CELEX: 32012M6682
Language: en
Date: 2012-11-27 00:00:00
Title: Commission Decision of 27/11/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6682 - KINNEVIK / BILLERUD / KORSNÄS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                          |EUROPEAN COMMISSION                                                                                              |
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Brussels, 27.11.2012
C(2012) 8858 

COMP Special Handling

|                                                                   |To the notifying party:                                                       |
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Dear Sir/Madam,

Subject:    Case No COMP/M.6682 - Kinnevik/ Billerud/ Korsnäs
Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004[1]

 1. On 5 October 2012, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation
    (EC) No 139/2004 by which the undertaking Investment AB Kinnevik ("Kinnevik", Sweden) acquires within the meaning of Article 3(1)(b) of the
    Merger Regulation, sole control of Billerud AB ("Billerud", Sweden) by way of purchase of shares.[2] Below, Kinnevik is referred to as the
    "Notifying Party" while Kinnevik and Billerud are jointly referred to as "the Parties".

 2. After examination of the notification, the Commission has concluded that the operation falls within the scope of the EU Merger Regulation
    and raises serious doubts as to its compatibility with the internal market.

I.    THE PARTIES

 3. Kinnevik is a Swedish company listed on the Stockholm Stock Exchange which has equity interests in various companies active in
    telecommunications services, online services, media, microfinancing, paper industry, agriculture and renewable energy.

 4. Korsnäs AB ("Korsnäs"), a wholly owned subsidiary of Kinnevik, is a manufacturer of paper-based packaging materials, covering cartonboard,
    kraftliner, kraft paper, as well as liquid and non-liquid packaging board. It is also active in the supply and purchase of wood, and it
    produces wood pulp for the supply of its own downstream businesses.

 5. Billerud is a Swedish company listed on the Stockholm Stock Exchange. Billerud is a manufacturer of pulp- and paper-based packaging products
    active in the areas of packaging and specialty paper, kraft paper, packaging boards and wood pulp. It is also active in the supply and
    purchase of wood.

II.   THE OPERATION AND THE CONCENTRATION

 6. Pursuant to a Combination Agreement […].

 7. Following completion of the concentration, Kinnevik will hold 25% of the shares and votes in Billerud. Frapag Beteiligungsholding AG ("FB")
    currently owns 21% of Billerud’s shares (and will hold 15.5% post-transaction) while the other shares are widely dispersed (apart from
    Kinnevik and FB, the largest shareholders are institutional shareholders such as pensions and other funds none of which would post
    transaction hold a shareholding above […]%). On the basis of attendance at the annual general meeting ("AGM") in the last three years, […]
    has had approximately […]% of the shares and votes.  On the basis of attendance rates at AGMs over the last three years, Kinnevik’s
    shareholding post-transaction would have been sufficient to attain between just under to just over […]% of the votes at the AGMs while […]
    would have attained around […]%.

 8. The Notifying Party submits that on the basis of Billerud’s AGMs, […].  The Notifying Party also acknowledges that a proposal by Kinnevik is
    unlikely to be blocked at a shareholders meeting […].

 9. Therefore, as a result of the proposed transaction, Kinnevik will acquire de facto sole control over Billerud. In view of the above, the
    proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

III.  EU DIMENSION

10. The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million[3] (Kinnevik: EUR 9 742 million,
    Billerud: EUR 1 257 million). Each of them has an EU-wide turnover in excess of EUR 250 million (Kinnevik: EUR[…], Billerud: EUR […]), but
    they do not achieve more than two thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation
    therefore has an EU dimension.

IV.   RELEVANT MARKET DEFINITION

IV.1. Introduction

11. The Parties' activities overlap in the supply of wood, kraft paper, corrugated case materials ("CCM") as well as liquid and non-liquid
    packaging board (the latter overlap does not however give rise to an affected market in the sense of the Form CO[4] and will therefore not
    be discussed further). There is also a vertical relationship between the Parties since Billerud supplies wood pulp on the open market and
    some limited volumes of wood to Korsnäs.

IV.2. Kraft paper

      A. Relevant product market

    (i) Introduction

12. Kraft paper is produced from virgin fibre (i.e. wood pulp derived from virgin wood, as opposed to recycled material) or recycled fibre. It
    may be white or brown, depending on whether it is produced from bleached or unbleached wood pulp. In addition, it can be coated or
    uncoated.[5]

13. Kraft paper is used primarily to make industrial sacks (e.g. for cement, fertiliser, agricultural products or pet food), consumer bags (e.g.
    flour and sugar packaging or department store bags), wrapping paper and flexible packaging. Most kraft paper customers are either  companies
    which manufacture the products described above (sacks, bags, etc), which are known as "converters", or downstream  operators  (brand-owners)
    with converting capability who source kraft paper to package various types of product, e.g. flour, sugar, cement, etc.

