CELEX: 32020M9560
Language: en
Date: 2020-09-23 00:00:00
Title: Commission Decision of 23/09/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9560 - GRÄNGES / IMPEXMETAL) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 23.09.2020
                                                                C(2020) 6652 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                                                                 information omitted has been replaced by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.9560 – Gränges/Impexmetal
                    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 19 August 2020, the European Commission (the ‘Commission’) received
          notification of a concentration pursuant to Article 4 of the Merger Regulation which
          would result from a proposed transaction by which Gränges AB (publ) (‘Gränges’ ,
          Sweden) intends to acquire control within the meaning of Article 3(1)(b) over the
          whole of Impexmetal S.A. (‘Impexmetal’ or the ‘Target’, Poland), by way of
          purchase of shares (‘the Transaction’).3 Gränges is referred to hereinafter as the
          ‘Notifying Party’ and together with Impexmetal 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 286, 31.8.2020, p. 2.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     Gränges manufactures and supplies aluminium flat rolled products (‘FRPs’) for
        customers in the automotive industry, the heating, ventilation and air conditioning
        (‘HVAC’) industry and niche sectors such as transformers and food packaging.
(3)     Impexmetal manufactures and supplies aluminium FRPs for the automotive industry,
        closure manufacturers, and companies within electronics.
(4)     Impexmetal is active in aluminium FRPs operations through its division Aluminium
        Konin. Apart from aluminium, the Target is active within copper, brass, lead and
        zinc. However, a disposal of these other activities will take place prior to the closing
        of the Transaction so that only the Aluminium Konin business will remain in the
        Target when the transaction is closed.
2.      THE CONCENTRATION
(5)     Pursuant to a share purchase agreement dated 27 November 2019, Gränges will
        acquire sole control over Impexmetal (only containing the Aluminium Konin
        business) by purchasing all the shares in the Target.
(6)     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
(7)     The Transaction does not have an Union dimension within the meaning of Article 1
        of the Merger Regulation because the combined aggregate worldwide turnover of
        Gränges and Impexmetal is not more than EUR 2 500 million.
(8)     However, on 13 December 2019, Gränges submitted a request for a referral to the
        Commission pursuant to Article 4(5) of the Merger Regulation (the ‘Form RS’). The
        request fulfilled the two conditions set out in Article 4(5) of the Merger Regulation
        in that (i) it referred to a concentration within the meaning of Article 3 of the Merger
        Regulation that (ii) it had to be notified in at least three Member States. In addition,
        the Transaction fulfilled a number of further criteria set out in the Commission’s
        Notice on Case Referral.4 In this regard, since the case extended over territories
        reaching beyond national boundaries, the markets involved were larger than national,
        the case required investigative efforts in several countries as well as appropriate
        enforcement powers, the Commission concluded it was in the best position to review
        the Transaction.
(9)     The Form RS was transmitted to all EU Member States and none of them expressed
        their disagreement to the referral. The Transaction is therefore deemed to have a
        Union dimension.
4   Commission Notice on Case Referral in respect of concentrations (‘Commission’s Notice on Case
    Referral’), OJ C 56, 05.03.2005, p. 2-23.
                                                     2
 ---pagebreak--- 4.       INTRODUCTION TO ALUMINIUM FLAT-ROLLED PRODUCTS
(10)     The Transaction brings together Gränges’ and Impexmetal’s manufacture and supply
         of aluminium FRPs. For the purpose of the merger control assessment of the
         Transaction, this section introduces the Commission’s understanding of the basic
         characteristics of aluminium FRPs.
4.1.     Different types of aluminium FRPs – Automotive HEX materials
(11)     Aluminium FRPs are a group of semi-finished flat aluminium products that are
         produced in hot and cold rolling mills. FRPs are produced from aluminium sheet
         ingots, sometimes referred to as rolling ingots or slabs, which are either produced
         from primary aluminium or from scrap (secondary aluminium).5 Cold rolling mills
         are used where flat products need to be rolled thinner.6
(12)     Aluminium FRPs comprise over 15 categories of products, some of which
         correspond to a specific end application, whereas some others are multi-purpose
         products. In general, rolling mills may be configured in such a way as to produce
         various types of FRPs depending on the final application (the so-called ‘product
         mix’).7
(13)     CRU,8 a provider of analysis, prices and consulting in the mining and metals market,
         has divided Aluminium FRPs into the various segments shown in Figure 1 below.
Figure 1. Segments within aluminium FRPs
Source: Notifying Party’s Response to Pre-Notification RFI 4, question 2
5   Commission decision of 29 September 2003, ALCAN/PECHINEY (II) (M.3225), paragraph 54.
6   See Form CO, paragraph 164 and minutes of a call with a competitor of 20 March 2020, paragraph 11.
7   The categories of FRPs that mills can produce include common material alloy (1xxx, 3xxx, 5xxx), paint
    stock & sheet, foil stock and foil, beverage can body stock, beverage can end stock, food can stock, bright
    sheet, brazing sheet, plate and shate, lithographic sheet, fin stock, other thin gauge (3xxx and 5xxx),
    automotive sheet and heat treat. See Commission decision of 29 September 2003, ALCAN/PECHINEY
    (II) (M.3225), paragraph 55.
8   For more information on CRU, see https://www.crugroup.com/.
                                                           3
 ---pagebreak--- (14)   Standard aluminium FRPs (‘Standard FRPs’) are a category within aluminium FRPs.
       This category, as will be discussed in the product market definition in Section 5
       below, consists of all FRPs that do not constitute distinct product markets within the
       field of aluminium FRPs.9
(15)   Aluminium FRPs for automotive heat exchangers (‘Automotive HEX’) are a
       category within aluminium FRPs. This category is marked in orange in Figure 1
       above. Automotive HEX materials can be divided into three categories which vary in
       shape and thickness: material for plates, tubes and fins.10 These categories are
       comprised within two segments: brazing sheet and finstock:
(16)   Brazing sheet segment: is comprised of material for plates and tubes.
              Material for plates: Usually has a thickness of more than 0.4mm. Material for
               plates serves for producing plates. Plates consist of a core alloy clad with braze
               clad on one or two sides. The rolled product is stamped or shaped by the
               customer, depending on the application. Plates are used in many kind of HEX
               applications, either for coolant plates or manifolds.11
              Material for tubes: Usually has a thickness of between 0.2 mm to 0.4 mm.
               Material for tubes serves for producing tubes. Tubes can be used for both
               welded and folded tube designs.12
(17)   Finstock: is comprised of material for fins (both clad and unclad, as will be
       explained in paragraph (19) below).
              Material for fins: Usually has a thickness of less than 0.2 mm. Material for fins
               serves for producing fins. Fins are used for applications such as radiators,
               heaters, charge air coolers and evaporators. For heat exchangers, the fins’
               function is to improve cooling performance. They also create structural
               integrity and work as a sacrificial part to prevent corrosion of the aluminium
               tubes (by directing the corrosion away from the tube material and absorbing
               the corrosion).13
(18)   Automotive HEX materials for fins can be either clad or unclad. Clad products
       consist of a core alloy with clad layers on one or two sides. Cladding consists of
       scalping a slab to remove an oxide layer, pre-heating and hot rolling into a long plate
       which is cut into smaller plates. These plates are then put on top and bottom of
       another so-called core slab to form a package of different alloys.14
9  Commission decision of 29 September 2003, ALCAN/PECHINEY (II) (M.3225), paragraph 61.
10 See Form CO, paragraph 38.
11 See Form CO, paragraphs 108 and 267.
12 See Form CO, paragraphs 108 and 267. Please note that, while tubes can be clad or unclad, unclad tubes
   are made by a process of extrusion and are not FRPs. The Commission has previously considered that
   FRPs and extrusions belong to two different product markets (see Commission decision of
   2 October 2007, RIO TINTO/ALCAN (M.4827), paragraph 33). Therefore, for the purposes of this
   Decision, if not explained otherwise the Commission refers to clad tubes when mentioning tubes.
