CELEX: 32021M10123
Language: en
Date: 2021-03-10 00:00:00
Title: Commission Decision of 10/03/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10123 - PPG / TIKKURILA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                              Brussels, 10.3.2021
                                                              C(2021) 1731 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                                                                omitted has been replaced by ranges of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.
                                                              PPG Industries, Inc.
                                                              One PPG Place
                                                              PA 15272 Pittsburgh
                                                              USA
Subject:             Case M.10123 – PPG / Tikkurila
                     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 03 February 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which PPG
          Industries, Inc. (“PPG”, USA) acquires within the meaning of Article 3(1)(b) of the
          Merger Regulation control of Tikkurila Oyj (“Tikkurila”, Finland), (the
          “Transaction”). PPG is referred to as the “Notifying Party” and, together with
          Tikkurila, 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”).
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 AND THE OPERATION
   (2)     PPG is a publicly listed corporation traded on the New York Stock Exchange. It is
           active worldwide in the production and sale of coatings and specialty materials.
   (3)     Tikkurila is a publicly listed entity on the Helsinki Stock Exchange. It is mainly
           active in the production and sale of decorative coatings and, to a lesser extent,
           industrial coatings. Tikkurila focuses its activities in Finland, Poland, Sweden and
           Russia, which account for over 80% of its worldwide turnover.
   (4)     On 18 December 2020, PPG and Tikkurila entered into an agreement pursuant to
           which PPG will offer to acquire all of the shares of Tikkurila through a
           recommended voluntary public offer. Following completion of the Transaction, PPG
           will thus acquire sole control of Tikkurila. The Transaction is therefore a
           concentration within the meaning of Article 3(1)(b) of the EU Merger Regulation.
   2.        EU DIMENSION
   (5)     The notified operation has a Union dimension pursuant to Article 1(2) of the Merger
           Regulation, because (i) the undertakings concerned have a combined aggregate
           world-wide turnover of more than EUR 5 000 million (PPG: EUR 13 531 million:
           Tikkurila: EUR 564 million),3 (ii) each of them has a EU-wide turnover in excess of
           EUR 250 million (PPG: EUR […] million: Tikkurila: EUR […] million) and (iii)
           none of the undertakings concerned achieves more than two-thirds of its aggregate
           Union-wide turnover within one and the same Member State.
   3.        RELEVANT MARKETS
   (6)     Both Parties are active in the manufacture and wholesale supply of decorative
           coatings.
   (7)     The Parties are also active in the retail distribution of decorative coatings through
           their own retail outlets.
3.1.      Market definitions
   3.1.1.    Manufacture and wholesale supply of decorative coatings
   (8)     Decorative coatings cover various types of coatings (such as paints, lacquer and
           varnish) normally used on-site both internally and externally during construction or
           refurbishment, to protect and decorate surfaces of buildings such as walls, ceilings,
           doors, window frames and other surfaces. Decorative coatings include both paints
           and woodcare products.
   3
        Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission
        Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).
                                                            2
 ---pagebreak--- 3.1.1.1. Product market definition
The Commission’s precedents
(9)     In previous decisions, the Commission concluded that decorative coatings form part
        of a distinct product market, separate from industrial coatings.4
(10)    In the market for decorative coatings, the Commission further considered
        distinctions between: (i) decorative paints and woodcare products;5 (ii) water-based
        and solvent-based decorative coatings;6 and (iii) decorative coatings sold through
        non-professional resellers (retail segment, which usually consists of Do-It-Yourself
        outlets) and decorative coatings sold through professional resellers (trade segment).7
        Within the segment for decorative coatings sold through the retail segment, the
        Commission considered a distinction between branded and private label products.8
        Ultimately, the Commission left open whether each of these segments and sub-
        segments would constitute a separate product market.
The Notifying Party’s view
(11)    The Notifying Party submits that the relevant product market is the wholesale supply
        of decorative coatings without any further segmentations. According to the
        Notifying Party, most suppliers produce all types of decorative coatings (i.e.
        decorative paints, woodcare products, water-based decorative coatings and solvent-
        based decorative coatings) and can relatively easily switch production between these
        products as the raw materials and manufacturing processes are similar. In addition,
        all types of decorative coatings are deemed interchangeable from a customer’s point
        of view.
(12)    The Notifying Party also submits that the potential segmentation by sales channels is
        not appropriate in view of the supply-side substitutability, as well as the lack of a
        clear distinction between retail and trade distribution channels (as all end-users are
        free to purchase from all resellers).9
The Commission’s assessment
Segmentation between decorative paints and woodcare products
(13)    The market investigation provided mixed results as to whether decorative paints and
        woodcare products constitute distinct product markets.
(14)    First, the majority of competitors indicated that suppliers of decorative coatings
        manufacture both paints and woodcare products,10 and that there are no significant
        hurdles to switch from paints to woodcare products and vice versa.11 However, a
4
     See cases M.8020 – Sherwin-Williams/Valspar, decision of 10 August 2016; M.6270 - Berkshire
     Hathaway/Lubrizol, decision of 24 August 2011; M.4779 AkzoNobel/ICI, decision of 13 December 2007;
     and M.4853 PPG/Sigmakalon, decision of 10 December 2007.
5
     See case M.1167 – ICI/Williams, decision of 29 April 1998.
6
     See case M.8020 – Sherwin-Williams/Valspar, decision of 10 August 2016.
7
     See case M.390 – Akzo/Nobel IndustrierCI/Williams, decision of 10 January 1994.
