Parties are used in a variety of
        other chemicals produced by Promox73, in particular Promox’s range of PAA
        products of various concentrations (such as 0.1%, 0.2%, 2.5%, 5%, 10%
        or 15%).74
5.3.2. Customer foreclosure
(82)    Customer foreclosure risks appear equally unlikely to arise in the present case, as
        the Parties are fully vertically integrated for their production of PAA and do not
        currently purchase H2O2 on the merchant market from any upstream competitor
        on the EEA market for H2O2.
(83)    Furthermore, as PAA producers that are not vertically integrated upstream into
        the production of H2O2, represent only [<5]% of all H2O2 purchases in the EEA,
        the Merged Entity would, in any event, not have the ability to harm its upstream
        H2O2 competitors by denying them access to the downstream PAA market.
5.3.3. Conclusion
(84)    Based on the above considerations and in light of all the evidence available to it,
        the Commission considers that the Transaction would not raise any serious doubts
        as to its compatibility with the internal market with regard to the vertically
        affected link between the upstream EEA market for H2O2 and the downstream
        EEA market for 35%-concentrated PAA products.
69    Non-confidential reply of question 28 to the questionnaire Q3 to PAA competitors.
70    Non-confidential reply of question 28 to the questionnaire Q3 to PAA competitors.
71    Non-confidential reply of question 5 to questionnaire Q4 to H2O2 competitors.
72    https://www.arkema.com/en/products/product-finder/range-viewer/Peroxal-hydrogen-peroxide-for-
      specialty-applications/ (consulted on 17 May 2019).
73    Non-confidential minutes of conference call with Promox of 14 May 2019.
74    Non-confidential reply to question 4 to questionnaire Q3 to PAA competitors.
                                                       17
 ---pagebreak--- 6.   CONCLUSION
(85) For the above reasons, the European Commission has decided not to oppose the
     notified operation and to declare it compatible with the internal market and with
     the EEA Agreement. This Decision is adopted in application of Article 6(1)(b) of
     the Merger Regulation and Article 57 of the EEA Agreement.
                                                  For the Commission
                                                  (Signed)
                                                  Margrethe VESTAGER
                                                  Member of the Commission
                                            18