13 See Form CO, paragraphs 108, 267 and 285.
14 See Form CO, paragraph 161 and minutes of a call with a competitor of 20 March 2020, paragraph 4.
                                                        4
 ---pagebreak--- (19)    Both unclad and clad fins have the same function in HEX, i.e. to improve cooling
        performance.15 Unclad fins are made of a single layer of alloy. Clad fins are made of
        clad material similar to brazing sheet, consisting of multiple layers. 16 Clad fins are
        predominantly used in an application called a condenser, a part of the air-
        conditioning loop in a vehicle which makes it possible to cool the cabin. The
        condenser typically has two different designs. One design uses clad fins and unclad
        tubes and the other design uses unclad fins and clad tubes.17 However, other designs
        could be possible, for example, water-cooled condensers. This concept would be a
        stack disc cooler where the refrigerant is cooled by means of a coolant. In the
        condenser, the refrigerant in the tubes is cooled with air from the outside by the
        airstream.18
4.2.    The production process of standard aluminium FRPs and Automotive HEX
        materials
(20)    The Automotive HEX materials are delivered to the producers of automotive heat
        exchangers in the form of aluminium coil, aluminium plates and aluminium strips.
        Those customers then use the Automotive HEX materials to create the HEX
        components (plates, tubes and fins) and assemble them into an Automotive HEX.
        Customers need to go through a process of validation in terms of properties
        (strength, corrosion, formability, etc.) for the materials or the suppliers they are
        going to use (they can validate more than one supplier if needed). Customers then
        provide the Automotive HEX to car manufacturers (the ‘OEMs’).19
(21)    There are two basic processes for producing Standard FRPs: direct-chill casting and
        continuous casting. Direct chill casting can be used to produce all Standard FRPs.
        Some categories of aluminium FRPs can also be produced using continuous casting:
        unclad fins, building sheet, foil stock and other 3x thin gauge. 20 The production
        process analysed in paragraphs (22) and ff. is that of the direct-chill casting, as it
        covers all Standard FRPs and it is the process used by the Parties to the Transaction.
(22)    Aluminium FRPs are produced using similar machinery, and involve several
        common steps, although depending on the product, certain adjustments (primarily
        and the finishing stage) are required to produce different aluminium FRPs.21
(23)    The production process is as follows:22
        (a)      Slabs: An aluminium ingot with the correct alloy chemistry is direct-chill
                 cast. This is the first stage in making all FRPs.
        (b)      Cladding (only for clad products): Consists of scalping a slab to remove an
                 oxide layer, pre-heating and hot rolling into a long plate which is cut into
                 smaller plates. These plates are then put on top and bottom of another
15  See Form CO, paragraph 285.
16  Annex 6.1 to the Form CO, Section 2.1.
17  See Form CO, paragraph 286.
18  See two responses to the request for information sent to car manufacturers, question 1(e) received on
    2 and 3 September 2020.
19  See Form CO, paragraphs 109, 156 and 379.
20  Annex 6.1 to the Form CO, footnote 7.
21  See Form CO, paragraph 160.
22  See Form CO, paragraph 161.
                                                       5
 ---pagebreak---                 so-called slab, to form a package of different alloys. As cladding only applies
                to clad products, unclad products do not have this stage.
        (c)     Pre-heating, hot rolling, cold rolling and annealing: these stages apply to all
                products. However, even though the cold rolling machines can in principle be
                universal for production of Standard FRPs and Automotive HEX materials,
                there are differences in the need of cold rolling capacity, due to differences in
                final product thickness. The thinnest product group within Automotive HEX
                materials, material for fins, requires most cold rolling capacity, while
                material for plates as the thickest product group requires the least amount of
                cold rolling capacity.23
        (d)     In practice, suppliers often use a heavy gauge machine for the initial cold
                rolling followed by a lighter gauge machine to roll thinner material. Mills can
                be segmented into ‘breakdown mills’ for heavy gauge (0.5-5mm) and mills
                for intermediate/light gauge (0.03-0.05-1mm). Some companies have
                universal mills, which can cover a wide gauge range, but these are not as
                productive as mills specially designed for light gauges. Therefore, most
                suppliers have a set-up of at least two mills (breakdown mill and finishing
                mill) or three or more mills (breakdown mill, intermediate mill, finishing
                mill) to cover the gauge range from plate over tube to fin.
        (e)     Finishing: Applies to all products. However, finishing (and hence finishing
                machines) is different depending on the product. For example, Automotive
                HEX materials for plates and tubes undergo an initial finishing stage called
                tension levelling, which is not applied to material for fins. Material for plates
                is slit using a heavy gauge slitting machine, and tubes, clad fins and unclad
                fins are slit using a light gauge slitting machine. Other aluminium FRPs can
                be finished using tension levelling and either a slitting or a cut-to-length
                machine.
(24)    Therefore, while the machinery for some of the production steps is similar, there are
        certain differences in the capacity and machinery required by product, most notably
        in the cold rolling mills (to achieve a certain product thinness) and in the finishing
        lines.
4.3.    Automotive HEX materials customers’ purchase process
(25)    Customers source Automotive HEX materials through tenders. These follow a
        typical B2B organisational buying process, where customers define their raw
        material specifications, and conduct a standard search to identify suppliers that offer
        what they are looking for. The Automotive HEX materials customers then request
        the identified suppliers to quote for the specified materials, review the proposals and
        make a choice.24
23  See Form CO, paragraph 164.
24  See Form CO, paragraph 370.
                                                    6
 ---pagebreak--- (26)    The selection process involves a review of the proposals (quotations) submitted,
        including price as well as consideration of the supplier’s quality performance,
        delivery performance, R&D capabilities, previous experiences etc.25
(27)    The customers then short-list a number of suppliers, who are invited to meet with
        them to discuss the proposal and address any questions, concerns or gaps. At this
        stage, the customer may attempt to negotiate final, advantageous terms with each of
        the short-listed vendors. Bilateral negotiations are typically used for supplier
        selection.26
(28)    After negotiations, the customer and the supplier agree on a supply agreement that
        lists technical specifications for the different materials, price, volumes,
        logistic/freight conditions, etc. The agreement may involve several product
        specifications and may be multi-year.27 Typically, agreements are concluded for 2 to
        5 years and the contract time is independent from the product category (i.e. material
        for plates, tubes and fins).28
(29)    Customers consider multi-sourcing useful29 but the decision depends mostly on
        whether there is enough budget, the volume of the project, and whether the
        manufacturing plant can handle two suppliers for the same application. Customers
        consider multi-sourcing good, to avoid supply disruptions: ‘Multisourcing is
        required in order to avoid any supply source risk and to safeguard the supply
        chain.’30, but as one customer stated: ‘On individual project (HEX product for a car
        model) level with an OEM mostly just one supplier is validated. On category basis
        (for example tube or fin), several suppliers are qualified. Validation cost to achieve
        dual sourcing on project level is generally very high. Therefore, risk management
        must at least be done on category level to be able to offer emergency solution to
        OEMs in case of supply issues’.31
4.4.    Automotive HEX materials’ validation process
(30)    Both Automotive HEX materials’ customers (tier suppliers) and end-customers
        (e.g. OEMs) need to validate the materials.32 This validation is done according to the
        requirements of the OEM.33
(31)    Customers need to validate the material before purchasing it for the first time.34 This
        is called the material validation process. During this process, the customer is testing
        for inter alia strength, corrosion and formability, after they have formed/brazed the
        heat exchanger together.35 Therefore, every time the Automotive HEX materials
        customers need a new product, suppliers need to produce new material (alloy, gauge,
