CELEX: 32021M10371
Language: en
Date: 2021-09-30 00:00:00
Title: Commission Decision of 30/09/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10371 - SIBUR / TAIF) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 30.9.2021
                                                                 C(2021) 7253 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                                                                  information omitted has been replaced by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.
                                                                 Public Joint-Stock Company SIBUR
                                                                 Holding
                                                                 6 Block 1, building 30, the Eastern Industrial
                                                                 District, Tobolsk
                                                                 626150 Tyumen Region
                                                                 Russia
Subject:             Case M.10371 – SIBUR/TAIF
                     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 2 September 2021, the European Commission received notification of a proposed
           concentration pursuant to Article 4 of the Merger Regulation by which Public Joint-
           Stock Company SIBUR Holding (“SIBUR”, Russia) acquires within the meaning of
           Article 3(1)(b) of the Merger Regulation sole control of Joint-Stock Company TAIF
           (“TAIF”, Russia) by way of purchase of shares.3 SIBUR is designated hereinafter as
           the “Notifying Party” while SIBUR and TAIF are designated hereinafter 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 (the ‘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 363, 9.9.2021, p. 5.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.      THE PARTIES
(2)     SIBUR is a public joint stock company organised and existing under the laws of
        Russia. It is an integrated petrochemicals group active in Russia and globally, with a
        focus on two business segments: (a) olefins and polyolefins (polypropylene,
        polyethylene, etc.), and (b) plastics, elastomers and intermediates (synthetic rubbers,
        expanded polystyrene, PET, etc.). SIBUR’s petrochemicals business mainly utilises
        its own feedstock, which is produced by its Midstream segment, which uses by-
        products purchased from oil and gas companies.
(3)     TAIF and its group of companies (‘TAIF Group’) are based in the Republic of
        Tatarstan, Russia. The TAIF Group comprises several subsidiaries and affiliated
        companies operating in oil and gas processing, chemicals and petrochemicals, and
        power engineering, as well as investment and other services. TAIF Group produces –
        among others– olefins, ethylene oxide, ethylene glycol, polymers and rubbers.
2.      THE CONCENTRATION
(4)     [Confidential information on the agreement between the Parties]. SIBUR will thus
        acquire direct sole control of TAIF by virtue of the Transaction.
(5)     TAIF operates in the petrochemical industry through its two main operational
        companies, Nizhnekamskneftekhim PJST (“NKNK”) and Kazanorgsintez PJSC
        (“KOS”), which are included in the perimeter of the Transaction.
(6)     [Confidential information on the agreement between the Parties],4 [Confidential
        information on the agreement between the Parties].5
(7)     [Confidential information on the agreement between the Parties].
(8)     In the current constellation, the Commission considers that SIBUR acquires sole
        control over TAIF and its subsidiaries, because [Sibur will control the decision-
        making bodies of TAIF and its key subsidiaries].
(9)     [Although TAIF shareholders retain limited rights for a transitional period, Sibur
        will already exercise control over the operational management of TAIF through the
        ability to decide on the business plans of TAIF key subsidiaries]. On this basis and
        even if it were considered that the remaining TAIF Shareholders would retain rights
        amounting to joint control, this would not change the Commission’s assessment,
        since such rights would not in any event constitute a lasting change of control.
        Therefore, the whole Transaction may be considered to be an acquisition of sole
        control.6
(10)    The Transaction is therefore an acquisition of sole control over TAIF by SIBUR
        within the meaning of Article 3(1)(b) of the Merger Regulation.
4   Form CO, paragraph 40 and response of the Notifying Party to RFI 8.
5   Form CO, paragraphs 41 et seq.
6   Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the
    control of concentrations between undertakings (OJ C 95, 16.4.2008, p. 1), paragraph 34.
                                                        2
 ---pagebreak---  ---pagebreak--- 5.       HORIZONTAL OVERLAPS – M ARKET DEFINITION AND COMPETITIVE ASSESSMENT
5.1.     Market Definition for butyl rubber
(15)     Butyl rubber is among the most widely used synthetic elastomers. Due to its high
         degree of gas impermeability, butyl rubber is widely used to produce a range of
         rubber goods, mostly inner liners and inner tubes of tires. Therefore, the tire industry
         accounts for approximately 70% of global butyl rubber consumption. The remaining
         butyl rubber is used for the production of various sealants for closing medicine
         bottles, pharmaceutical packaging and injection vials, as well as for the production
         of air cushions, pneumatic springs, adhesives, fibre optic compounds, sports ball
         bladders or chewing gum.