8
     See case M.4779 AkzoNobel/ICI, decision of 13 December 2007.
9
     Form CO, paragraphs 41-46.
10
     Question 6 of questionnaire Q2 to competitors.
11
     Question 7 of questionnaire Q2 to competitors.
                                                        3
 ---pagebreak---         third of the respondents considers that switching production between the two
        products would involve considerable time and resources and could even be
        uneconomical.12
(15)    Second, while virtually all customers purchase both decorative paints and woodcare
        products,13 they consider that these products cannot be used interchangeably by end-
        customers.14 In this respect, one customer indicated that “in general paints and
        woodcare products are used for different purpose of use. However, it is possible that
        some consumers use paints as a substitute for woodcare products and vice versa in
        certain occasions” and another one specified that “[w]hen it comes to paints and
        woodcare products, our customers buy them for different use”.15
(16)    Third, the market investigation did not provide any indication that any further
        segmentation of the (i) decorative paints and/or (ii) woodcare products segments was
        warranted.16
(17)    In any event, for the purpose of this decision, the question of whether decorative
        paints and woodcare products constitute distinct markets can be left open, as it has
        no impact on the Commission’s competitive assessment of the Transaction.
Segmentation between water-based and solvent-based coatings
(18)    The results of the market investigation did not support the Notifying Party’s view
        and provided indications that water-based coatings and solvent-based coatings
        constitute distinct product markets.
(19)    First, whilst the vast majority of competitors indicated that manufacturers of
        decorative coatings produce both water-based and solvent-based coatings,17 half of
        them consider that switching production between the two products would involve
        considerable time and resources or even be uneconomical.18 In that respect, one
        supplier explained that “it would be quite time and resource consuming to change
        the production facility from water to solvent based (safety level of machines, air
        cleaning...)”.19
(20)    Second, virtually all retailers (i.e. customers) purchase both water-based and solvent-
        based coatings.20 The majority of retailers consider however that these products are
        not purchased interchangeably by end-customers:21 more and more customers (and
        in particular DIY customers) choose water-based products because these are more
        environmentally friendly; conversely, some customers appear to keep a preference
12
     Question 7 of questionnaire Q2 to competitors.
13
     Question 3 of questionnaire Q2 to customers.
14
     Question 6 of questionnaire Q1 to customers. The Commission notes that wholesalers’ supply strategies
     are driven by end-customers’ preferences and expectations. For this reason, the preferences of end-
     customers appear relevant in the context of assessing the market definition at wholesale level.
15
     Question 6.1 of questionnaire Q1 to customers.
16
     Questions 6.2 and 6.3 of questionnaire Q1 to customers.
17
     Question 8 of questionnaire Q2 to competitors.
18
     Question 9 of questionnaire Q2 to competitors.
19
     Question 7.1 of questionnaire Q2 to competitors.
20
     Question 3 of questionnaire Q1 to customers.
21
     Question 7 of questionnaire Q1 to customers.
                                                           4
 ---pagebreak---         for solvent-based products based on the perception that these are more efficient.22 In
        addition, professional painters may in some instances favour solvent-based products
        because of their faster drying time, meaning that successive layers of paint can be
        applied faster, which increases the painters’ productivity.23
(21)    Third, the market investigation did not provide any indication that any further
        segmentation of the (i) water-based coatings and/or (ii) solvent-based segments was
        warranted.24
(22)    In any event, for the purpose of this decision, the question of whether water-based
        and solvent-based coatings constitute distinct product markets can be left open, as it
        has no impact on the Commission’s competitive assessment of the Transaction.
        Segmentation by sales channels
(23)    The market investigation provided indications that a segmentation of the market for
        decorative coatings (and its sub-segments) by sales channels is not appropriate in the
        present case.
(24)    First, virtually all competitors who responded to the market investigation confirmed
        that they sell their products through both sales channels.25 Conversely, the results of
        the market investigation confirmed the lack of a clear distinction between retail and
        trade distribution channels from a customer’s point of view as end-users are
        increasingly free to purchase from all resellers.26
(25)    Second, while the market investigation provided mixed results on whether the price
        and packaging of decorative coatings sold to professional and non-professional
        resellers were the same,27 both suppliers and customers recognized that there is no
        meaningful or only a relatively small difference in terms of quality, and that end-
        customers are free to choose either category of products.28 One customer indicated
        that “[a]ll products are usable by both user groups” and another one added that
        “[t]here are no meaningful differences between professional and consumer products.
        In both channels, customers have options to choose from a wide range of paints”.29
(26)    In light of the above, the Commission considers that, for the purpose of this decision,
        the overall market for the manufacture and wholesale supply of decorative coatings
        and the possible narrower markets (i.e. potential segmentations of the overall market
        for the manufacture and wholesale supply of decorative coatings, either between (i)
        decorative paints and (ii) woodcare products; or between (i) water-based decorative
        coatings and (ii) solvent-based decorative coatings; or between (a) solvent-based
22
     Question 7.1 of questionnaire Q1 to customers.
23
     Non-confidential minutes of a call with a decorative coatings competitor, dated 20 January 2021.
24
     Questions 6.2 and 6.3 of questionnaire Q1 to customers.
25
     Question 12 of Q2 to competitors.
26
     Question 12.1 of Q2 to competitors.
27
     Questions 10.1 and 10.2 of questionnaire Q1 to customers and questions 11.1 and 11.2 of Q2 to
     competitors.
28
     Question 10.3 of questionnaire Q1 to customers and question 11.3 of Q2 to competitors.
29
     Question 11.4 of Q2 to competitors.