        width, temper) to fulfil the customers’ requirements on strength, corrosion,
25  See Form CO, paragraph 370.
26  See Form CO, paragraph 370.
27  See Form CO, paragraph 370.
28  Questionnaire to customers, question D.C.7.
29  Questionnaire to customers, question D.C.2.1.
30  Questionnaire to customers, question D.C.2.1.
31  Questionnaire to customers, question D.C.2.1.
32  Questionnaire to customers, question D.C.1.1.
33  Questionnaire to customers, question D.C.1.1.
34  There is no need to validate the machinery.
35  See Form CO, paragraph 374.
                                                   7
 ---pagebreak---         formability or similar requirements.36 If suppliers change materials without
        informing the customers, they may be reported. As a customer submitted: ‘Suppliers
        shall be reported if they change like the 4Ms (Material/Machine/Men/Method)’.37
(32)    Further, if changes occur in suppliers’ production lines (new machinery or changed
        process) then they need to apply for a change request for a renewed material
        validation at the customer and show that the new material is the same as the old
        material in terms of properties (strength, corrosion, formability, etc.).38
(33)    The supplier’s material also has to be proposed to the OEM and accepted by it. This
        includes technical presentations, product testing and validation.39 In addition, IATF
        16949 certification is mandatory for suppliers to the automotive industry.40
(34)    Validation times vary per product and end-customer. Duration and qualification
        requirements are specific to each OEM.41 The process can take up to two years.42For
        example, a competitor points at the following steps and duration: ‘Typical steps:
        1) Lab testing at HEX manufacturer of material properties (9-12 months);
        2) Material validation at HEX manufacturer of material used on specific customer
        application. In some cases also partially done by end-customer (car manufacturer)
        12-15 months); 3) Process validation at HEX manufacturer plant (3-6 months).’43
(35)    As one customer stated: ‘As a first step the supplier must be certified for the needs of
        automotive quality requirements (IATF and audit specific customer requirements).
        Once the supplier is certified, a process for validation of supplier process and
        product (material) is performed. Once supplier validations are completed and
        declared as conform, Tier 1 will validate the material on the heat exchanger by
        performing a design and product validation, based on a testing plan discussed and
        agreed with the OEM. Tests results will be then presented to the OEM, which will as
        well perform tests on its side (including sometime vehicle tests). This long and heavy
        process, including administrative tasks and lead times for production, usually takes
        more than two years’.44
5.      PRODUCT MARKET DEFINITION
(36)    The Parties activities overlap45 in the production of aluminium FRPs, including
        Standard FRPs and all segments of Automotive HEX. In the EEA, both Parties
36 See Form CO, paragraph 375.
37 Questionnaire to customers, question D.C.1.1.
38 See Form CO, paragraph 376.
39 Questionnaire to customers, question D.C.1.1.
40 Questionnaire to competitors, question D.C.1.1.
41 Questionnaire to competitors, question D.C.1.1.
42 Questionnaire to customers, question D.C.1.1., questionnaire to competitors, question D.C.1.1.
43 Questionnaire to competitors, question D.C.1.1.
44 Questionnaire to customers, question D.C.1.1.
45 The Parties also have a small overlap in the supply of rolled aluminium products to the HVAC/ R HEX
   sector (‘HVAC/ R HEX FRPs’), also a part of the larger Standard FRP segment, in the EEA. This industry
   includes systems for heating, ventilation and air-conditioning in private homes, and in commercial and
   industrial buildings. The Parties argue that HVAC/R HEX FRPs is not a separate market from the wider
   Standard FRPs. However, under any plausible market definition, including HEVAC/R HEX FRPs as a
   separate market, the Parties’ combined market share would be [0-5]% in the EEA and [10-20]% on a
                                                         8
 ---pagebreak---          produce, sell and deliver both Standard FRPs and Automotive HEX materials for
         plates, tubes and fins with different gauges, widths, tempers and alloys.46 Therefore,
         the Transaction gives rise to horizontal overlaps with respect to the manufacture and
         supply of Standard FRPs and of Automotive HEX materials.
5.1.     The Commission’s precedents
(37)     In previous decisions, the Commission segmented aluminium FRPs into several
         separate product markets, one of them being Standard FRPs.47 The Commission
         considered that there exists a distinct market for Standard FRPs consisting of all
         FRPs that do not constitute distinct product markets within the field of FRPs. The
         market for Standard FRPs would include standard sheet, plates, foil stock, etc. for
         which, there exists a certain degree of supply side substitutability. The market
         investigations in these previous cases indicated that aluminium producers were able
         to produce the full range of Standard FRPs, switching production between the
         different types within a short period of time and without incurring significant
         additional costs.48
(38)     In one case, the Commission contemplated the possibility of considering brazing
         sheet (i.e. sheet for tubes and plates) for the use in heat exchangers as a separate
         product market.49 However, the product market definition was left open.
5.2.     The Notifying Party’s view
(39)     The Notifying Party submits that the relevant product market in this case is the
         supply of Standard FRPs. The Notifying Party considers that Standard FRPs belong
         to the same product market as aluminium FRPs for Automotive HEX materials. The
         Notifying Party considers the supply of Standard FRPs as the relevant product
         market for the following reasons:50
         (a)      There is a large overlap between the production stages required not only for
                  aluminium FRPs for Automotive HEX but for aluminium FRPs more
                  generally. Therefore, Gränges argues that it is possible for suppliers to flex
                  between the production of aluminium FRPs for Automotive HEX. Moreover,
                  as the main suppliers of aluminium FRPs for Automotive HEX already
                  produce plates, tubes and either clad or unclad fins, they are able to flex
                  production volumes between various types of Automotive HEX that they
                  produce without incurring in material investment costs.
    global market with predominant significance in North America. Therefore, HVAC/R HEX FRPs does not
    constitute an affected market and will not be analysed further.
46  Form CO, paragraphs 10 and 11.
47  According to the Commission’s precedents FRPs have thus been segmented into the following seven
    distinct product markets: (i) beverage can bodies; (ii) beverage can ends; (iii) food can bodies;
    (iv) lithographic sheet; (v) aluminium foil, which in turn may be divided into container foil, converter foil,
    household foil and industrial foil; (vi) automotive sheet; and (vii) Standard FRPs. (M.4605 - Hindalco /
    Novelis, paragraph 13).
48  Commission decision of 29 September 2003, ALCAN/PECHINEY (II) (M.3225), paragraph 61;
    Commission decision of 4 March 2002, Norsk Hydro /VAW (M.2702), paragraph 11.