(16)     Butyl rubber is a synthetic elastomer produced by polymerisation of isobutylene
         with a smaller amount of isoprene. Regular butyl rubber (i.e. non-halogenated butyl
         rubber) can be further halogenated using elemental chlorine or bromine. Halogenated
         chloro- and bromo-butyls are commercially the most important butyl rubber
         derivatives, having higher levels of resistive properties, low gas permeability, and
         cure versatility. Chloro- and bromo-butyls are halogenated butyl rubbers which are
         extensively used in the automotive sector for tire production and automobile shock-
         absorption applications, such as suspension bumpers, exhaust hangers, and body
         mounts.
5.1.1. Product Market Definition
The Commission’s previous decisions
(17)     The wider product market concerned is the market for synthetic elastomers. In
         Dow/DuPont 10 the Commission considered that each synthetic elastomer constitutes
         a separate product market as it has specific characteristics and/or costs which define
         the applications for which they may be used. Furthermore, the production of each
         family of synthetic elastomer requires equipment and techniques specific to that
         family so that it is not possible to switch the use of a facility designed to produce one
         elastomer to another in a short time. Therefore, the Commission identified a separate
         product market for butyl rubber.
(18)     In Saudi Aramco/SABIC 11 the Commission considered a further segmentation of the
         butyl rubber market into halogenated and non-halogenated butyl rubber, as the
         market investigation indicated that they are not generally substitutable with each
         other from a demand-side perspective. This is because non-halogenated butyl rubber
         cannot be co-vulcanised with other tire materials and is therefore not suitable for
         inner liner applications. Within the halogenated category, the Commission also
         considered a further segmentation between bromobutyl and chlorobutyl as they can
         be used for the manufacture of different types of tyres. The Commission ultimately
         left the exact scope of the product market definition for butyl rubber open.
10   See case IV/M.663 – Dow/DuPont, decision of 21.02.1996.
11   See case COMP/M.9410 – Saudi Aramco/SABIC, decision of 27.02.2020.
                                                        4
 ---pagebreak--- The Notifying Party’s view
(19)    The Notifying Party considers that butyl rubber forms a separate product market
        without further segmentation, due to the high degree of supply-side substitutability
        across the various hypothetical sub-segments. The Notifying Party submits that the
        precise product market definition can be left open as the Transaction would not raise
        serious doubts as regards its compatibility with the internal market irrespective of the
        product market defined in this case.
The Commission’s assessment
(20)    The Commission’s market investigation did not provide evidence suggesting that
        butyl rubber is part of a wider market including other elastomers. With respect to a
        potential further segmentation within the butyl rubber market, customers responding
        to the questionnaire generally considered that halogenated and non-halogenated
        butyl rubber are not substitutable with each other as each product presents different
        qualities and characteristics.12 A customer also mentioned that the end products
        usually undergo laboratory testing in order to be qualified, thus their composition
        and quality cannot be changed with the use of a different type of rubber.
(21)    Responses from the market investigation further indicated that within the
        halogenated category, a distinction can be made between bromobutyl and
        chlorobutyl, although some respondents consider them substitutable to a certain
        extent on the basis of the customer’s production plant’s chemical mixing and know-
        how.13
(22)    From a supply side perspective, the responses to the market investigation also
        indicated that butyl rubber and its segments are somewhat homogeneous commodity
        products across suppliers, and that from a supply-side perspective it is generally
        possible and straightforward to switch production between the different types. 14
(23)    In any event, the Commission considers that, for the purposes of the present
        decision, the exact scope of the product market definition for butyl rubber can be left
        open, since the Transaction does not raise serious doubts as to its compatibility with
        the internal market or the functioning of the EEA Agreement, under any of the
        following plausible product market definitions: (i) butyl rubber overall, (ii) non-
        halogenated butyl rubber (iii) halogenated butyl rubber, and within halogenated butyl
        rubber, (iv) bromobutyl or (v) chlorobutyl rubber.
5.1.2. Geographic Market Definition
The Commission’s previous decisions
(24)    In its older precedents,15 the Commission considered the relevant geographic market
        for butyl rubber to be at least EEA-wide, and probably larger, ultimately leaving the
12  Responses to question 2 of the questionnaire to customers of butyl rubber.
13  Responses to question 2 of questionnaire to customers of butyl rubber.
14 Responses to question 2 of questionnaire to competitors of butyl rubber.
15 See case IV/M.663 – Dow/DuPont, decision of 21.02.1996 and case COMP/M.3733 – Dow/DDE,
    decision of 26.04.2005.