14. The main characteristic of kraft paper distinguishing it from other paper materials is its tensile strength, i.e. the  weight  it  can  hold
    without tearing. Other characteristics assessed or required by customers include tear strength (i.e. the force required to continue  tearing
    the paper from an initial cut), runnability (i.e. ability to run smoothly in the machinery and to ensure  accurate  feeding  and  delivery),
    extensibility (i.e. ability of the paper to stretch without bursting), porosity (i.e. ability of the paper to allow air to pass through it),
    as well as appearance and printability (white paper has better appearance and printability than brown paper, so it is  primarily  used  when
    appearance of the packaging is important or when better printability is sought to print logos, instructions, etc).

15. According to the Notifying Party, from a  production  perspective  there  are  three  types  of  kraft  paper:  sack  kraft  paper,  machine
    finished/unglazed kraft paper and machine glazed kraft paper.

16. Sack kraft paper is a very strong and porous paper whose characteristics include a high "strain to break" (i.e. stretch capacity)  and  high
    porosity. Extensibility or stretch refers to the ability of the paper to stretch without bursting. It is expressed as a  percentage  of  the
    initial sample length and is normally referred to in three categories: (i) natural/flat sack kraft paper (extensibility of 2-3%), (ii) semi-
    extensible sack kraft paper (extensibility of 5-6%) and (iii) fully-extensible sack kraft paper (extensibility of 7-8%).  Whilst  the  first
    category corresponds to the sack kraft paper's extensibility in its natural state, the latter two are achieved  by  extensibility  enhancing
    treatment achieved with a so-called extensible unit (e.g. Clupak or  Expanda)  installed  in  the  drying  section  of  the  paper  machine.
    Converters use sack kraft paper to produce sacks that can be filled up quickly and hold heavy content  without  tearing.  Sack  kraft  paper
    finds considerable use in the building sector, in the form of sacks for packaging cement, as well as in other fields such as sacks  for  pet
    food, flour or agricultural products.

17. Machine finished/unglazed ("MF/UG") kraft paper has high printability combined with high strength and is matt on both sides. The  production
    process for MF/UG kraft paper is similar to that used for sack kraft paper, except that rather than going through an extensible unit at  the
    end, most MF kraft papers go through a so-called calendar unit attached to the machine. However, MF kraft paper can also be produced with  a
    so-called Yankee cylinder or a so-called smoothing cylinder. A calendar unit includes several smooth cylinders  applying  pressure  on  each
    other. The calendar process makes the kraft paper smoother and improves printability. In case the kraft paper does not go through a calendar
    unit or similar, it is unglazed kraft paper, which has a rougher surface. End-use applications include carrier bags, pulp bale wrapping  and
    consumer packaging of sugar and flour.[6]

18. Machine glazed ("MG") kraft paper is characterised by a smooth, glossy surface on  one  side.  Its  manufacture  requires  a  paper  machine
    equipped with a large drying cylinder, a Yankee cylinder. In addition, MG kraft paper machines may be equipped  with  a  calendar  unit.  MG
    kraft paper is used for a range of applications including flexible packaging of consumer goods, bags and pouches and wrapping paper, as well
    as packaging with stringent demands on purity for medical applications  and  release  liners  (i.e.  silicon-base  paper  for  stickers  and
    labels).[7]

19. Kraft paper has been the subject of several previous Commission decisions. In its earlier decisions, the Commission assessed separately sack
    kraft paper and its white and brown segments.[8] In later decisions, the Commission has considered the overall market  for  kraft  paper  to
    form a distinct product market separate from other types of paper but it has not, in those cases, considered the further segmentation within
    kraft papers.[9] In these decisions the Commission also left open the question whether kraft papers should include kraftliner.[10]

    (ii) The Notifying Party's views

20. The Notifying Party considers that the market for kraft paper should be defined as one single product market without  further  segmentations
    given the demand- and supply-side substitutability between the different types of kraft paper.

    Demand-side substitution

21. The Notifying Party submits that in particular there is demand-side substitution between (i) sack kraft and MF/UG kraft papers,  (ii)  MF/UG
    kraft and MG kraft papers, as well as (iii) brown and white kraft paper types.

22. First, the Notifying Party argues that there is demand-side substitution between sack kraft and MF/UG kraft papers since sack kraft and  low
    grammage MF/UG kraft papers are very similar kraft papers, differentiated only in respect of the end-use application (sack paper is sold  to
    sack converters while MF/UG kraft paper is used in non-sack applications).

23. According to the Notifying Party there is also demand-side substitution between MF/UG kraft and MG kraft papers since MF kraft  papers  that
    have been treated to achieve a smooth surface and good printability would often be fully comparable to MG  kraft  papers.  MG  kraft  papers
    typically have lower strain to break and often higher tensile stiffness than MF/UG kraft paper, but for most MF/UG kraft paper and MG  kraft
    paper end-use applications this difference in strain to break would not be of material importance. For some end uses (for example flour  and
    sugar packaging) MF/UG kraft and MG kraft papers could therefore be used on the same converting machine.