49  Commission decision of 26 June 2001, ELKEM/SAPA (M.2404), paragraph 19.
50  Form CO, paragraph 21, and Annex 6.1 to the Form CO.
                                                            9
 ---pagebreak---         (b)      The machinery used for Automotive HEX FRPs and other Standard FRPs is
                 similar. Costs and time for installation of machinery are limited (no barriers
                 to entry), it would take probably less than 6 months to move into an adjacent
                 segment (e.g. from clad tube to clad fin);51
        (c)      There is significant spare capacity, which facilitates supply-side expansion.
                 Subsequently, the Notifying Party argues that suppliers are able to expand
                 production to produce another material type in the short term by utilising the
                 existing equipment;52
        (d)      A 5-10% price rise for Automotive HEX could induce volumes to be
                 switched from other Standard FRPs to Automotive HEX FRP production. As
                 supply-side substitution is likely to be profitable, separate markets for
                 Automotive HEX should not be defined.
        (e)      For the narrower segments of material for clad fins and unclad fins, the
                 Notifying Party argues that there is also demand-side substitutability for these
                 types of products. With the introduction of more corrosion resistant tube
                 stock, more condenser designs are using external unclad fins. Therefore,
                 Gränges believes that if the price of clad fins increased, customers that have a
                 secondary condenser design that uses unclad fins could switch to unclad
                 fins.53
5.3.    The Commission’s assessment
(40)    A wide majority of customers and competitors who expressed an opinion in the
        market investigation on this point submitted that they cannot use Standard FRPs
        instead of aluminium FRPs for Automotive HEX for the same applications neither
        overall or in terms of price, use/end applications, product characteristics and
        efficiency.54 As one customer stated: ‘Automotive heat exchangers products are not
        generic flat rolled aluminium alloys but customized per application, tailor made in
        chemical composition, mechanical properties, dimensional tolerances.’55; and a
        competitor mentioned: ‘Aluminium FRPs for Automotive HEX are in general
        completely different products than Standard FRPs. For example, Standard products
        are for building applications, Foilstock or General Engineering, while Automotive
        HEX products are made for heat exchanger for passenger cars or trucks. A big part
        of this products is clad, which means the products have a core alloy and on top a
        clad layer which allows the customer to braze material together in order to produce
        a heat exchanger. The Standards FRPs do not have alloy combinations in one
        product”.56
(41)    All customers and a large majority of competitors who expressed an opinion in the
        market investigation on this point consider that Automotive HEX material for
        (i) plates (with a thickness of >0.4 mm), (ii) tubes (with a thickness between 0.2 mm
51  Annex 6.1, paragraph 3.1.1.
52  Form CO, paragraph 103.
53  See Form CO, paragraph 287.
54  Questionnaire to customers, questions B.1 and B.1.1; questionnaire to competitors, questions B.1
    and B.1.1.
55  Questionnaire to customers, question B.1.1.
56  Questionnaire to competitors, question B.1.1.
                                                    10
 ---pagebreak---         and 0.4 mm) and (iii) fins (with a thickness of <0.2 mm) belong to separate product
        markets due to limited substitutability for customers in terms of, e.g., product
        characteristics, applications and prices.57 Also a large majority of customers and
        competitors consider clad fins are not interchangeable with unclad fins due to limited
        substitutability for customers in terms of, e.g., product characteristics, applications
        and prices.58 In this respect, a customer stated: ‘Clad fin materials are developed
        and/or selected for specific functionality and/or technical requirement. Thus, clad
        and unclad fin materials are not substitutable each other by its technical nature.’59
        The majority of competitors considered that the supply side substitutability between
        different types of Automotive HEX is limited.60
(42)    Based on the market investigation and in view of the information available to it in
        paragraphs (11) to (41), the Commission considers, for the purposes of this Decision,
        that Standard FRPs and aluminium FRPs for Automotive HEX both constitute
        distinct relevant product markets. The question whether the market for aluminium
        FRPs for Automotive HEX could be further segmented into Automotive HEX
        material for plates; Automotive HEX material for tubes; Automotive HEX material
        for overall fins; Automotive HEX material for clad fins and Automotive HEX
        material for unclad fins can be left open as the Transaction does not give rise to
        serious doubts as to its compatibility with the internal market or the functioning of
        the EEA Agreement under any of these plausible product market definitions.
6.       GEOGRAPHIC MARKET DEFINITION
6.1.    The Commission’s precedents
(43)    The Commission previously considered that the geographic market of Standard
        aluminium FRPs is at least EEA-wide and possibly, for certain categories, even
        wider in scope.61
(44)    The Commission has not specifically analysed the supply of Automotive HEX
        materials (i.e. materials for plates, tubes and fins) in its previous decisions in the
        aluminium sector.
6.2.    The Notifying Party’s view
(45)    The Notifying Party agrees with the Commission’s precedents, and considers the
        relevant geographic market to be at least EEA-wide.
6.3.    The Commission’s assessment
(46)    The market investigation in the present case supports the view that the relevant
        geographic market for the production and supply of Standard FRPs and Automotive
        HEX materials is EEA-wide.
57  Questionnaire to customers, question B.4; questionnaire to competitors, question B.2.
58  Questionnaire to customers, question B.5; questionnaire to competitors, question B.3.
59 Questionnaire to customers, question B.5.1.
60 Questionnaire to competitors, question B.7.1.
61 Commission decision of 8 May 2007, HINDALCO / NOVELIS (M.4605), paragraph 13; Commission
    decision of 29 September 2003, ALCAN/PECHINEY (II) (M.3225), paragraphs 66-67.
                                                        11
 ---pagebreak--- (47)    In particular, during the Commission’s market investigation, all of the competitors
        and customers who expressed an opinion stated that the supply and demand of
        Standard FRPs are at least EEA-wide.62 A competitor stated that ‘[s]everal risk
        factors discourages customers to buy globally’.63 Another competitor stated that:
        ‘[the Company] does not consider to be directly competing with Asian producers as
        the latter’s materials are not exactly the same quality.’64
(48)    Market participants expressed similar views with regard to Automotive HEX
        materials. Irrespective of whether they are defined as a separate relevant product
        market, from a geographic perspective appear to follow largely similar competitive
        dynamics as other types of Standard FRPs. Most competitors and customers also
        stated that the prices of Automotive HEX materials are similar throughout the entire
        EEA.65 The majority of customers consider that suppliers provide Automotive HEX
        materials at EEA level.66 The majority of competitors and customers consider that
        the above does not differ for the different types of Automotive HEX materials
        (i.e. materials for tubes, fins overall, clad fins and unclad fins).67
(49)    In addition to the foregoing, respondents to the market investigation considered
        duties as an important constraint.68 Imports of Automotive HEX materials from a
        third country into the EEA are subject to an import duty of 7.5%. Further, and on top
        of these 7.5% duties, the Commission opened an antidumping investigation on China
        imports (AD668) on 14 August 2020.69 As a customer explained: ‘In case additional
        duties are applied, supply from outside the EEA cannot be as competitive compared
        to supply within the EEA.’70 This may constitute an additional constraint for
        customers to source from outside the EEA.