                                                          5
 ---pagebreak---          products and (b) water-based products within each of (i) paints and (ii) woodcare
         products) do not need to be further segmented by sales channels.30
3.1.1.2. Geographic market definition
(27)     In previous decisions, the Commission has left open whether the market for
         decorative coatings (and its sub-segments) is EEA-wide or national.31
(28)     The Notifying Party submits that the market for decorative coatings has a national
         dimension, although the competitive pressure from imports is relevant.
(29)     The market investigation was not conclusive as to whether the market for decorative
         coatings (and its sub-segments) is EEA-wide or national.32
(30)     In any event, for the purpose of assessing the Transaction, the exact scope of the
         geographic market definition can be left open since under all above-mentioned
         plausible alternative geographic market definitions (EEA-wide or national), the
         Transaction does not give rise to serious doubts as to its compatibility with the
         internal market.
3.1.2.     Retail distribution of decorative coatings
(31)     The market for the retail distribution of decorative coatings is downstream from the
         market for the manufacture and wholesale supply of decorative coatings, and
         consists in the sale of decorative coatings to end-users by (specialised or not) shops.
3.1.2.1. Product market definition
The Commission’s precedents
(32)     The Commission has previously examined the market for the retail of DIY products
         (including decorative coatings). The Commission considered whether the market
         should be further segmented between products sold including (i) decorative
         products, (ii) wall, floor and tile coatings, (iii) tools, (iv) hardware and storage, (v)
         electricity and lighting, (vi) bathroom equipment, (vii) construction materials, (viii)
         woodwork and (ix) gardening.33 The Commission also considered a segmentation of
         the markets between distribution channels including (i) Do-It-Yourself retail shops,
         (ii) large food retailers, (iii) mono-product specialised shops, and (iv) neighbourhood
         stores.34 In both instances the Commission ultimately left the market definition open.
30
     As a consequence, there is no need to assess, for the purpose of this decision, the relevance of a further
     segmentation between branded products and private labels within the retail segment.
31
     See cases M.4779 AkzoNobel/ICI, decision of 13 December 2007; M.4853 PPG/Sigmakalon, decision of
     10 December 2007; and M.8020 – Sherwin-Williams/Valspar, decision of 10 August 2016.
32
     Questions 11-13 of questionnaire Q1 to customers and questions 13-15 of questionnaire Q2 to
     competitors.
33
     See cases M.2898 Leroy Merlin/Brico, decision of 13 December 2002 and M.2804 - Vendex KBB/Brico
     Belgium, decision of 17 July 2002. Also see referral cases M.7677 OBI/Baumax certain assets, decision
     of 4 August 2014 and M.7283 Kingfisher/Mr Bricolage, decision of 11 August 2014.
34
     See cases M.2898 Leroy Merlin/Brico, decision of 13 December 2002. Also see referral cases M.7677
     OBI/Baumax certain assets, decision of 4 August 2014 and M.7283 Kingfisher/Mr Bricolage, decision of
     11 August 2014.
                                                          6
 ---pagebreak---  The Notifying Party’s view
(33)    The Notifying Party considers the retail distribution of decorative coatings to be the
        relevant product market, without the need for any further segmentations.35
The Commission’s assessment
(34)    The market investigation did not indicate that the market for the retail distribution of
        decorative coatings should be further segmented. As a result, for the purposes of
        assessing the Transaction, the Commission will analyse the retail activities of the
        Parties on the basis of the narrowest plausible product market, namely the market for
        the retail distribution of decorative coatings. The Commission therefore considers
        that, for the purposes of assessing the Transaction, the retail distribution of
        decorative coatings constitutes a distinct product market, without the need for further
        segmentations.
3.1.2.2. Geographic market definition
The Commission’s precedents
(35)    The Commission has previously considered the market for the distribution of
        decorative, Do-It-Yourself and gardening products to be local in scope (within a
        20km radius), while acknowledging the relevance of national market positions and
        strategies.36
The Notifying Party’s view
(36)    The Notifying Party submits that the relevant geographic market for the retail
        distribution of decorative coatings is national or local (e.g. within a 30-50 km radius
        from a given store, depending on the country) in scope. The Notifying Party claims
        that prices do not vary significantly between different localities within the same
        country, inter alia because wholesalers set uniform prices over a national territory or
        because of competition from online resellers with such uniform pricing policies.37
The Commission’s assessment
(37)    The market investigation did not provide any indications pointing towards either
        alternative potential geographic market definition (i.e. national or local) for the
        resale of decorative coatings to end-users.
(38)    In any event, for the purpose of assessing the Transaction, the exact scope of the
        geographic market definition can be left open since under all above-mentioned
        plausible alternative geographic market definitions, i.e. whether markets are defined
        as national, regional or local (including either as a 20km or a 30-50 km radius
        around stores), the Transaction does not give rise to serious doubts as to its
        compatibility with the internal market.
35
     Form CO, paragraph 47.
36
     See cases M.2898 Leroy Merlin/Brico, decision of 13 December 2002. Also see referral case M.7677
     OBI/Baumax certain assets, decision of 4 August 2014.
37
     Form CO, paragraph 62.
                                                        7
 ---pagebreak--- 3.2.      Competitive assessment
   3.2.1. Introduction
   (39)    Based on the Notifying Party’s market share estimates, the Transaction gives rise to
           horizontally affected markets in (i) the manufacture and wholesale supply of
           decorative coatings in Denmark, France, Hungary, Latvia, Lithuania, the
           Netherlands, Poland, Slovakia, and Sweden and (ii) the retail distribution of
           decorative coatings in Denmark.38, 39
   (40)    The Transaction also gives rise to vertically affected markets as a result of the
           vertical link between the activities of the Parties as wholesalers of decorative
           coatings (upstream) and the retail distribution of decorative coatings to end-users
           (downstream) in Denmark, Hungary, the Netherlands, Poland, Slovakia, and
           Sweden.