24. As regards brown and white kraft paper, the Notifying Party submits that apart  from  the  difference  in  colour  there  are  only  limited
    differences in the end-use which would not warrant a separate relevant product market. The Notifying Party further argues  that  their  view
    concords with the Commission's findings in Repola/Kymmene, where the Commission referred to a high degree of  similarity  of  the  end  uses
    between white and brown sacks on the downstream market for paper sacks.[11] Therefore, customers could and would switch from one paper  sack
    type (white and brown) to another if prices on one type were to increase.

    Supply-side substitution

25. The Notifying Party submits that in particular there is supply-side substitution between (i) sack kraft and  MF/UG  kraft  papers,  (ii)  MG
    kraft paper and other kraft paper types, as well as (iii) brown and white kraft paper types.

26. As regards sack kraft and MF/UG kraft papers, the Notifying Party states that all sack kraft paper machines could produce UG kraft paper  by
    selecting not to use the extensible unit. In addition, if the machine is equipped with a calendar unit, it can also produce MF kraft  paper.
    Furthermore, all MF kraft paper machines can without any modification and with trivial time outlay produce flat sack kraft paper  and  –  if
    they are equipped with an extensible unit – also extensible sack kraft paper.[12]

27. Kraft paper machines equipped with both an extensible unit and a calendar unit would provide an existing swing capacity between MF/UG  kraft
    and sack kraft paper. For machines that are not equipped with an extensible unit (for swing from MF kraft to sack kraft  paper)  or  with  a
    calendar unit (for swing from sack kraft paper to MF kraft paper), such units could be bought on the open market and installed by  investing
    approximately EUR […] and EUR […] respectively. The Notifying Party argues that these costs are not significant in the light  of  the  total
    cost of a completely new paper machine, estimated at EUR […].

28. With respect to the substitutability between MG kraft paper and other types of kraft paper, there would be MG  kraft  paper  machines  whose
    Yankee cylinder could either be bypassed or where the machine configuration would  allow  for  avoidance  of  the  glossing  effect  of  the
    cylinder, making it possible to produce more than MG kraft paper on the same machine (e.g. one of the machines at […]  is  equipped  with  a
    Yankee cylinder and […] produces MF/UG kraft paper).

29. The Notifying Party also submits that the use of bleached rather than unbleached pulp is the only distinction between brown and white  kraft
    paper products. Therefore, all kraft paper machines producing brown kraft paper would be able to produce white kraft paper by using bleached
    softwood pulp. A manufacturer supplying white kraft paper will either have a bleaching plant at its own pulp mill or can  purchase  bleached
    pulp on the open market. Even for an actor who currently only supplies brown kraft paper, the Notifying Party's view is that the  investment
    required to start supplying white sack kraft paper would be at most EUR […] relating to shredding equipment to handle bleached market pulp.

30. Furthermore, the Notifying Party argues that there would be no technical obstacles to exchanging unbleached for bleached pulp in one and the
    same machine. Such swing would have modest consequences in that the machine would need to be cleaned (particularly for switching from  brown
    to white kraft paper) for around […] hours, during which time the machine is at standstill. However, the effects of this could be  minimised
    by scheduling such cleaning at the same time as scheduled maintenance and by having production runs to build up stocks (of  white  or  brown
    sack kraft paper).

31. The Notifying Party also submits that kraft paper market meets competitive constraints  from  sources  external  to  it,  such  as  plastic,
    kraftliner and fine paper. These potential competitive constraints are addressed in the section concerning the competitive assessment.

    (iii) The Commission's assessment

32. This section addresses the arguments concerning the relevant product market put forward by the Notifying Party in light of  the  results  of
    the market investigation.

    (a) Whether kraft paper should be segmented into sack kraft, MF/UG kraft and MG kraft papers

    Demand-side substitution

33. As regards demand-side substitution between sack kraft and MF/UG kraft papers, the majority of  customers  indicated  that  they  would  not
    change their purchasing patterns in response to a price increase although very few said they  may  do  so  depending  on  ultimate  customer
    acceptance. For example, one customer stated that "you cannot switch between MF/UG paper and sack kraft. They are two  completely  different
    substrates with different properties, and finished looks (…) prices (…) are different, and marketed differently -based on functionality  (…)
    It is not about price it is about functionality."[13] Another customer replied that "it is not possible to use other  papers  and  keep  the
    performance of the sacks."[14] Yet another considers that "there are not other papers for the production  of  industrial  paper  sacks".[15]
    Even Mondi, which is both a competitor and customer of kraft paper products (due to its  downstream  converting  business),  considers  that
    demand-side substitution depends on the end-customer acceptance and will depend on the specific end-use.[16] In this context  it  should  be
    noted that even the Notifying Party concedes that the end-use applications are different (see paragraph 22 above).