                                                         5
 ---pagebreak---         question open. In Saudi Aramco/SABIC 16 the Commission considered that the
        relevant geographic scope for butyl rubber and its plausible sub-segments is likely
        worldwide, as the market investigation indicated that both the supply of and demand
        for butyl rubber are global, with regular trade flows between regions. The
        Commission ultimately left the exact scope of the geographic market definition
        open.
The Notifying Party’s view
(25)    The Notifying Party considers that the geographic market for butyl rubber is global
        in scope.
(26)    First, the Notifying Party submits that each major butyl rubber manufacturer has a
        few global production facilities that supply customers around the globe, while they
        use multiple production sites to supply butyl rubber to the same customer. Second,
        the Notifying Party considers the key butyl rubber customers to be global tire
        manufacturers that are active worldwide, thus butyl rubber trade flows are global
        with significant imports and exports between continents. Third, the Notifying Party
        submits that production costs are roughly comparable among various worldwide
        production facilities and transportation costs are low (typically just a few percent of
        the sales price).
(27)    The Notifying Party submits that the precise geographic market definition can be left
        open as the Transaction would not raise serious doubts as regards the impact of the
        transaction on the internal market irrespective of any plausible geographic market
        definition (i.e. EEA-wide or global) in this case.
The Commission’s assessment
(28)    The Commission’s market investigation indicates that the relevant geographic scope
        for butyl rubber and its possible sub-segments is likely worldwide. All customers
        responding to the market investigation replied that they purchase butyl rubber
        globally.17 Two respondents mentioned that they prefer to purchase raw materials
        locally. For example, one respondent replied: “We purchase and negotiate
        Bromobutyl sourcing globally. Considering the transportation/logistic costs and
        delivery lead times, production facilities in Europe or Russia might be more
        advantageous for our manufacturing plants in Europe.” 18 This suggests that
        sourcing close to the production facility of the end product is commercially
        attractive. However, most competitors and the main customers (tire manufacturers)
        have production sites in locations across the world. Competitors further indicated
        that customers tend to multi-source from suppliers located in various locations
        worldwide with relatively frequent changes in product flows. 19
(29)    In any event, the Commission considers that, for the purposes of the present
        decision, the exact scope of the geographic market definition for butyl rubber can be
        left open, since the Transaction does not raise serious doubts as to its compatibility
16  See case COMP/M.9410 – Saudi Aramco/SABIC, decision of 27.02.2020.
17  Responses to question 2 of questionnaire to customers of butyl rubber.
18 Response to question 3 of questionnaire to customers of butyl rubber.
19 Responses to question 3 of questionnaire to competitors of butyl rubber.
                                                         6
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- The Notifying Party’s view
(34)    The Notifying Party submits that the overlap with TAIF does not give rise to
        competition concerns notably on the grounds that (i) SIBUR is an insignificant
        player, (ii) the combined market shares of the Parties or the increment brought about
        by the Transaction are low, (iii) there is a large number of competitors, (iv) there are
        no barriers to entry, including R&D, (v) the Parties’ customers have significant
        buyer power and can easily switch among suppliers at a global level, (vi) the Parties
        are not close competitors.
The Commission’s assessment
(35)    In the EEA market for butyl rubber overall in 2020, the Parties had a combined
        volume market share of [40-50]% ([30-40]% in value), with SIBUR bringing an
        increment of [0-5]% in volume and [0-5]% in value. Although the Parties’ combined
        market share is significant, this is largely attributable to TAIF’s pre-existing market
        share. While the HHI is above 2000 ([…]), the HHI delta brought about by the
        Transaction is […] by volume and […] by value, and therefore at a level at which the
        Commission is unlikely to identify horizontal competition concerns absent other
        conditions.27 Moreover, none of the market participants responding to the market
        investigation, including customers and competitors of the Parties, has raised
        concerns about the impact resulting from the Transaction. 28 In light of this, the
        Commission concludes that the Transaction does not raise serious doubts as to its
        compatibility with the internal market or the functioning of the EEA Agreement in
        relation to butyl rubber overall in the EEA.