   3.2.2.     Horizontal non - coordinated effects
   3.2.2.1. 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")40 distinguish between 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.
   (43)    Non-coordinated effects may significantly impede effective competition by
           eliminating the competitive constraint imposed by each 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 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
   38
        As regards Czechia, given Tikkurila’s negligible amount of sales over the past years on the market for the
        manufacture and wholesale supply of decorative coatings ([…]) and the fact that, post-Transaction, the
        Parties will continue to face the competition of strong players, the Commission concludes that the
        Transaction does not give rise to competition concerns in Czechia.
   39
        As regards the segmentation of paints and woodcare products by chemical composition, the Notifying
        Party confirmed that, based on the Parties’ best estimates, the Parties’ combined market shares for the
        supply of (i) water-based paints, (ii) solvent-based paints, on the one hand, and (iii) water-based
        woodcare products, and (iv) solvent-based woodcare products, on the other hand, in each of the relevant
        Member States examined in Section 3.2.2, would not differ substantially from the Parties’ combined
        market shares for the supply of (i) paints, and (ii) woodcare products respectively in these countries.
   40
        OJ C 31, 05.02.2004, p. 5.
                                                               8
 ---pagebreak---  ---pagebreak---  ---pagebreak---        including Denmark.48 On the solvent-based market segment, the combined entity
       will continue to face strong players such as Flügger, and Hempel, with shares
       exceeding the Tikkurila’s pre-Transaction, as well as Jotun with a similar share as
       the Tikkurila ([5-10]% in value and [5-10]% in value), and AkzoNobel, B&J and
       WOCA.
(52)   Second, the results of the market investigation confirmed that the Parties are not
       particularly close competitors. The vast majority of retailers who replied to the
       market investigation identified only PPG among the top five suppliers of decorative
       coatings in Denmark.49 They explained that while PPG supplies well-known brands
       in the Danish market, Tikkurila is perceived by the Parties’ customers as a very
       small player (some of them not having heard of the company before).50 Overall, it
       appears that each of the Parties compete more closely with other suppliers, rather
       than between themselves, both in relation to decorative coatings and in relation to its
       sub-segments.51
(53)   Third, the market investigation revealed that it is relatively easy for retailers to
       change suppliers since (i) retailers usually have more than one supplier,52 and (ii)
       contracts have a limited duration of 1-3 years.53 Half of the Danish retailers who
       responded to the market investigation had switched suppliers over the past 3 years.54
       In addition, retailers confirmed that neither PPG nor Tikkurila have products in their
       portfolio that are not offered by rivals.55 Therefore, there are limited barriers to
       switching.
(54)   Fourth, the vast majority of respondents to the market investigation confirmed that
       they would continue to have a sufficient number of alternative suppliers from which
       to procure decorative coatings, including woodcare products and solvent-based
       coatings in Denmark post-Transaction.56 None of them expects the Transaction to
       bring about any negative changes on the market.57 This was also confirmed by
       competitors.58
(55)   In light of the above, the Commission concludes that the Transaction does not raise
       serious doubts as to its compatibility with the internal market in relation to the
       supply of decorative coatings (or any plausible sub-segmentation thereof) in
       Denmark.
48
     Non-confidential minutes of a call with a decorative coatings competitor, dated 20 January 2021.
49
     Question 14 of questionnaire Q1 to customers.
50
     Questions 15.1 and 15.2 of questionnaire Q1 to customers.
51
     Questions 16 and 17.3 of questionnaire Q1 to customers.
52
     Question 19 of questionnaire Q1 to customers.
53
     Question 20.2 of questionnaire Q1 to customers.
54
     Question 20 of questionnaire Q1 to customers.
55
     Question 18 of questionnaire Q1 to customers.
56
     Question 22 of questionnaire Q1 to customers.
57
     Question 24.3 of questionnaire Q1 to customers.
58
     Question 21.1 of questionnaire Q2 to competitors.
                                                          11
 ---pagebreak---          (B)    Retail distribution of decorative coatings in Denmark
(56)     According to the Notifying Party, PPG and Tikkurila have a combined market share
         of [20-30]% (PPG: [10-20]% and Tikkurila: [5-10]%)59 in volume in 2019 on the
         market for the retail distribution of decorative coatings in Denmark. The Notifying
         Party was not able to provide market shares at local level but provided the below
         map showing the localities where the Parties’ direct resale outlets overlap. The
         Notifying Party also confirmed that, based on the Parties’ best estimates, their
         combined market share for the supply of decorative coatings at retail level (i) at
         regional level, (ii) in any 20km radius catchment area around each of their store and
         (iii) in any 30-50km radius catchment area around each of their store would not
         differ substantially from the Parties’ combined market share for the supply of
         decorative coatings at retail level in Denmark.
 The Notifying Party’s view
(57)     The Notifying Party submits that (i) the Parties’ combined market share at national
         level remains limited and many other players will remain active on the market and
         that (ii) in the localities where the parties’ direct resale outlets overlap, there are a
         large number of both independent resale outlets and outlets owned by competing
         decorative coatings manufacturers.60
The Commission’s assessment
(58)     The Commission considers that the Transaction does not give rise to competition
         concerns on the Danish market for the retail distribution of decorative coatings for
         the following reasons.