34. Regarding demand-side substitution between MF/UG kraft and MG kraft papers, though a few end uses are similar, the majority of customers who
    replied to the Commission's market investigation stated that they would not change their purchasing patterns in response to a price increase
    due to the fact that the two products have different end uses. As one customer stated "the products we make with MG paper need this kind  of
    paper".[17] Furthermore, some customers indicated that prices of MG kraft paper and MF/UG kraft paper move in different  ways  as  the  end-
    users of MG and MF tend to be different.

35. Therefore, on balance, the Commission considers that demand-side substitutability between different types of kraft paper is limited.

    Supply-side substitution

36. The majority of competitors agreed with the Notifying Party's argument that technically, most sack kraft paper  machines  could  produce  UG
    kraft paper by adjusting the line to operate without the extensible unit and that if the machine is equipped with a calendar unit, it  could
    also produce MF kraft paper. One competitor considered that "not all paper machines have the same flexibility"[18] and another  argued  that
    "combinations of both products at the same machine means some restrictions and constraints that depend from individual  configurations".[19]
    Competitors have also generally confirmed that MF kraft paper machines can without modification produce flat sack kraft paper,  as  well  as
    extensible sack kraft paper if equipped with an extensible unit.

37. With regard to the substitutability between MG kraft paper and  other  types  of  kraft  paper,  the  results  of  the  Commission's  market
    investigation are mixed. Some competitors said that it is possible for an MG kraft paper producer to produce other types of kraft paper if a
    proper by-pass of the Yankee cylinder is carried-out. However, other competitors consider that in order for this to  work,  drying  capacity
    would have to be increased and some competitors also considered that there are technical issues with  this  by-pass  process  and  that  for
    example, mono-cylinder Yankee machines do not allow for this possibility.

38. In light of the market investigation, the Commission considers that technical supply-side substitutability may exist to some extent  between
    sack kraft paper and MF/UG kraft paper but become more remote between MG kraft papers on the one hand and sack kraft and MF/UG papers on the
    other.

    (b) Whether sack kraft paper should be segmented between flat, semi-extensible and extensible

    Demand-side substitution

39. With regard to whether sack kraft paper can be segmented into  flat,  semi-extensible  and  extensible  sack  kraft  paper,  most  customers
    indicated that the end uses for each of these sack  kraft  paper  types  were  not  the  same,  suggesting  that  there  is  no  demand-side
    substitutability. For example, (i) flat sack kraft paper is used for open-mouth block bottom bags and e.g. in the packaging of flour,  sugar
    or pet food (ii) semi-extensible sack kraft paper may be used for outer ply of paper bags and patches, handles of paper bags, industrial and
    agricultural bags or sacks for chemical products, and (iii) fully-extensible sack kraft paper may be used for  industrial  and  agricultural
    bags, valve bags, cement sacks, chemical and mineral products sacks.

40. The Commission therefore considers that demand-side substitutability between these different types of sack kraft paper is limited.

    Supply-side substitution

41. With regard to supply-side substitution, the replies to the market investigation suggest that the differences in the production processes of
    the different types of sack kraft paper relate mainly to the use of an extensible unit for the production of semi-extensible and  extensible
    sack kraft paper.

42. On balance the Commission's view is that supply-side substitutability may exist subject to the producer having or being prepared to purchase
    an extensible unit.

    (c) Whether kraft paper and its segments should be segmented into white and brown kraft paper

    Demand-side substitution

43. The results of the Commission's market investigation show that the colour of the paper produced is dictated  by  the  end  customer's  needs
    rather than those of the converter and that the type of kraft paper used depends on the end-use. Brown sack kraft paper is mainly  used  for
    industrial sacks whereas white sack kraft paper, as well as white MF/UG kraft paper, is necessary in particular for consumer goods where the
    converters' customers require a white finish with good printability. As explained by one converter, a white bag can convey a  cleaner  image
    and is used often for marketing purposes to brand premium products. Customers also stated that it is not possible to  switch  between  brown
    and white kraft paper because "printability and runnability are not the same"[20] and "brown paper is not possible for pulp wrapping".[21]

44. Furthermore customers have indicated that users of white sack kraft paper are less price sensitive than users of brown sack kraft paper  and
    that, as competition is restricted to very few players in white sack kraft paper, "producers manipulate prices and availability more".[22]

45. In conclusion, the Commission considers that demand-side substitutability between white and brown sack kraft paper is very limited.