(36)    In the EEA market for halogenated butyl rubber in 2020, TAIF had a market share of
        [40-50]% in volume and [30-40]% in value. SIBUR is not currently active in
        halogenated butyl rubber and did not generate revenues with halogenated butyl
        rubber in the EEA in 2020. In view of the fact that SIBUR does not currently sell
        halogenated (bromo or chloro) butyl rubber in the EEA, the Transaction only leads
        to future overlaps in those plausible markets. In particular, SIBUR will only produce
        halogenated (bromo and chloro) butyl rubber through its Joint Venture RSE, in
        which it has a share of 20%. […]. Therefore, given that the Parties’ likely significant
        combined market share from 2022 is largely attributable to TAIF’s pre-existing
        market presence, the Transaction is unlikely to bring any significant change to the
        current structure of the market.
(37)    Moreover, while SIBUR is arguably a future entrant in the plausible market for
        halogenated butyl rubber in the EEA, the Transaction is unlikely to change this due
        to the fact that SIBUR is entering the market via its Joint Venture RSE with
        Reliance. Besides having joint control over RSE, Reliance holds the majority of
        shares in the Joint Venture. The Commission considers that Reliance is unlikely to
        have any incentive to stop the current plans to enter the market even in the
        hypothetical scenario that SIBUR might wish so. In any case, the market
        investigation confirmed that the butyl rubber market overall is growing, thus it
        would make no commercial sense for Joint Venture RSE not to enter the market or
        not to expand its capacity. For example, one competitor states: “(…) the production
27  See Horizontal Merger Guidelines, paragraph 20.
28  Responses to questions 6 and 7 of the questionnaires to customers and competitors of butyl rubber.
                                                         10
 ---pagebreak---         of butyl rubber is an attractive investment opportunity due to the growing demand
        for butyl rubber products used in tire manufacturing and, therefore, new entry in this
        market occurs regularly. Indeed, in the past years the global butyl rubber business
        has experienced rapid expansion of capacity and new market entry. For instance, a
        butyl rubber manufacturing facility – Reliance Sibur Elastomers Private Limited –
        has recently been constructed in Jamnagar, Gujarat, India.”29
(38)    The vast majority of respondents to the market investigation considers that the
        Transaction will bring no change to the current market structure. 30 As mentioned
        above, one customer provided an estimate of market shares in the chlorobutyl
        market: “The chlorobutyl market is limited to few suppliers particularly Exxon [30-
        40]% share (our estimation), Arlanxeo [10-20]% share and new Sibur [10-20]%
        (including Reliance joint venture and TAIF) following JSR [5-10]%.”31 Another
        customer considers that “the Transaction would not influence overall availability in
        EU of bromobutyl, nor [they] believe there’s any rationale for the new owner to
        downsize existing capacity at TAIF”. According to the customer, SIBUR’s market
        share is too limited to be qualified as a “‘true’ competitor” to TAIF, while
        “regardless of the Transaction, Exxon and Arlanxeo will still be the suppliers of
        reference”.32
(39)    Based on the above considerations, the Commission concludes that the Transaction
        does not raise serious doubts as to its compatibility with the internal market or the
        functioning of the EEA Agreement in relation to halogenated butyl rubber and its
        further plausible segmentations in the EEA.
(40)    In the global market for non-halogenated butyl rubber in 2020, the Parties had a
        combined volume market share of [20-30]% ([10-20]% in value). Other major global
        competitors include Exxon ([10-20]%), Tatneft ([10-20]%) and Saudi Aramco ([5-
        10]%). Given that (i) the Parties’ combined market share is limited and the market is
        only affected by volume market shares, (ii) there remain sufficiently strong
        competitors in the global market, and (iii) none of the market participants responding
        to the market investigation has raised concerns about the impact resulting from the
        Transaction,33 the Commission concludes that the Transaction does not raise serious
        doubts as to its compatibility with the internal market or the functioning of the EEA
        Agreement in relation to non-halogenated butyl rubber in the global market.
(41)    In the EEA market for non-halogenated butyl rubber in 2020, the Parties had a
        combined volume market share of [50-60]% ([40-50]% in value). Post-Transaction,
        the Parties would continue to face several competitors, including Saudi Aramco
29  Response to question 5 of the questionnaire to competitors of butyl rubber.
30  Responses to questions 6 and 7 of the questionnaires to customers and competitors of butyl rubber. One
    market participant raised concerns that the Transaction will reduce the number of manufacturers of
    bromobutyl and chlorobutyl rubber from four to three players in Europe, while also acknowled ging that
    “the existing suppliers will have sufficient capacity to supply European customers”. Given that SIBUR is
    not yet active in the manufacturing of bromobutyl and chlorobutyl rubber, the Commission does not
    consider it likely that the Transaction will bring any significant change to the current structure of the
    market.