(50)    Moreover, transportation costs also impacts imports and exports of Automotive HEX
        materials. The majority of customers consider that, due to transport cost, Automotive
        HEX materials can only be sold within the same region (e.g. the EEA) where they
        are manufactured.71 A competitor pointed out that: ‘transport cost can have a
        sizeable impact in the aluminium FRP price when overseas shipments are
        involved’.72 The majority of competitors and customers consider that the above does
        not differ for the different types of Automotive HEX materials (i.e. materials for
        tubes, fins overall, clad fins and unclad fins).73
6.4.    Conclusion on the geographic market definition
(51)    For the purposes of this decision and in light of the results of the market
        investigation and of all information available to it, the Commission considers that
        the geographic market for Standard FRPs and Automotive HEX materials is
62  Questionnaire to customers, question C.1; questionnaire to competitors, question C.1.
63  Questionnaire to competitors, question C.2.1.
64  Minutes of a call with a competitor of 12 March 2020, paragraph 16.
65  Questionnaire to customers, question C.2; questionnaire to competitors, question C.2.
66  Questionnaire to customers; question C.2
67  Questionnaire to customers, question C.2.2; questonnaire to competitors, question C.2.2.
68  Questionnaire to customers, question C.3.1, questionnaire to competitors, question C.3.1.
69  See https://trade.ec.europa.eu/tdi/case details.cfm?id=2475.
70  Questionnaire to customers, question C.3.1.
71  Questionnaire to customers, question C.3.
72  Questionnaire to competitors, question C.3.1.
73  Questionnaire to customers, question C.3.2; questionnaire to competitors, question C.3.2.
                                                          12
 ---pagebreak---         EEA-wide in scope. The production and supply of the different Automotive HEX
        materials (i.e. materials for tubes, fins overall, clad fins and unclad fins), if treated as
        separate relevant product markets, would also be EEA-wide in scope.
7.      COMPETITIVE ASSESSMENT
7.1.    Legal framework
(52)    Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
        whether a proposed concentration would significantly impede effective competition
        in the internal market or in a substantial part of it, in particular through the creation
        or strengthening of a dominant position. In this respect, a merger can entail
        horizontal and/or non-horizontal effects.
(53)    Horizontal effects are those deriving from a concentration where the undertakings
        concerned are actual or potential competitors of each other in one or more of the
        relevant markets concerned. The Commission appraises horizontal effects in
        accordance with the Horizontal Merger Guidelines.74
(54)    According to paragraph 26 of the Horizontal Merger Guidelines, a non-exhaustive
        list of relevant factors need to be assessed in order to draw a conclusion whether
        significant non-coordinated effects are likely to result from a merger.
(55)    Accordingly, Section 7.4 assesses market shares, closeness of competition between
        the Parties, important dynamics of the markets where the Parties’ activities overlap,
        the alternatives to the Parties and barriers to entry and competitors’ behavior in case
        of price increases. Based on all these factors considered together, conclusions on
        horizontal non-coordinated effects are drawn in at the end of Section 7.4.
7.2.    Introduction and market structure
(56)    The Automotive HEX materials market, as Table 1 below shows, is small compared
        to the Standard FRPs market, estimated at around [10-20]% of the volume sales of
        Standard FRPs. Within the Automotive HEX segment material, plates
        represent [20-30]%, tubes represent [30-40]%, overall fins represent [30-40]%
        (unclad fins representing [30-40]% and clad fins representing [0-5]%).
Table 1. Estimated market sizes of various potential segments of Standard FRPs
EEA Markets 2018 (mt):
Standard FRPs: 2 346 410
Auto HEX FRPs: [280 000-310 000]
Plates:               [70 000-90 000]
Tubes:                [100 000-120 000]
Fins:                 [90 000-110 000]
Unclad fins:          [80 000-100 000]
Clad fins:            [10 000-20 000]
Source: Form CO, paragraph 289
74  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
    concentrations between undertakings (‘Horizontal Merger Guidelines’), OJ C 31, 05.02.2014.
                                                       13
 ---pagebreak--- (57)  Automotive HEX materials are used in all types of vehicles, from light to heavy
      duty, as well as hybrid and Electric Vehicles (‘EV’). A higher share of hybrid
      vehicles, EVs and vehicles with different types of advanced features, affects the
      demand of Automotive HEX materials.
(58)  Gränges supplies aluminium FRPs, primarily for use in HEX applications. Gränges
      has one production site in the EEA, in Finspång, Sweden, which supplies the
      Automotive and HVAC/R industries.
(59)  Impexmetal operates one production facility in Konin, Poland, with an annual
      production capacity of 100,000 mt. Impexmetal has [Impexmetal’s strategic decision
      relating to possible expansion of capacity/offering].75
(60)  In the EEA, for Automotive HEX materials and Automotive HEX materials
      subcategories the Notifying Party identifies at least four large suppliers, namely
      Aleris, Hydro, Constellium, and AMAG and several other smaller ones: Arconic,
      Elval, Alinvest, Alcha, Novelis, Huafon, and Wuxi Yinbang.76 The market
      investigation revealed the following companies that registered sales of Automotive
      HEX in the EEA for the last 4 years: AMAG, Constellium, Elval, Eurofoil, Norsk
      Hydro, ALRO, Hulamin, Huafon, Novelis and Assan.77
(61)  Customers of Automotive HEX are large Tier 1-suppliers to OEMs like [the Parties’
      customers 1, 2 and 3]. They represented [60-70]% of Gränges’ sales of Automotive
      HEX in the EEA in 2018. Impexmetal has in total [number of customers] automotive
      HEX materials customers in EEA. In addition, the Parties’ customers multisource.78
(62)  For Automotive HEX materials and subcategories, besides the market shares used to
      assess market power, the overall production and spare capacity is also a good
      parameter to assess the competitive strength of a supplier. A suppliers’ capacity to
      increase production depends on the part of the equipment that is usually the
      bottleneck in the process, and this is usually the finishing equipment (i.e. capacity
      for slitters, tension levelling etc.).79 The CRU report focuses on rolling capacity
      since this is the capital-intensive part of the business, hence the capacity presented in
      Table 2 below is related to the rolling capacity of the factories.
75 Form CO, paragraphs 136 and 137.
76 Form CO, paragraph 258.
77 Questionnaire to competitors, question D.D.8.
78 Form CO, paragraph 266.
79 Form CO, paragraphs 329-331.
                                                   14
 ---pagebreak---  ---pagebreak---  ---pagebreak---        HEX materials for tubes, overall fins (including clad and unclad), clad fins and
       unclad fins.
(66)   In this regard, the Notifying Party claims that: (i) the Parties are not close
       competitors; (ii) there will remain a sufficient number of competitors post-
       Transaction; (iii) suppliers of Standard FRPs can switch their current product mix in
       order to increase (or start) supplying Automotive HEX materials, especially if prices
       increase; (iv) capacity constraints in Automotive HEX materials are unlikely to be a
       problem; (v) customers of Automotive HEX materials are large sophisticated
       companies with plenty of countervailing buyer power, and they usually multi-source.
(67)   On closeness of competition, the Notifying Party submits that Gränges and
       Impexmetal’s businesses are complementary,84 and that they are in any case not
       close competitors.