    Supply-side substitution

46. Regarding supply side-substitution between white and brown kraft paper, some competitors indicated that there are some technical barriers in
    switching from producing brown kraft paper to white kraft paper. White kraft paper requires very  clean  conditions  to  avoid  any  product
    defects. While Mondi (which is a vertically integrated operator from pulp production to converting) indicated  that  it  regularly  switches
    between these paper types according to its needs and that "only cleaning needs to be done", the ability of a producer to switch  effectively
    may depend on the production environment in which that particular producer operates as the time required for cleaning does not appear to  be
    the same for all producers. For instance, another producer indicated that "exchanging brown for white pulp at the same machine needs a great
    deal of time of shutdown to clean the machine…exchanging brown for white pulp is technically possible…but may cause  production  losses  and
    increase costs of production."[23]

47. In addition, a number of competitors who responded to the Commission's market investigation argued that integrated mills, i.e.  those  which
    have an in-house production facility for bleached pulp, have more advantageous cost conditions than those who  source  their  bleached  pulp
    requirements from the market. Competitors indicate that this is due to the volatility of white pulp prices  which  increases  the  financial
    risk of producing white kraft paper types. Therefore, the lack of an  in-house  bleached  pulp  production  constitutes  a  further  barrier
    regarding the entry from brown paper producers. Furthermore, some competitors who only produce brown kraft paper(s)  argue  that  additional
    investment and know-how relating to customers for the particular white kraft paper type would be needed.

48. As such, although the same machine may technically be used for the production of both white and brown kraft paper(s), other factors, such as
    the time required for switching, as well as the lack of in-house bleached pulp production and know-how regarding customers may  constrain  a
    producer's ability (and incentive) to switch from producing brown kraft paper to white kraft paper. The Commission therefore  consider  that
    supply-side substitutability may exist for some producers such as Mondi and the Parties but not for others.

    (d) Conclusion

49. In light of the above, and in particular given the lack of any significant  demand-side  substitutability  and  the  restricted  supply-side
    substitutability, the Commission considers, for the purposes of this decision, that the supply of each of white and brown sack  kraft  paper
    and each of white and brown MF/UG kraft paper constitute separate relevant product markets. The question as to whether MG kraft paper should
    be segmented between white and brown can be left open since the Parties'  activities  do  not  overlap  in  relation  to  MG  kraft  papers.
    Furthermore, the question of whether the white and brown sack kraft paper markets should be further segmented into flat, semi-extensible and
    extensible sack kraft segments can be left open since the Commission's conclusion is that the proposed  transaction  raises  serious  doubts
    under any plausible market definition.

      B. Relevant geographic market

50. The Commission has previously defined the relevant geographic market for kraft papers as at least EEA-wide.[24] The Notifying Party agrees
    with this approach and submits that imports from outside the EEA constitute a significant constraint on competition within the EEA.

51. The results of the Commission's market investigation were mixed. A number of customers said they only source kraft paper within the EEA  and
    a number of others said they also source some kraft paper from outside the EEA. Several customers mentioned that sourcing from  outside  the
    EEA may be possible but raises a number of issues such as transport costs, currency exchange, lead times and the different geographic  focus
    of competitors based outside the EEA. For example, according to one customer the currency exchanges, transport costs and delivery times have
    constituted barriers, while another customer said that it is carrying out tests with a paper mill outside the EEA but that the distance  was
    a problem.[25] A third customer said that "the delivery times required in Europe by sack users are counted in days/max weeks.  If  we  would
    try to seek for alternative supplier oversea, it will be impossible for the multiple needs we have and for the delivery times (…)  an  order
    placed in Canada will need 2 to 4 months to be delivered while in Europe we speak about 4 weeks in normal circumstances. We should also  say
    that the alternative to European qualities are unavailable in other parts of the world."[26] Yet another  customer  stated  that  "transport
    costs play a huge part in sourcing. It is not only transport cost, but lead times for other sources."[27] Another customer points  out  that
    "it is mainly EEA as other markets do not meet requirements for either quality (Asia) or lead times (US)".[28]

52. It is therefore evident that some customers also consider that the quality of the paper sourced from outside the EEA is not the same as  the
    quality of the paper sourced within the EEA, in particular for white kraft papers. Some customers submitted that the best quality wood/paper
    comes from the Nordic region and some mentioned that the long wood fibres sourced from there results in stronger paper (and therefore  lower
    weight requirements) than wood sourced from outside the EEA.

53. For the purposes of this decision, given the apparent limited role played by imports due to transport costs,  longer  lead-times,  currency-
    related issues, and some potential quality differences, the Commission considers that the appropriate  geographic  market  for  the  various
    kraft papers concerned is the EEA.

IV.3. Corrugated case materials ("CCM")

      A. Relevant product market

54. CCM are the input used for the production of corrugated board, from which ultimately corrugated boxes and containers  are  made.  Corrugated
    board consists of a corrugated layer of paper glued to a flat paper on each of the two surfaces. The  corrugated  paper  in  the  centre  is
    called "fluting" and the flat papers on either side are called "liner". According to the Notifying Party, kraftliner (like kraft paper) is a
    very strong material.

55. The main difference between kraft paper and liner is typically the grammage. Liner can be either white or brown, depending  on  whether  the
    pulp is bleached or not. All types of liners can be coated or uncoated. The coating consists of a thin layer of mineral  slurry  on  one  or
    both surfaces of the liner. Liner produced from recovered waste paper is called testliner, whereas kraftliner is produced from  virgin  wood
    pulp. Kraftliner is typically stronger than testliner but the production costs of testliner are generally  lower.  Kraftliner  can  also  be
    divided into white top kraftliner (one side is white) and fully white kraftliner (both sides are white).