31 Response to question 6 of the questionnaire to customers of butyl rubber.
32 Responses to questions 4 and 6 of the questionnaire to customers of butyl rubber.
33 Responses to questions 6 and 7 of the questionnaires to customers and competitors of butyl rubber.
                                                          11
 ---pagebreak---         ([30-40]% by volume, [30-40]% by value) and Tatneft ([10-20]% by volume, [10-
        20]% by value).
(42)    With respect to the market shares provided by the Notifying Party, as set out in
        Table 5 above, the Commission firstly notes that Exxon’s market position in the
        EEA market for non-halogenated butyl rubber has been significantly underestimated.
        In light of Exxon’s response to the market investigation including its sales data for
        non-halogenated butyl rubber in the EEA,34 as well as the responses provided by
        customers,35 the Commission considers that Exxon is a credible supplier of non-
        halogenated butyl rubber within the EEA. In that regard, the Commission considers
        that, in a plausible market for non-halogenated butyl rubber in the EEA, the
        Transaction would lead to a consolidation from five to four market players and not to
        a reduction from four to three market players, as Table 5 suggests. Thus, the merged
        entity would continue to face competition from sizeable players who currently
        supply EEA customers with non-halogenated butyl rubber including Saudi Aramco,
        Exxon and Tafnet. In fact, the majority of customers of non-halogenated butyl
        rubber responding to the market investigation indicated that the major suppliers of
        non-halogenated butyl rubber in Europe are Saudi Aramco and Exxon, which also
        have production facilities within the continent. 36 .
(43)    Second, the results of the market investigation indicate that even in a plausible
        market for non-halogenated butyl rubber in the EEA, the merged entity would still
        face competitive constraints from global non-halogenated butyl rubber suppliers who
        currently only supply EEA-based customers to a more limited extent. As a
        competitor put it, “the Transaction is unlikely to have any anticompetitive effects
        because the butyl rubber business is highly competitive with many suppliers active
        on a global basis with a highly commoditized product” and “it is fairly easy for any
        supplier located in or outside the EEA, to supply customers in the EEA”.37 In this
        respect, the Commission also notes that SIBUR only supplies […] customers
        through its joint venture with Reliance, RSE, located in India, whereas TAIF
        supplies the […] market from Russia.38 Given that none of the Parties has
        manufacturing facilities in the EEA and both of them only export non-halogenated
        butyl rubber to the EEA customers from outside Europe, the Commission considers
        that the market is characterised by significantly low barriers to entry for potential
        competitors active in the global market for non-halogenated butyl rubber. In this
        regard, the Commission also takes note of the recent Saudi Aramco/SABIC case,
        where the market test indicated that “there are no technical, economic or regulatory
        barriers to purchasing or selling butyl rubber at a worldwide level at competitive
        terms, with the exception of recently imposed anti-dumping duties in China”.39
(44)    Third, the results of the market investigation also indicate that SIBUR and TAIF are
        not close competitors. The majority of the responding customers does not consider
        the Parties as close competitors in the butyl rubber industry in general and does not
34  Response to question 1 of the questionnaire to competitors of butyl rubber.
35  Responses to question 5 of the questionnaire to customers of butyl rubber.
36  Responses to question 5 of the questionnaire to customers of butyl rubber.
37  Responses to questions 6 and 7 of the questionnaire to competitors of butyl rubber.
38  Form CO, paragraphs 408 et seq.
39  See case COMP/M.9410 – Saudi Aramco/SABIC, decision of 27.02.2020, paragraph 38.
                                                         12
 ---pagebreak---          include both of them40 among the major butyl rubber suppliers in the EEA. In this
         context, one customer states: “From a [customer’s] purchasing point of view we do
         not consider NKNH and SIBUR to be competitive players in the Butyl rubber market
         as SIBUR is only establishing (ramping up) Butyl (non-halogenated and
         halogenated) production in India targeting mostly local Indian/Asian market while
         NKNH’s traditional key sales market is Europe.” 41 This is also corroborated by the
         differences seen between the Parties’ volume and value market shares (particularly
         in this market, where differences between volume and value market shares are the
         highest of all the plausible butyl rubber product markets), especially with regard to
         TAIF, indicating that they are not manufacturing high-end butyl rubber products. In
         light of the Parties’ current geographic focus (even in a context of low entry barriers)
         and the type of product on this specific market, the Commission does not consider
         the Parties to be close competitors in the plausible market for non-halogenated butyl
         rubber in the EEA.