(68)   The Notifying Party considers that there are two different types of suppliers of
       Automotive HEX materials as regards product quality and whether products are
       standardised or commoditised: high-end and low-end suppliers.85
(69)   Gränges regards itself as a high-end supplier, and considers Impexmetal to be a low-
       end supplier. In Gränges’ opinion, it has more advanced capabilities and technical
       competence in process and R&D, as well as higher quality or more advanced
       products than those of low-end suppliers. The Notifying Party considers that other
       high-end suppliers include Aleris, Constellium, Hydro, AMAG and Elval.86 Gränges
       believes that customers might regard the Target to be focusing on the commodity
       market.87 Other low-end suppliers produce more standardised products, such as
       Eurofoil, Alro, Assan, Alcomet, Hulamin, Arconic, and Alcha.88 This is also true for
       the different Automotive HEX materials, and particularly for materials for tubes.89
(70)   The Notifying Party submits that its high- versus low- end suppliers argument is
       further supported by [price structure of the Parties] between the Parties and by
       analysing the products in Gränges portfolio that Impexmetal cannot produce.90 For
       example, Gränges supplies multiclad materials while Impexmetal does not
       [Impexmetal’s strategic decision relating to possible expansion of capacity/offering].
       Gränges also submits that it is focused on being a flexible supplier that allows
       smaller order sizes to the customer, [price structure of Gränges] (smaller order sizes
       mean more setup time in the machinery).91
84 According to the Notifying Party, around [70-80]% of Impexmetal’s business consist of other aluminium
   FRPs than Automotive HEX FRPs. The reverse happens with Gränges, where in the EEA, about
   [90-100]% of its sales of Standard FRPs consist of Automotive HEX FRPs. See Form CO, paragraph 28.
85 See Form CO, paragraphs 392, 394 and 395.
86 See Form CO, paragraphs 12, 34, 392, 394.
87 See Form CO, paragraphs 12, 34, 394, 395.
88 See Form CO, paragraph 41.
89 See Form CO, paragraphs 276 and 277.
90 See Form CO, paragraphs 34, 395.
91 See Form CO, paragraph 395.
                                                        17
 ---pagebreak--- (71)    The pricing comparison of the Parties’ average prices for Automotive HEX materials
        is shown below:
Figure 2. Parties' average conversion prices for Automotive HEX materials
[…]
Source: Form CO, table 37 (paragraph 395)
(72)    On the sufficient number of remaining competitors in the market, the Notifying
        Party submits that, post-Transaction, it will be possible for customers to switch
        volumes of products to other suppliers.92
(73)    The Notifying Party submits that it possible to switch supplier, despite the validation
        costs in case a customer needs to validate new Automotive HEX materials. The
        Notifying Party considers these costs as insignificant compared to the potential
        savings that could occur.93
(74)    Gränges argues that multi-sourcing is very common, and therefore customers would
        not need to go through additional validation processes to switch volumes quickly.94
        Gränges considers that due to multi-sourcing, customers could easily switch
        suppliers in case of a price increase.95 According to Gränges, Automotive HEX
        materials customer [the Parties’ customer 1] multi-sources standardised tubes from
        eight suppliers, and fins from seven suppliers. [the Parties’ customer 2] multi-
        sources tubes and fins from six suppliers (each product).96
(75)    The Notifying Party argues that the difficulty for customers of switching supplier is
        further decreased for commoditised products (such as unclad fins) as these are
        standardised (i.e. the same material can be used for multiple applications so there
        would be no need to pass a validation process).97
(76)    On the suppliers’ ability to flex (and/or increase) production in case of a price
        increase, the Notifying Party submits that supply-side substitution is timely and
        inexpensive within Automotive HEX materials.98 The Notifying Party submits that
        post-Transaction, several powerful actual and potential competitors would still be
        able to discipline the Parties by starting or expanding their production of Automotive
        HEX materials.99 Further, the Notifying Party submits that a 5-10% price rise in any
        Automotive HEX material would likely cause rapid switching and expansion.100
(77)    Gränges argues that competitors active in other segments than Automotive HEX
        materials have the possibility to switch capacity in or out of Automotive HEX
        materials.101 The Notifying Party submits that most of the main Automotive HEX
        materials suppliers already produce material for plates, tubes and either clad or
92  See Form CO, paragraphs 36 and 377.
93  See Form CO, paragraph 363.
94  See Form CO, paragraph 377.
95  See Form CO, paragraph 386.
96  See Form CO, paragraphs 278 and 283.
97  See Form CO, paragraph 378.
98  See Annex 6.1 to the Form CO, Section 3.1.2.
99  See Form CO, paragraph 216.
100 See Annex 6.1 to the Form CO, Section 3.1.3.
101 See Form CO, paragraph 248, and Annex 6.1 to the Form CO.
                                                      18
 ---pagebreak---         unclad fins, and they would be able to flex production volumes between the
        Automotive HEX materials that they produce without incurring material investment
        costs.102 Gränges considers that, for suppliers already acquainted with clad products,
        and with the equipment in place, it would take less than six months to move into an
        adjacent segment (e.g. from clad tubes to clad fin).103
(78)    Further, the Notifying Party submits that the production process for Automotive
        HEX materials (i.e., materials for plates, tubes and fins) use similar or identical
        equipment, and even if a supplier needs to invest in additional machinery, this
        machinery is low cost and can be set up quickly.104 The table below shows the
        machinery requirements to switch capacity between Automotive HEX materials:
Table 4. Machinery requirements to switch capacity between Automotive HEX
materials
Source: Annex 6.1 to the Form CO, table 5
(79)    The Notifying Party notes that this table assumes that direct chill technology is used.
        Suppliers of unclad fins using continuous casting would not be able to switch
        production to direct-chill products without significant investment.105
(80)    With regards to the cost and time to install machinery required to switch capacity
        from one Automotive HEX material to another, the Notifying Party estimates the
        following:
102 See Annex 6.1 to the Form CO, Section 3.1.1.
103 See Annex 6.1 to the Form CO, Section 3.1.1.
104 See Annex 6.1 to the Form CO, Section 3.1.2.
105 See Annex 6.1 to the Form CO, Section 3.1.2.
                                                  19
 ---pagebreak--- Table 5. Cost and time to install machinery required to switch capacity
Machinery                     Cost (EUR million)           Time to install      Annual capacity
Cladding                                      [...]            12 months                   50 kt
Tension levelling                             [...]          8-12 months                20-50 kt
Slitting – light gauge                        [...]          8-12 months                 5-30 kt
Slitting – heavy gauge                        [...]          8-12 months                 5-30 kt
Source: Annex 6.1 to the Form CO, table 6
(81)     Therefore, Gränges argues that the costs and time required to install machinery to be
         able to switch capacity from one Automotive HEX material to another is not
         significant.
(82)     Moreover, the Notifying Party believes that there are credible import threats coming
         from Chinese suppliers.106 According to Gränges, Chinese suppliers have access to
         cheaper metal as well as government subsidies.107
(83)     With regard to material for clad fins, the Notifying Party argues that fewer number
         of clad fin suppliers is likely due to low demand and low volumes of product sold
         and not to barriers to entry.108 Gränges considers that suppliers of unclad fins need
         little time and capital to start producing clad fins (although suppliers would have to
         use the direct chill technology).109 Further, suppliers who already produce clad
         material (e.g. tubes) can start producing clad fins without installing any additional
         machinery, as tubes use the same cladding and light gauge slitting machines as clad
         fins.110 Moreover, Gränges considered that even in the case that investments in a clad
         fin were needed, it would only take a year to build with some minor investment (of
         around EUR [information on the Parties’ costs relating to manufacture]).111 Gränges
         believes higher clad fin prices would induce more suppliers to produce clad fins.112
(84)     On the lack of capacity constraints, Gränges argues that this would contribute to
         competitors increasing (or starting) their supply of Automotive HEX materials.