56. In its previous decisions, the Commission identified a separate  product  market  for  CCM[29]  as  well  as  for  corrugated  board  sheets
    (comprising both liners and fluting).[30] In addition, the Commission further considered a distinction between kraftliner and testliner, but
    ultimately left the exact market definition open.[31]

57. The Notifying Party submits that there is one single product market for CCM and that any subdivision – in particular a  distinction  between
    kraftliner and testliner – would not reflect market reality either from a demand-side  perspective,  as  converters  need  both  to  produce
    corrugated cases, or from a supply-side perspective, as the same machinery can produce both types. Similarly  the  Notifying  Party  submits
    that it is inappropriate to define a discrete market segment for (fully) white kraftliner in the EEA as this is a niche product with limited
    use and a very small segment with few active players. In any event, it can have no competitive relevance for this case  as  it  produces  no
    overlap due to the fact that Korsnäs only produces white top kraftliner, and not (fully) white kraftliner. In any event the Notifying  Party
    submits that the exact market definition may be left open.

B. Relevant geographic market

58. In line with the Commission's previous decisions, the Notifying Party submits that the geographic market for CCM is at least  EEA-wide.  The
    scope of the market for the supply of corrugated board sheets has been left open in previous Commission decisions.[32]

IV.4. Liquid packaging board ("LPB")

    A. Relevant product market

59. LPB is a paperboard made from pure virgin fibres and used for the production of packaging containers for liquid and semi-liquid  foodstuffs.
    It is sold to a few large converters active in Europe (Tetra Pak, Combibloc and Elopak) who convert it  into  liquid  packaging  containers,
    which are then sold to end-users (i.e. liquid or semi-liquid food companies, often called "fillers", such as Nestlé, Danone or Unilever).

60. LPB may be bleached or unbleached, coated or uncoated. It may be used for both aseptic and non-aseptic packaging. In addition to the "rigid"
    LPB there is also "liquid bag paper", also used for liquid food packaging.[33]

61. In line with the Commission's previous practice, the Notifying Party submits that (although the exact definition can be left  open  in  this
    case given the very small increment resulting from the proposed transaction) LPB is a distinct product market that  does  not  include  non-
    liquid packaging boards.[34] Nevertheless, as the Commission acknowledged previously, there is a competitive  constraint  on  LPB  producers
    from non-liquid packaging boards and other  neighbouring  markets  such  as  plastic  and  glass.[35]  The  Commission  has  not  previously
    distinguished any narrower markets within the market for the supply of LPB.[36]

      B. Relevant geographic market

62. The LPB market has been considered as at least EEA-wide in previous Commission decisions[37] though certain elements  indicated  a  possibly
    wider market given growing competition from outside the EEA.[38] The Notifying Party provided its views on the competition assessment at the
    EEA level although it did not substantiate its views on the relevant geographic market definition.

IV.5. Wood pulp

      A. Relevant product market

63. Wood pulp is a dry fibrous material that is most commonly made from wood either by chemical or mechanical means.[39] Wood pulp is  primarily
    used to produce paper and paperboard and can be bleached or unbleached: paper made from  bleached  pulp  is  white  while  paper  made  from
    unbleached pulp is brown.

64. Both Billerud and Korsnäs produce wood pulp as a raw material for paper production. Because Billerud also supplies pulp  to  third  parties,
    there is a potential vertical relationship between the Parties. [Reference to the limited pulp sourcing by Korsnäs from Billerud][40] […].

65. The Commission has in the majority of its earlier decisions considered that there is a single  product  market  encompassing  all  types  of
    pulp.[41] In two decisions the Commission has treated chemical pulp as a separate product market.[42]  The  Commission  has  considered  the
    possibility of further sub-segmenting the chemical pulp market into hardwood and softwood pulps, each  further  divided  into  bleached  and
    unbleached pulps. However, the market definition was left open. The Notifying Party submits that the chemical  pulp  market  should  not  be
    further sub-segmented but that the market definition can be left open in this case.

      B. Relevant geographic market

66. In previous cases, the relevant geographic market for the supply of chemical pulp has been defined as at least EEA-wide.[43] The Notifying
    Party agrees that this should remain the geographic scope of the market definition.

IV.6. Purchase and sale of wood

      A. Relevant product market

67. The Parties use wood in their commercial activities as a raw material for wood pulp. Both Parties are active in the  purchase  and  sale  of
    wood. They purchase wood from forest owners or other sellers of wood, which is then harvested, usually by third parties contracted for  this
    purpose. The Parties purchase wood from forest owners or other sellers of wood, either in the form of wood deliveries to them or in the form
    of the right to harvest or have harvested wood within a given area ("standing wood").