(45)     Fourth, from a demand-side perspective, the majority of butyl rubber, including the
         potential sub-segment of non-halogenated butyl rubber, is mostly consumed by
         leading global players active in the tire industry. In particular, the ten largest tire
         producers take up approx. 70% of the entire butyl rubber demand.42 The Notifying
         Party submits that customers of non-halogenated butyl rubber are therefore
         sophisticated purchasers that have significant negotiating power due to their size and
         commercial significance. Moreover, they have multi-sourcing strategies and they
         would typically qualify multiple producers for their supply. Given that butyl rubber,
         including the potential market of non-halogenated butyl rubber, is a commodity
         product, the Notifying Party claims that customers are able to switch between
         suppliers quickly and easily.43 In the recent Saudi Aramco/SABIC case44 the
         Commission considered that at least for the global tire manufacturers, butyl rubber is
         indeed a relatively homogenous product across different suppliers and that “most
         customers multi-source, consider that there are no barriers to switching other than
         the need to qualify the supplier’s plant and product, and indeed have switched butyl
         rubber supplier in the last three years”. In light of this, as well as the results of the
         market investigation, confirming that customers consider that they will continue to
         have access to a sufficient choice of credible suppliers of non-halogenated butyl
         rubber in the EEA post-Transaction,45 the Commission considers the Notifying
         Party’s claims to be valid.
(46)     Fifth, neither customers nor competitors expect the Transaction to have a significant
         impact on the plausible market for non-halogenated butyl rubber in the EEA.46 Most
         customers that replied to the market investigation considered that a sufficient number
         of both halogenated and non-halogenated butyl rubber suppliers remain available
40  A few customers include TAIF in the five major butyl rubber suppliers in the EEA. Only one of them also
    includes SIBUR in the list.
41  Response to question 4 of the questionnaire to customers of butyl rubber.
42  Form CO, paragraphs 395, 404 and 429. The same considerations have been made in case COMP/M.9410
    – Saudi Aramco/SABIC, decision of 27.02.2020, paragraph 65.
43  Form CO, paragraph 430.
44  See case COMP/M.9410 – Saudi Aramco/SABIC, decision of 27.02.2020, paragraphs 65 and 70.
45  Responses to questions 5, 6 and 7 of the questionnaire to customers of butyl rubber.
46  Responses to question 6 of the questionnaire to customers of butyl rubber and responses to question 6 in
    the questionnaire to competitors of butyl rubber.
                                                         13
 ---pagebreak---          post-Transaction to serve customers in the EEA. 47 For example, one customer states:
         “We do not expect any change compared to the current, known supplier situation.” 48
(47)     Based on the above considerations, and all the evidence available to it, the
         Commission concludes that the Transaction does not raise serious doubts as to its
         compatibility with the internal market or the functioning of the EEA Agreement in
         relation to non-halogenated butyl rubber in the EEA.
6.       VERTICAL LINKS – M ARKET DEFINITION AND COMPETITIVE ASSESSMENT
(48)     Butyl rubber is produced by polymerization of a mixture of isobutylene (around
         98%) and isoprene (about 2%). Isobutylene is typically supplied to butyl rubber
         facilities by pipeline from nearby oil refineries. 49
(49)     Isobutylene, also known as isobutene, is a colourless, extremely flammable gas with
         a faint petroleum-like odour. SIBUR sold […] of isobutylene to TAIF in Russia in
         2020, and […] globally in 2020 ([…]).50 TAIF used the product as an input in the
         production of butyl rubber.
6.1.     Isobutylene (upstream) – Butyl Rubber (downstream)
6.1.1. Product and Geographic Market Definitions
The Commission’s previous decisions
(50)     The Commission has not previously considered the product market for isobutylene.
         However, the Commission has considered the market for high purity isobutylene
         (“HPIB”) and left open whether the relevant product market was the broader
         chemical group of isobutylene or whether HPIB constituted a separate market. 51 The
         market investigation in that case indicated that HPIB and isobutylene likely are
         separate markets, but did not conclude on the product market definition.
(51)     In terms of geographic market definition, the market investigation in SK Capital
         Partners/Schenectady indicated that the market for HIPB/isobutylene is regional
         (e.g. EEA-wide), because long-distance transport of the product is generally not
         commercially viable52 , but did not conclude on the exact geographic market.