         Gränges estimates that capacity utilisation in 2019 was likely to be around
         80-90%.113 Gränges expects capacity to increase substantially in the coming years
         because of three main reasons:114
                 First, the US-China trade war has freed Chinese capacity to supply European
                  customers.
106  See Form CO, paragraph 262.
107  See Form CO, paragraph 262.
108  See Form CO, paragraph 300.
109  See Form CO, paragraphs 300 and 301.
110  See Form CO, paragraph 300.
111  See Form CO, paragraph 301.
112  See Form CO, paragraph 300.
113  See Form CO, paragraph 265.
114  See Form CO, paragraphs 216 and 265.
                                                    20
 ---pagebreak---                Second, a weak automobile sector has reduced orders, and led to idle
                European capacity.
               Third, Gränges estimates that between 2018-2023 Europe will add
                403 000mt of capacity of aluminium FRPs which includes planned
                expansions in the near future by Elval, Assan, AMAG, Alcomet and Alro.115
                The Notifying Party argues that, in principle, it is possible to use the capacity
                for all different segments of aluminium FRPs to produce Standard FRPs, so it
                estimated these capacity increases on the basis of capacity for all aluminium
                FRP segments.116
(85)    On the countervailing buyer power, the Notifying Party argues that customers are
        sophisticated and consolidated (with only a few large customers making up for a
        large part of suppliers’ sales of Automotive HEX materials) have global contracts
        and strong financial resources, and therefore have a strong countervailing buyer
        power.117 Therefore, Gränges submits that significant losses of sales and market
        shares would occur if customers were to switch volumes away from the Parties,
        which makes suppliers of Automotive HEX materials more dependent on the
        customers than the other way round.118
7.4.    The Commission’s assessment
7.4.1. Automotive HEX materials overall – horizontal non-coordinated effects
(86)    In this Section, the Commission will assess the effects of the Transaction in an
        overall plausible market for Automotive HEX materials. The assessment for the
        alternative plausible markets for individual products (i.e. Automotive HEX materials
        for tubes, fins overall, clad fins and unclad fins) will be addressed in
        Section 7.4.27.4.2.
(87)    The Transaction is not likely to raise serious doubts in relation to the EEA-wide
        market for the supply of Automotive HEX materials overall for the reasons set out
        below.
(88)    If an overall market for all Automotive HEX materials were defined, the
        Transaction would give rise to an affected market. The market investigation has
        pointed at certain barriers to entry for example, the cost, time and approval needed
        for validation of additional materials/suppliers and the current imports that may be
        affected by further duties imposed to them.119
115 See Form CO, paragraph 265.
116 See Form CO, paragraph 244.
117 See Form CO, paragraphs 382, 384 and 385.
118 See Form CO, paragraph 385.
119 Questionnaire to customers, questions C.3.1 and D.C.2.1; questionnaire to competitors, question E.2.1.
                                                        21
 ---pagebreak---  ---pagebreak---         quality, high assortment range, HEX-specific R&D capability) whereas Impexmetal
        is perceived as being able to supply less complex products than Gränges.126
(93)    Third, competitors have idle capacity for Automotive HEX materials, as shown in
        Table 2, and as confirmed in the market investigation. Therefore, several competitors
        could increase production of Automotive HEX materials in reaction to an increase in
        demand in the EEA.127 Further, the majority of competitors consider that neither
        casting, nor hot rolling, cold rolling, cladding, cleaving or packing would act as
        barriers or bottlenecks in case of an increase of production on Automotive HEX
        materials.128
(94)    Fourth, several (actual and potential) suppliers would remain in the market. The data
        provided by the Notifying Party and the results of the market investigation indicate
        that the competitive landscape in the market for Automotive HEX materials is
        characterised by a number of strong global players, which are active across the EEA.
        The merged entity will continue to face strong competitive pressure from strong
        players such as Aleris ([10-20]%), Constellium ([10-20]%), Hydro ([10-20]%) and
        other smaller players as well as imports from South Africa and China. A competitor
        explained that ‘there are many suppliers active in the EEA’.129
(95)    Lastly, competitors are likely to increase their supply should prices increase. The
        market investigation results have shown that the majority of competitors who
        expressed an opinion on this point would increase production of Automotive HEX
        materials overall in the event of a 5-10% price increase.130
(96)    Based the considerations in paragraphs (88) to (95) above and in light of the results
        of the market investigation and of all evidence available to it, the Commission
        concludes that the Transaction does not give rise to serious doubts as to its
        compatibility with the internal market or the functioning of the EEA Agreement with
        respect the overall market for Automotive HEX in the EEA.
7.4.2. Plausible markets of Automotive HEX materials for tubes, fins overall, clad fins and
        unclad fins
(97)    In this Section, the Commission will assess the effects of the Transaction in the
        plausible narrower markets for each individual product within aluminium FRPs for
        Automotive HEX, where there is an affected market: Automotive HEX materials for
        tubes, Automotive HEX materials for fins overall, Automotive HEX materials for
        clad fins, and Automotive HEX materials for unclad fins.
7.4.2.1. Plausible narrower market of Automotive HEX materials for tubes – horizontal
          non-coordinated effects
(98)    The Transaction is not likely to raise serious doubts in relation to the EEA-wide
        market for the supply of Automotive HEX materials for tubes for the following
        reasons.
126 Questionnaire to customers, questions D.C.6, and D.C.6.1; questionnaire to competitors, questions D.C.3
    and D.C.3.1.
127 Questionnaire to competitors, question D.D.7.
128 Questionnaire to competitors, question D.D.9.
129 Minutes of a call with a competitor of 20 March 2020, paragraph 20.
130 Questionnaire to competitors, question D.D.2.
                                                        23
 ---pagebreak---  ---pagebreak---  ---pagebreak--- (107) However, on balance, the Commission finds the transaction not likely to raise
       serious doubts in relation to the EEA-wide market for the supply of all Automotive
       HEX fin materials because of the following reasons.
(108) First, based on the Parties’ estimates in Section 7.2 above, the combined share of the
       Parties in all Automotive HEX materials for fins in 2018 would be limited to
       [20-30]% in the EEA. The Automotive HEX materials for fins market is likely not to
       increase in the following years since a large majority of customers that responded in
       the market investigation stated135 that they do not intend to or are unsure as whether
       they will increase their demand for overall fins for the next 3 years.
(109) Second, several (actual and potential) suppliers would remain in the market. The
       data provided by the Notifying Party and the results of the market investigation
       indicate that the competitive landscape in the market for Automotive HEX materials
       for fins overall is characterised by a number of strong global players, which are
       active across the EEA. The merged entity will continue to face strong competitive
       pressure from strong players such as as Alinvest ([10-20]%), Hydro ([5-10]%),
       Eurofoil ([5-10]%), Arconic ([5-10]%), Aleris ([5-10]%), Elval ([0-5]%) as well as
       imports from Turkey, South Africa and China.
(110) Third, Gränges and Impexmetal are not close competitors in all Automotive HEX fin
       materials as Gränges is specialised in more high-end quality products than
       Impexmetal.136
(111) Forth, even though competitors there are barriers to entry the Automotive HEX fin
       materials market in terms of investment in production machinery, know-how and the
       validation process with customers, the majority of competitors answered they would
       increase the production of material for fins in the event of a price increase of
       5-10%137 and, as Table 2 above shows it, they would have spare capacity they can
       use in case of necessity.