(59)     First, at national level, the combined market share of PPG and Tikkurila remains
         limited (below 25%), a level below which transactions are unlikely to impede
59
     Market shares have been estimated on the basis of the paint association data and have been
     complemented by PPG's own estimates. Should the market shares be computed based on the Parties’
     sales (EUR), the market for the retail distribution of decorative coatings in Denmark would not be
     affected (PPG: [5-10]% and Tikkurila: [0-5]% in 2019). The market shares of the Parties did not
     substantially differ in 2017, 2018 and 2020 (based on the Notifying Party’s estimates for 2020).
60
     Form CO, paragraph 122.
                                                         12
 ---pagebreak---  ---pagebreak--- The Notifying Party’s view
(64)     The Notifying Party submits that (i) Tikkurila is an insignificant player in France, so
         that the Transaction will not result in anything but a negligible change in the market
         structure, (ii) the combined entity will continue to face strong competition from a
         large number of players, and that (iii) the Parties’ customers are strong and
         sophisticated resellers and retail stores, who multi-source and can switch supplier
         with no efforts and possess significant bargaining power.64
The Commission’s assessment
(65)     The Commission considers that the Transaction does not give rise to competition
         concerns on the French market for the manufacture and wholesale supply of
         decorative coatings.
(66)     As can be seen from Table 2 above, the Transaction will only lead to a negligible
         increment on the market for the manufacture and wholesale supply of decorative
         coatings and its sub-segments (in any event significantly below [0-5]%) and the
         ensuing HHI delta is less than 150. Post-Transaction, the combined entity will
         continue to face significant competition from a number of strong rivals in the
         manufacture and wholesale supply of decorative coatings and its sub-segments in
         France, including from Cromology, AkzoNobel, V33, Unikalo, and STO. Each of
         these players has a market share higher than Tikkurila on the decorative coatings
         market and all relevant sub-segments in France. In addition, the vast majority of
         retailers considers that there would still remain a sufficient number of companies
         active in the wholesale supply of decorative coatings in France.65 None of them
         expects the Transaction to bring about any negative changes on the market.66 This
         was also confirmed by competitors.67
(67)     In light of the above, the Commission concludes that the Transaction does not raise
         serious doubts as to its compatibility with the internal market in relation to the
         supply of decorative coatings (or any plausible sub-segmentation thereof) in France.
3.2.2.5. Hungary
(68)     The Notifying Party’s estimates of the Parties’ and their competitors’ market shares
         in the affected markets and sub-segments based on the value and volume of sales for
         2019 in Hungary are as follows.68
64
     Form CO, paragraph 129.
65
     Question 22 of Q1 to customers.
66
     Question 24.4 of Q1 to customers.
67
     Question 21.5 of questionnaire Q2 to competitors.
68
     The Notifying Party confirmed that these shares did not evolve significantly in the course of the past
     three years.
                                                       14
 ---pagebreak---  ---pagebreak---          in the Hungarian market, Tikkurila is not particularly well-known.71 Overall, it
         appears that each of the Parties compete more closely with other suppliers, rather
         than between themselves, both in relation to decorative coatings and in relation to its
         sub-segments.72
(73)     Third, the market investigation revealed that it is relatively easy for retailers to
         change suppliers since (i) retailers usually have more than one supplier,73 and (ii)
         contracts have a limited duration of 1-3 years.74 In addition, retailers confirmed that
         neither PPG nor Tikkurila have products in their portfolio that are not offered by
         rivals.75 Therefore, there are limited barriers to switching.
(74)     Fourth, the vast majority of respondents to the market investigation active in
         Hungary confirmed that they will continue to have a sufficient number of alternative
         suppliers from which to procure all types of decorative coatings in Hungary post-
         Transaction.76 None of them expects the Transaction to bring about any negative
         change on the market.77 This was also confirmed by competitors.78
(75)     In light of the above, the Commission concludes that the Transaction does not raise
         serious doubts as to its compatibility with the internal market in relation to the
         supply of decorative coatings (or any plausible sub-segmentation thereof) in
         Hungary.
3.2.2.6. Latvia
(76)     According to the Notifying Party’s estimates, PPG and Tikkurila have combined
         market shares of 20% or more only on the market segment for the manufacture and
         wholesale supply of woodcare product in Latvia. On this market segment, the Parties
         had a combined market share of [20-30]% in value (PPG: [0-5]% and Tikkurila: [10-
         20]%) and [20-30]% in volume (PPG: [5-10]% and Tikkurila: [10-20]%) in 2019.79
         The Notifying Party’s estimates of the Parties’ and their competitors’ market shares
         in woodcare products based on the value and volume of sales for 2019 in Latvia are
         as follows.80
71
     Questions 15.1 and 15.2 of questionnaire Q1 to customers.
72
     Questions 16 and 17.5 of questionnaire Q1 to customers.
73
     Question 19 of questionnaire Q1 to customers.
74
     Question 20.2 of questionnaire Q1 to customers.
75
     Question 18 of questionnaire Q1 to customers.
76
     Question 22 of questionnaire Q1 to customers.
77
     Question 24.4 of questionnaire Q1 to customers.
78
     Question 21.2 of questionnaire Q2 to competitors.
79
     The Notifying Party confirmed that these shares did not evolve significantly in the course of the past
     three years.
80
     The Notifying Party confirmed that these shares did not evolve significantly in the course of the past
     three years.