The Notifying Party’s view
(52)     The Notifying Party expressed no specific views with respect to the product or
         geographic market definition of isobutylene, but considered that the geographic
         market for isobutylene is global or at least EEA-wide, because isobutylene is
         actively traded across borders within the EEA. In any case, the Notifying Party
47   Responses to questions 6 and 7 of the questionnaire to customers of butyl rubber.
48   Response to question 7 of the questionnaire to customers of butyl rubber.
49   Form CO, paragraph 360.
50   Response of the Notifying Party to RFI 6, paragraph 14.
51   Case COMP/M.9017, SK Capital Partners/Schenectady International Group, decision of 11.10.2018,
     paragraphs 159 – 162.
52   Case COMP/M.9017, SK Capital Partners/Schenectady International Group, decision of 11.10.2018,
     paragraph 164.
                                                          14
 ---pagebreak---        submits that the exact product and geographic market definitions can be left open in
       this case, as the Transaction raises no serious doubts with respect to its compatibility
       with the internal market under any plausible market definition.
The Commission’s assessment
(53)   The Commission has obtained no evidence indicating that the market for isobutylene
       should be considered as one market overall or as separate segmented markets (i.e.
       HPIB and isobutylene), and considers that the exact market definition can be left
       open in this case.
(54)   [Details of SIBUR’s sales of isobutylene], the Commission considers that this
       supports the previous finding that the plausible isobutylene markets are likely EEA-
       wide. [SIBUR’s sales of isobutylene in 2020].53
(55)   The Commission considers that no conclusion on the exact product or geographic
       market definition for isobutylene is necessary in the present case, since no serious
       doubts as to the compatibility of the Transaction with the internal market or the
       functioning of the EEA Agreement arise, regardless of the product (i.e. isobutylene
       overall or further segmentation into HPIB and isobutylene) or geographic scope (i.e.
       EEA-wide or global) of that market.
6.1.2. Competitive Assessment
The Notifying Party’s view
(56)   The Notifying Party submits that post-Transaction the Parties have no ability or
       incentive to engage in either input or customer foreclosure for the following reasons:
       (i) SIBUR only sold limited quantities of isobutylene to TAIF, and in any case only
       sold isobutylene in Russia; (ii) SIBUR’s total sales of isobutylene are negligible,
       amounting to […] in 2020; (iii) according to the Notifying Party’s best estimates,
       SIBUR's sales on the merchant market for isobutylene are insignificant in light of
       global sales and amounted to no more than [0-5]% of global sales on the merchant
       market. [TAIF’s sales of isobutylene].
(57)   Furthermore, and in terms of customer foreclosure, the merged entity will have
       neither the ability nor the incentive to engage in customer foreclosure practices, in
       particular by restricting its isobutylene competitors on the upstream market from
       access to downstream producers of butyl rubber, mostly because both SIBUR and
       TAIF produce isobutylene captively and hence, are no significant customers of
       isobutylene currently.
The Commission’s assessment
(58)   The Commission recalls that non-horizontal mergers generally pose no threat to
       effective competition unless the merged entity has a significant degree of market
       power (which does not necessarily amount to dominance) in at least one of the
       markets concerned. In assessing the likelihood of an anticompetitive input
       foreclosure scenario, the Commission examines, first, whether the merged entity
       would have, post-merger, the ability to substantially foreclose access to inputs,