(112) Based on the considerations in paragraphs (107) to (111) and in light of the results of
       the market investigation and of all evidence available to it, the Commission
       concludes that the Transaction does not give rise to serious doubts as to its
       compatibility with the internal market or the functioning of the EEA Agreement with
       respect to the market for all Automotive HEX fins in the EEA.
       (A)         Plausible market of Automotive HEX materials for clad fins
(113) The Transaction is not likely to raise serious doubts in relation to the EEA-wide
       market for the supply of Automotive HEX materials for clad fins for the reasons set
       out below.
(114) If one single market for Automotive HEX clad fin materials were defined, then the
       Transaction would give rise to an affected market. The market investigation has
       pointed at certain barriers to entry such as, for example, the cost, time and approval
       needed for validation of additional materials/suppliers and the current imports may
135 Questionnaire to customers, question D.D.5.
136 Questionnaire to customers, question D.A.2.
137 Questionnaire to competitors, question D.D.2.
                                                  26
 ---pagebreak---  ---pagebreak---        requirements for clad finstock in […] Europe are quite low (less than 3% of our
       FRP usage), so very few new RFQ have been sent in the last year’.143
(119) Second, several (actual and potential) suppliers would remain in the market. The
       merged entity will continue to face strong competitive pressure from strong players
       such as Hydro and Elval ([10-20]%), as well as imports from South Africa and
       China. There would still remain enough competitive pressure on the market as one
       competitor stated: ‘Suppliers that focus on thinner products like clad fin, unclad fin,
       and clad tube to some extent have a relatively small market volume to compete for.
       These products are niche products in the FRP industry, and normally suppliers
       combine this business with other foil type of products to be able to reach positive
       contribution. There are still enough suppliers to generate low market prices for
       these niche products, and even if the clad fin product is higher priced due to fewer
       supply alternatives, the total market volume is low.’144
(120) Third, as Table 2 above shows, there is spare capacity that could be used to increase
       clad fins’ production. Despite the barriers to entry in the Automotive HEX material
       for clad fins market in terms of investment in production machinery, know-how and
       the validation process with customers, there are interested competitors that would
       increase the production of material for clad fins in the event of a price increase
       of 5-10%.145
(121) Fourth, customers would still have enough ability to switch to other suppliers as the
       results of the market investigation indicate: most customers see Alcha and Huafon as
       potential alternatives for their demand, but a large minority of customers also
       consider Arconic, Assan and Hydro.146 Yinbang and Elval were also pointed out as
       possible suppliers.147 Even the Notifying Party argues that it lost sales to [Gränges’
       volume loss to a competitor in 2013-2014 and 2019].148
(122) Fifth, Gränges and Impexmetal are not close competitors in the market for
       Automotive HEX materials for clad fins as the Parties’ products are substantially
       differentiated. Gränges supplies the more advanced multi-clad products than
       Impexmetal, such as [an example of Gränges’ multiclad clad fin products and the
       volume sold thereof], which represents […] of Gränges’ sales within clad fins.149
(123) Lastly, even though the customers perceive the clad fins market to be less
       competitive compared to other Automotive HEX categories, the majority of
       customers consider150 that clad fin prices did not evolve differently from the prices
       of the other aluminium FRPs for Automotive HEX in the past 3 years.
(124) Based on the considerations in paragraphs (116) to (123) and in light of the results of
       the market investigation and of all evidence available to it, the Commission
       concludes that the Transaction does not give rise to serious doubts as to its
143 Questionnaire to customers, question D.D.4.2.
144 Questionnaire to competitors, question E.3.2.
145 Questionnaire to competitors, question D.D.2.
146 Questionnaire to customers, question D.D.4.
147 Questionnaire to customers, question D.D.4.1.
148 Form CO, paragraph 293.
149 Form CO, paragraph 295.
150 Questionnaire to customers, question D.E.3.
                                                  28
 ---pagebreak---  ---pagebreak---         investigation stated151 that they do not intend to or are unsure as to whether they will
        increase their demand for unclad fins in the next 3 years.
(129) Second, several (actual and potential) suppliers would remain in the market. The
        data provided by the Notifying Party and the results of the market investigation
        indicate that the competitive landscape in the market for Automotive HEX materials
        for unclad fins is characterised by a number of strong global players, which are
        active across the EEA. The merged entity will continue to face strong competitive
        pressure from strong players such as Alinvest ([10-20]%), Eurofoil ([5-10]%),
        Hydro ([5-10]%), Arconic ([5-10]%) amongst others and as well as imports from
        Turkey, South Africa and China. The results of the market investigation revealed
        that there are suppliers that most customers would consider as potential alternatives
        for their demand:152 Alcha, Alinvest, Eurofoil and also153 Elval, Huafon, Yinbang
        and Alu-Slim/Grupporeco.
(130) Further, and as shown in Table 2 above, there are no capacity constraints, and spare
        capacity can be mobilised where needed. So, despite the smaller share of supply of
        some of the competitors mentioned above, these have spare capacity and some of
        them plan to further increase capacity in the near future, or are undergoing current
        plans for capacity increases, for example Elval, AMAG, Alro and Alcomet.154
(131) Third, unclad fins are standardised products, which makes it easier to switch
        suppliers. Further, the market investigation results have shown that for unclad fins
        the barriers to entry are low. A competitor mentioned that the ‘barriers to entry are
        low provided the rolling infrastructure (gauge capability at cold mill) is in place’155
        and a customer stated: ‘Unclad fins for HEX are more and more produced via the
        Continuous Casting Process with subsequent cold rolling to final thickness. This
        process is very price competitive and produces fin materials with good forming
        behaviour and superior corrosion properties.’156
(132) Fourth, Gränges and Impexmetal are not close competitors in Automotive HEX
        materials for unclad fins as Gränges is specialised in more high end quality products
        than Impexmetal.157
(133) Fifth, the majority of competitors answered that they would increase the production
        of material for unclad fins in the event of a price increase of 5-10%158 and, as Table
        2 above shows, they would have spare capacity they can use in case of necessity.
(134) Based on the considerations in paragraphs (128) to (133) and in light of the results of
        the market investigation and all evidence available to it, the Commission concludes
        that the Transaction does not give rise to serious doubts as to its compatibility with
        the internal market or the functioning of the EEA Agreement with respect to the
        market for Automotive HEX for unclad fins in the EEA.
151 Questionnaire to customers, question D.D.5.
152 Questionnaire to customers, question D.D.3.
153 Questionnaire to customers, question D.D.3.1.
154 Questionnaire to competitors, question D.D.7 and minutes of a call with a competitor of 12 March 2020,
    paragraph 19, Form CO, table 20.
155 Questionnaire to competitors, question D.D.5.
156 Questionnaire to customers, question B.5.1
157 Questionnaire to customers, question D.A.2.
158 Questionnaire to competitors, question D.D.2.
                                                       30
 ---pagebreak--- 7.4.3. Final conclusion of the competitive assessment
(135) Based on the considerations included in paragraphs (87) to (134) above and in light
       of the results of the market investigation and of all evidence available to it, the
       Commission considers that the Transaction will not give rise to serious doubts as to
       its compatibility with the internal market or the functioning of the EEA Agreement
       with respect to horizontal non-coordinated effects under any plausible market
       definition.
8.     CONCLUSION
(136) For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with the
       EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
       Merger Regulation and Article 57 of the EEA Agreement.
                                                     For the Commission
                                                     (Signed)
                                                     Margrethe VESTAGER
                                                     Executive Vice-President
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