68. The wood, which consists of a mix of sizes and ages of trees, is then harvested, usually by third parties contracted for this  purpose.  The
    harvested wood includes some wood suitable for pulp production.[44] The harvested wood also contains  larger  logs  not  suitable  for  pulp
    production.[45] As a result, wood for pulp production is fed into the respective Party's pulp production. The larger/higher quality wood  is
    sold on to saw mills etc. for consideration in money or in kind, viz. in return for sawmill residue materials suitable for  pulp  production
    (sawdust, chips). The tops and branches are either used internally as fuel in the pulp  production  or  sold  to  producers  of  alternative
    energy. The value of the purchased wood is thus maximised for the party in question.

69. The Commission has in its previous cases concluded that there are separate markets for the purchase and sale of wood[46] and noted that wood
    may be subdivided into logs and pulp wood (based on end use), but ultimately left the market definition open. The Notifying Party  considers
    that the Commission's previous definitions of the markets for the purchase and sale respectively of wood can apply in this case but that the
    precise market definition may be left open.

      B. Relevant geographic market

70. In its previous practice, the Commission has left open the question whether the precise geographic market scope for the purchase and  supply
    of wood is national, regional or EEA-wide.[47] The Notifying Party considers this market to be at least regional comprising the whole of the
    Nordic and Baltic area in order to reflect the competitive dynamics of the market.[48]

IV.7. Conclusion concerning markets other than kraft paper

71. The Commission considers that the exact product market definition of the supply of the products described in sections IV.3 to IV.6 above can
    be left open in this case since the competitive assessment is unlikely to change under  any  reasonable  market  definition.  Regarding  the
    geographic scope of the relevant markets, for the purposes of this decision the Commission will carry out  the  assessment  on  an  EEA-wide
    basis for CCM, LPB and wood pulp, and on the narrowest possible geographic basis for the purchase and sale of wood, i.e. on national level.

V.    COMPETITIVE ASSESSMENT – NON-COORDINATED EFFECTS

V.1.  Analytical framework

72. Through its control of mergers, the Commission prevents mergers that would be likely to deprive consumers of  the  benefits  that  effective
    competition brings by significantly increasing the market power of firms.[49] What is meant by increased market power is the  ability  of  a
    firm to profitably increase prices, reduce output, choice or quality of goods and  services,  diminish  innovation  or  otherwise  influence
    parameters of competition.[50] A merger would inter alia significantly impede effective competition if  it  would  create  or  strengthen  a
    dominant position of a single firm, which typically would have an appreciably larger market share than the next competitor post-merger.[51]

73. In line with the Guidelines on the assessment of horizontal mergers under the Council Regulation on the control  of  concentrations  between
    undertakings[52] ("Horizontal Merger Guidelines"), the Commission focussed on  a  number  of  factors  to  determine  whether  the  proposed
    concentration in this case is likely to significantly impede effective competition, in particular as a result of the creation of a  dominant
    position and in the light of the merged entity's ability to behave to a significant extent independently of its customers and competitors.

V.2.  Kraft paper

V.2.1       Market shares and market structure

74. Korsnäs supplies sack paper and MF/UG paper in the EEA (a majority of which is white, but also some quantities  of  brown[…]).  Billerud  is
    active in all of the kraft paper segments (both white and brown). The Parties' activities do not overlap in respect of MG paper  since  only
    Billerud produces this type of paper (both white and brown).

75. The table below sets out the Notifying Party's estimates for the Parties' market shares in the EEA  in  an  overall  market  comprising  the
    supply of all kraft paper.[53]

    |Merchant market for kraft paper, EEA, 2011                               |
|Total market          |EUR 2,500 million                                 |
|                      |2,511 kilo-tonnes per annum ("ktpa")              |
|The Parties           |Sales                   |Share                   |
|Billerud              |[…]                     |Value: [10-20]%         |
|                      |[…]                     |Volume: [10-20]%        |
|Korsnäs               |[…]                     |Value: [0-5]%           |
|                      |[…]                     |Volume: [0-5]%          |
|Combined              |[…]                     |Value: [10-20]%         |
|                      |[…]                     |Volume: [20-30]%        |

76. The tables below show the Notifying Party's estimates regarding the market shares of the Parties and their  competitors  in  the  supply  of
    white and brown sack kraft papers in the EEA.