                                                         16
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- The Notifying Party’s view
(92)     The Notifying Party submits that the Transaction does not raise competition
         concerns because (i) the combined entity will continue to face strong competition
         from a large number of competitors with production capacities in Poland, (ii) the
         Parties are not close competitors as Tikkurila is perceived as a high-quality/high cost
         supplier on the market, while PPG is instead perceived as supplier of intermediate
         quality and cost, and (iii) the Parties’ customers are strong and sophisticated resellers
         and retail stores, who multi-source and can switch supplier with no efforts and
         possess significant bargaining power.96
The Commission’s assessment
(93)     The Commission considers that the Transaction does not give rise to competition
         concerns on the Polish market for the manufacture and wholesale supply of
         decorative coatings for the following reasons.
(94)     First, as can be seen from Table 7 above, the combined entity will continue to face
         strong players in the wholesale supply of decorative coatings (and its sub-segments)
         in Poland, including from AkzoNobel, Sniezka, Kabe, Flügger and Caparol.97 This is
         in line with the views expressed by respondents to the market investigation active in
         Poland, one of them explaining that “Poland is a very competitive market with many
         players.”98
(95)     Second, the market investigation confirmed to some extent the Notifying Party’s
         claim that the Parties do not compete closely on the Polish market. Only around half
         of Polish retailers place both Parties among the top 5 competitors in Poland.99
         Similarly, when asked specifically about each of the Parties’ closest competitors on
         the Polish market, only around half of retailers consider either PPG to be among
         Tikkurila’s top 5 competitors (or vice versa) in Poland.100 The difference between
         the Parties’ offering is highlighted by a customer of the Parties in Poland, in the
         following terms: “Tikkurila offers adequate price for all the products, high quality,
         strong brand position, wide range of products, positive existing relatioship [sic] with
         supplier, manufacturing located in Poland what follows easy acces [sic] to the
         products. PPG average quality and prices of the products, poor range of products,
         not existing business relationship, manufacturing located in Poland, insignificant
         position on the market.”101 The fact that Tikkurila’s brands and products compete in
         the premium segment of the market, while PPG’s are perceived as brands and
         products of more intermediate quality and cost is confirmed by another customer of
         the Parties in Poland: “In Poland, PPG has strong brands (Bondex and Dekoral)
         which are well-seen both by professional and DIY customers. Drewnochon is also
         perceived as popular: a mid-quality product at an affordable price. In Poland,
96
     Form CO, paragraphs 161-167.
97
     In addition, as mentioned in footnote 95 above, these competitors have been responsible, in the course of
     the past four years, for the progressive decline of PPG’s (and subsequently the Parties’ combined) market
     shares.
98
     Non-confidential minutes of a call with a decorative coatings competitor, dated 20 January 2021. See also
     the same competitor’s response to question 17.1 of Q2 – Questionnaire to decorative coatings
     competitors: “Poland is a competitive market with a number of players.”
99
     Question 14 of Q1 – Questionnaire to decorative coatings customers.
100
     Question 17.2 of Q1 – Questionnaire to decorative coatings customers.
101
     Question 13.1 of Q1 – Questionnaire to decorative coatings customers.
                                                           21
 ---pagebreak---         Tikkurila and Beckers products (Tikkurila brands) are positioned at a higher
        (medium/high price) price point than Dekoral (PPG brand) - they are premium
        products.”102 Retailers confirmed that this analysis would not differ depending on
        any potential sub-segments within decorative coatings.103
(96)    In addition, the vast majority of both retailers and competitors consider that PPG and
        Tikkurila compete in Poland equally with several other suppliers.104 This view is
        confirmed by a customer of the Parties in Poland, commenting “in Poland […] both
        manufacturers compete between themselves as well as with a number of other
        suppliers.”105 Finally, according to an overwhelming majority of both retailers and
        competitors, none of PPG or Tikkurila have any particular product not offered by
        other players or offered by fewer than two other suppliers.106 Again, both retailers
        and competitors confirmed that their opinion would not differ depending on any
        potential sub-segments within decorative coatings.107
(97)    Third, the market investigation also confirmed to some extent the validity of the
        Notifying Party’s argument about the sophistication and bargaining power of the
        Parties’ customers. Half of responding Polish retailers considers that they have equal
        bargaining power with the strongest suppliers when negotiating their purchases of
        decorative coatings (irrespective of the type of decorative coating)108. The other half
        considers that they have either strong or very strong bargaining power, and none of
        the Polish retailers considers that it has either little or very little bargaining power
        compared with the strongest suppliers when negotiating their purchases of decorative
        coatings.109 By contrast, a majority of competitors, including large players, generally
        consider they have little or very little bargaining power compared to large retailers
        when negotiating their supply of decorative coatings.110 As an illustration of this
        bargaining power, a Polish customer of the Parties explains: “My company has a
        long lasting presence on the local market […] if any new supplier is about to
        establish in the area, it is known that it rather needs to establish a contract with my
        company.”111
(98)    This element is reinforced by the multi-sourcing strategies put in place by retailers,
        and their ease to switch suppliers. The vast majority of Polish retailers have more
        than five different suppliers of decorative coatings.112 A customer of the Parties in
        Poland mentions “We work in Poland with various supplier for paint coatings
        (Sniezka, Akzo Nobel, PPG, Tikkurilla, Syntilor, V33 the main one[s])”,113 while
        another explains that it has “more than 5 suppliers of decorative coatings in all of
102
     Question 15.3 of Q1 – Questionnaire to decorative coatings customers.