53  Response of the Notifying Party to RFI 6, paragraph 12.
                                                        15
 ---pagebreak---         second, whether it would have the incentive to do so, and third, whether a
        foreclosure strategy would have a significant detrimental effect on competition
        downstream. In assessing the likelihood of an anticompetitive customer foreclosure
        scenario, the Commission examines, first, whether the merged entity would have the
        ability to foreclose access to downstream markets by reducing its purchases from its
        upstream rivals, second, whether it would have the incentive to reduce its purchases
        upstream, and third, whether a foreclosure strategy would have a significant
        detrimental effect on consumers in the downstream market. 54
(59)    As regards input foreclosure (isobutylene and further plausible segmentations),
        SIBUR’s sales of isobutylene suggest that it is not a key player and source for butyl
        rubber producers in the EEA or globally. Given these low shares ([0-5]% of global
        isobutylene sales on the merchant market)55 , SIBUR is unlikely to have the ability to
        foreclose competitors on the downstream market, which will continue to have
        multiple alternative suppliers to source from at the global level, as well as in the
        EEA, including suppliers such as LyondellBasell, Evonik Industries, Enterprise,
        Shandong Yuhuang, Shandong Shenchi, and Saudi Aramco. 56 Given that most of the
        isobutylene production by petrochemical companies is used captively57 , there are
        likely no incentives to foreclose downstream competitors, which could simply
        increase their own in-house supply. According to the Notifying Party, the volume of
        isobutylene sold on the merchant market in the EEA amounts to less than [20-30]%
        of total consumption of isobutylene, with the [70-80]% corresponding to the in-
        house production of the customers. A partial input foreclosure (increased prices) is
        also unlikely to be successful considering the market structure on the upstream
        markets which are characterised by self-supply. In any event, neither SIBUR nor
        TAIF sells isobutylene in the merchant market in the EEA. The Commission
        considers that it is therefore unlikely that the merged entity has the ability or
        incentive to foreclose downstream rivals of TAIF post-Transaction.
(60)    As regards customer foreclosure, TAIF’s market share in the plausible downstream
        markets was highest in non-halogenated butyl rubber in the EEA with [40-50]% in
        2020 (SIBUR: [10-20]%). Even in this narrowest plausible downstream market
        where TAIF has the highest market share no concerns arise, as TAIF has no ability
        to foreclose isobutylene producers. In particular, TAIF is not a significant customer
        for isobutylene as it produces it captively, covering [a large percentage] of its global
        needs in 2020 with its in-house production and only sourcing [a small percentage] on
        the merchant market. In any event, several other large producers of butyl rubber
        remain in the market (with more than 50% market share in the EEA for example), as
        possible customers of isobutylene. With respect to incentives, suppliers can sell
        isobutylene to customers that are active in downstream markets other than butyl
        rubber, meaning that the upstream product has more widespread use than only in the
        downstream butyl rubber market (which accounts for approx. 5% of total isobutylene
        consumption). Major customers include producers of methyl tertiary butyl ether
        (approx. 35-40% of total isobutylene consumption), methyl methalycrate (approx.
        1% of total isobutylene consumption), as well as other end uses, e.g. ETBE, gasoline
        alkylate, BHT, t-butyl mercaptan, isobutyl aluminium compounds and others,
54  See Non-horizontal Merger Guidelines, paragraphs 23, 32 and 59.
55  Response of the Notifying Party to RFI 6, paragraph 14.
56 Response of the Notifying Party to RFI 6, paragraph 17.
57 Response of the Notifying Party to RFI 6, paragraph 13.
                                                        16
 ---pagebreak---          accounting for the majority of the total isobutylene consumption.58 It is therefore
         unlikely that the merged entity has the ability or incentive to foreclose SIBUR’s
         isobutylene rivals upstream post-Transaction.
(61)     Based on the results of the market investigation and all other evidence available to it,
         the Commission considers that the Transaction does not raise serious doubts as to its
         compatibility with the internal market or the functioning of the EEA Agreement with
         respect to the vertical relationship between isobutylene (upstream) and butyl rubber
         (downstream) under any market definition that the Commission considers plausible.
7.       CONCLUSION
(62)     For the above reasons, the European Commission has decided not to oppose the
         notified Transaction and to declare it compatible with the internal market and with
         the EEA Agreement.59 This decision is adopted in application of Article 6(1)(b) of
         the Merger Regulation and Article 57 of the EEA Agreement. This decision is
         without prejudice to the Union’s restrictive measures imposed in response to the
         crisis in Ukraine as set out in Council Regulation (EU) No 833/2014 60 and Council
         Regulation (EU) No 269/2014.61
                                                              For the Commission
                                                              (Signed)
                                                              Margrethe VESTAGER
                                                              Executive Vice-President
58  Response of the Notifying Party to RFI 6, paragraph 22 and RFI 9.
59  Before the concentration is implemented, it is necessary to examine whether its consummation would
    violate Article 2a(1)(b) of Council Regulation (EU) No 692/2014 (OJ L 183, 24.6.2014, p. 9).
60 OJ L 229, 31.7.2014, p. 1, as subsequently amended, most recently by Commission Implementing
    Regulation (EU) 2019/1163 (OJ L 182, 8.7.2019, p. 33).
61 OJ L 78, 17.3.2014, p. 6, as subsequently amended, most recently by Council Implementing Reg ulation
    (EU) 2021/446 (OJ L 87, 15.3.2021, p. 19).
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