103
     Question 14.1 and 17.6 of Q1 – Questionnaire to decorative coatings customers.
104
     Question 16 of Q1 – Questionnaire to decorative coatings customers and question 17 of Q2 –
     Questionnaire to decorative coatings customers.
105
     Question 16.1 of Q1 – Questionnaire to decorative coatings customers.
106
     Questions 18 and 18.2 of Q1 – Questionnaire to decorative coatings customers and questions 19 and 19.2
     of Q2 – Questionnaire to decorative coatings customers.
107
     Question 16.1 of Q1 – Questionnaire to decorative coatings customers and question 17.1 of Q2 –
     Questionnaire to decorative coatings customers.
108
     Question 21.1 of Q1 – Questionnaire to decorative coatings customers.
109
     Question 21 of Q1 – Questionnaire to decorative coatings customers.
110
     Question 20 of Q2 – Questionnaire to decorative coatings competitors.
111
     Question 21.1 of Q1 – Questionnaire to decorative coatings customers.
112
     Question 19 of Q1 – Questionnaire to decorative coatings customers.
113
     Question 19.1 of Q1 – Questionnaire to decorative coatings customers.
                                                        22
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---         Flügger, AkzoNobel, Jotun, Caparol and Teknos. Each of these players has a higher
        share than PPG in the market for the wholesale supply of decorative coatings in
        Sweden.
(110) Second, the results of the market investigation confirmed that the Parties are not
        particularly close competitors. The majority of retailers responding to the market
        investigation identified either PPG or Tikkurila among the top five suppliers of
        decorative coatings in Sweden.128 They explained that while Tikkurila sells well-
        known brands in the Swedish market, PPG has a limited presence in the country
        (some retailers are not able to name a brand owned by PPG).129 Overall, it appears
        that each of the Parties compete more closely with other suppliers, rather than
        between themselves, both in relation to decorative coatings and in relation to its sub-
        segments.130
(111) Third, the market investigation revealed that it is relatively easy for retailers to
        change suppliers since (i) retailers usually have more than one supplier,131 and (ii)
        contracts have a limited duration of 1-3 years.132 The majority of Swedish retailers
        who responded to the market investigation had switched suppliers over the past 3
        years.133 In addition, retailers confirmed that neither PPG nor Tikkurila have
        products in their portfolio that are not offered by rivals.134 Therefore, there are
        limited barriers to switching.
(112) Fourth, all retailers active in Sweden who responded to the market investigation
        confirmed that they will continue to have a sufficient number of alternative suppliers
        from which to procure all types of decorative coatings in Sweden post-
        Transaction.135 None of them expects the Transaction to bring about any negative
        changes on the market.136
(113) In light of the above, the Commission concludes that the Transaction does not raise
        serious doubts as to its compatibility with the internal market in relation to the
        supply of decorative coatings (or any plausible sub-segmentation thereof) in
        Sweden.
3.2.3.    Vertical non—coordinated effects
3.2.3.1. Legal framework
(114) The Commission’s 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.137
128
     Question 14 of questionnaire Q1 to customers.
129
     Questions 15.1 and 15.2 of questionnaire Q1 to customers.
130
     Questions 16 and 17.4 of questionnaire Q1 to customers.
131
     Question 19 of questionnaire Q1 to customers.
132
     Question 20.2 of questionnaire Q1 to customers.
133
     Question 20 of questionnaire Q1 to customers.
134
     Question 18 of questionnaire Q1 to customers.
135
     Question 22 of questionnaire Q1 to customers.
136
     Question 24.2 of questionnaire Q1 to customers.
137
     OJ L 24, 29.1.2004, p. 1.
                                                         26
 ---pagebreak--- (115) For a merger to raise input foreclosure competition concerns, the merged entity must
        have a significant degree of market power upstream.138 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.139
(116) For a merger 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.140 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 its 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.141
3.2.3.2. Overview of the Parties’ and their competitors’ market shares
(117) Decorative coatings manufacturers supply their products at the wholesale level to
        retailers (upstream market). Retailers then sell decorative coatings to end-users,
        through their retail outlets or DIY stores. (downstream market).
(118) Most decorative coatings manufacturers are, at least to a certain extent, vertically
        integrated at retail level. Depending on the EEA country, the level of integration of
        the various manufacturers can be very different.
(119) An overview of the vertically affected markets arising from the Transaction is
        provided in the table below.
138
     Non-horizontal Merger Guidelines, paragraph 35.
139
     Non-horizontal Merger Guidelines, paragraph 32.
140
     Non-horizontal Merger Guidelines, paragraph 61.
141
     Non-horizontal Merger Guidelines, paragraph 59.
                                                     27
 ---pagebreak---  ---pagebreak---         serious doubts as to its compatibility with the internal market relative to customer
        foreclosure risks.
3.2.3.4. Input foreclosure
The Notifying Party’s views
(124) In relation to Hungary, Netherlands, Poland and Slovakia, the Notifying Party
        submits that input foreclosure is unlikely to materialize because (i) Tikkurila is not
        (or barely) active in the retail distribution of decorative coatings to end-users and (ii)
        PPG is already active at both upstream and downstream level pre-Transaction. As
        such, the Transaction would not create any shift in PPG’s incentives to engage in
        potential input foreclosure strategies.143
(125) As regards Denmark and Sweden, the Notifying Party submits that input foreclosure
        is unlikely to materialize since (i) the Parties’ main competitors upstream are
        suppliers of decorative coatings which are themselves vertically integrated
        downstream, (ii) PPG (for Denmark) and Tikkurila (for Sweden) are already today
        active at both upstream and downstream levels (and not engaging in any input
        foreclosure practice), (iii) the increment brought by Tikkurila at downstream for
        Denmark and by PPG for Sweden is too small to create a significant shift in the
        combined entity’s incentives to engage in potential input foreclosure strategies, and
        (iv) any foreclosure strategy of independent resale outlets would likely divert the
        wholesale purchases of these resale outlets towards rival suppliers.144
The Commission’s assessment
(126) The Commission considers that the Transaction would not give rise to any
        significant input foreclosure for the following reasons.
(127) First, the Commission considers that the combined entity would not have the ability
        to foreclose its rivals in the downstream market for the retail supply of decorative
        coatings in Denmark, Hungary, the Netherlands, Poland, Slovakia and Sweden due
        to the presence of a substantial number of decorative coatings suppliers to which
        independent resale outlets could turn to. The vast majority of retailers who
        responded to the market investigation confirmed that there would remain a sufficient
        number of alternative suppliers they could to turn to if the combined entity decided
        to stop selling them decorative coatings.145 This is further corroborated by the fact
        that, as explained in Section 3.2.2 above, the majority of retailers have more than
        five different suppliers,146 switching suppliers is relatively easy,147 and contracts
        generally have a limited duration of 1-3 years.148 Over half of the retailers who
        responded to the market investigation switched suppliers over the past 3 years.
        Therefore, there are limited barriers to switching and, post-Transaction, a sufficient
        number of decorative coatings suppliers will remain on the market. In addition, the
143
     Form CO, paragraphs 136, 155, and 172.
144
     Form CO, paragraphs 124 and 187.
145
     Question 23 of questionnaire Q1 to customers.
146
     Question 19 of questionnaire Q1 to customers.
147
     Question 20 of questionnaire Q1 to customers.
148
     Question 20.2 of questionnaire Q1 to customers.
                                                     29
 ---pagebreak---        vast majority of competitors149 and retailers150 confirmed that neither PPG not
       Tikkurila have a unique type of decorative coatings in their portfolio that could not
       be offered by rival suppliers.
(128) Second, the Commission considers that the combined entity would not have the
       incentive to foreclose its downstream rivals in the resale of decorative coatings to
       end-users in Denmark, Hungary, the Netherlands, Poland, Slovakia and Sweden, by
       restricting access to its decorative coatings to independent resellers.151 The
       Commission finds that any foreclosure strategy would likely divert wholesale sales
       towards rival manufacturers while only leading to marginal benefits at the retail level
       due to the Parties’ limited market share downstream, and the competition they face
       in every relevant market. The market investigation indeed confirmed that retailers
       can easily switch suppliers within a short period of time (and the vast majority has
       done so in the past), in particular due to the fact that the vast majority of retailers
       rely on multi-sourcing strategies.152 Retailers usually carry multiple brands from
       different manufacturers, which allows them to supply and reallocate their respective
       shares of wallet within a short period of time, should supply conditions from the
       combined entity deteriorate post-Transaction.
(129) In addition, the Commission notes that the vertical link between the wholesale
       provision of decorative coatings in Denmark and the resale of decorative coatings to
       end-users in Denmark is pre-existing, as both Parties are active both upstream and
       downstream, with a limited increment brought about by Tikkurila (both upstream
       and downstream). Thus, the Commission considers that the incentives of the
       combined entity will not change significantly as a result of the Transaction. This is
       all the more true in Hungary, the Netherlands,Poland and Slovakia, where PPG is
       strong at both upstream and downstream level and Tikkurila is not or barely active at
       downstream level.
(130) Similarly, the vertical link between the wholesale provision of decorative coatings in
       Sweden and the resale of decorative coatings to end-users in Sweden is also pre-
       existing, as both Parties are active both upstream and downstream, with a limited
       increment brought about by PPG (both upstream and downstream). Thus, the
       Commission considers that the incentives of the combined entity will not change
       significantly as a result of the Transaction.
(131) Third, the Commission considers that any input foreclosure strategy is unlikely to
       have a significant detrimental impact on competition in the resale of decorative
       coatings to end-users in Denmark, Hungary, the Netherlands, Poland, Slovakia and
       Sweden. The Commission notes that retailers responding to the market investigation
149
    Question 19 to questionnaire Q2 to competitors.
150
    Question 18 to questionnaire Q1 to customers.
151
    As regards Denmark and Sweden, the Parties’ main competitors upstream are suppliers of decorative
    coatings which are themselves vertically integrated downstream, and only sell their own products in their
    branded stores. This would be true as well in other countries (Hungary, the Netherlands, Poland and
    Slovakia); however, the limited importance of branded outlets compared to independent resellers in these
    countries makes this argument less relevant in the context of input foreclosure scenarios. At any rate, the
    Commission notes that in all countries considered in this section, input foreclosure could only apply to
    independent resellers (and not branded outlets).
152
    Questions 19 and 20 of Q1 – Questionnaire to decorative coatings customers.
                                                        30
 ---pagebreak---       did not raise concerns as to the risk of a foreclosure strategy or its potential impact
      on their business or on the market.153
(132) In light of the above, the Commission concludes that the Transaction is unlikely to
      raise serious doubts as to its compatibility with the internal market in relation to the
      vertical link between the wholesale supply of decorative coatings and the retail of
      decorative coatings in Denmark, Hungary, the Netherlands, Poland, Slovakia and
      Sweden.
4.      CONCLUSION
(133) 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
153
    Question 25 of questionnaire Q1 to customers.
                                                  31