|Merchant market for white sack kraft paper, EEA, 2011                                         |
|Total market                 |[…]                                                              |
|                             |[…][54]                                                          |
|The Parties                  |Sales                          |Share                            |
|Billerud                     |[…]                            |Value: [50-60]%                  |
|                             |[…]                            |Volume: [50-60]%                 |
|Korsnäs                      |[…]                            |Value: [10-20]%                  |
|                             |[…]                            |Volume: [10-20]%                 |
|Combined                     |[…]                            |Value: [70-80]%                  |
|                             |[…]                            |Volume: [70-80]%                 |
|Competitors                  |Sales                          |Share                            |
|Canfor Corporation           |[…]                            |Value: [10-20]%                  |
|                             |[…]                            |Volume: [5-10]                   |
|Mondi                        |[…]                            |Value: [0-5]%                    |
|                             |[…]                            |Volume: [0-5]%                   |
|Smurfit Kappa Group          |[…]                            |Value: [0-5]%                    |
|                             |[…]                            |Volume: [0-5]%                   |
|Cartiera del Chiese          |[…]                            |Value: [0-5]%                    |
|                             |[…]                            |Volume: [0-5]%                   |

         |Merchant market for brown sack kraft paper, EEA, 2011                                         |
|Total market                   |[…]                                                           |
|                               |[…]                                                           |
|The Parties                    |Sales                          |Share                          |
|Billerud                       |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Korsnäs                        |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [0-5]                  |
|Combined                       |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Competitors                    |Sales                          |Share                          |
|Mondi                          |[…]                            |Value: [30-40]%                |
|                               |[…]                            |Volume: [40-50]%               |
|Smurfit Kappa Group            |[…]                            |Value: [20-30]%                |
|                               |[…]                            |Volume: [20-30]%               |
|Nordic Paper                   |[…]                            |Value: [10-20]%                |
|                               |[…]                            |Volume: [10-20]%               |
|Stora Enso                     |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Horizon                        |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [5-10]%                |

77. The tables below show the Notifying Party's estimates regarding the market shares of the Parties and their  competitors  in  the  supply  of
    white and brown MF/UG kraft papers in the EEA.

|Merchant market for white MF/UG, EEA, 2011                                                    |
|Total market                   |[…]                                                           |
|                               |[…]                                                           |
|The Parties                    |Sales                          |Share                          |
|Billerud                       |[…]                            |Value: [50-60]%                |
|                               |[…]                            |Volume: [50-60]%               |
|Korsnäs                        |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Combined                       |[…]                            |Value: [60-70]%                |
|                               |[…]                            |Volume: [60-70]%               |
|Competitors                    |Sales                          |Share                          |
|Mondi group                    |[…]                            |Value: [20-30]%                |
|                               |[…]                            |Volume: [20-30]%               |
|Grupo Iberpapel                |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [0-5]%                 |
|Crown van Gelder N.V.          |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [0-5]%                 |
|Lenzing Papier GmbH            |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [0-5]%                 |
|Favini Srl                     |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [0-5]%                 |

      |Merchant market for brown MF/UG, EEA, 2011                                                    |
|Total market                   |[…]                                                           |
|                               |[…]                                                           |
|The Parties                    |Sales                          |Share                          |
|Billerud                       |[…]                            |Value: [10-20]%                |
|                               |[…]                            |Volume: [10-20]%               |
|Korsnäs                        |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [0-5]%                 |
|Combined                       |[…]                            |Value: [10-20]%                |
|                               |[…]                            |Volume: [10-20]%               |
|Competitors                    |Sales                          |Share                          |
|Mondi group                    |[…]                            |Value: [10-20]%                |
|                               |[…]                            |Volume: [10-20]%               |
|Nordic paper AS                |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Alier/SA                       |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Horizon Pulp & Paper           |[…]                            |Value: [5-10]%                 |
|                               |[…]                            |Volume: [5-10]%                |
|Cartiera Saci Spa              |[…]                            |Value: [0-5]%                  |
|                               |[…]                            |Volume: [5-10]%                |

78. The tables below show the Notifying Party's estimates regarding the Parties' market shares in white flat sack kraft paper and separately  in
    white extensible sack kraft paper[55] in the EEA.

         |Merchant market for white flat sack kraft paper, EEA, 2011                                    |
|Total market                   |[…]                                                           |
|                               |[…]                                                           |
|The Parties                    |Sales                          |Shares                         |
|Billerud                       |[…]                            |Value: [50-60]%                |
|                               |[…]                            |Volume: [40-50]%               |
|Korsnäs                        |[…]                            |Value: [20-30]%                |
|                               |[…]                            |Volume: [20-30]%               |
|Combined                       |[…]                            |Value: [70-80]%                |
|                               |[…]                            |Volume: [70-80]%               |

         |Merchant market for white extensible sack kraft paper, EEA, 2011                              |
|Total market                   |[…]                                                           |
|                               |[…]                                                           |
|The Parties                    |Sales                          |Shares                         |
|Billerud                       |[…]                            |Value: [60-70]%                |
|                               |[…]                            |Volume: [50-60]%               |
|Korsnäs                        |[…]                            |Value: [10-20]%                |
|                               |[…]                            |Volume: [10-20]%               |
|Combined                       |[…]                            |Value: [70-80]%                |
|                               |[…]                            |Volume: [70-80]%               |

79. It is therefore clear that in the brown kraft paper market segments the market structure is more fragmented and the Parties' combined market
    shares much lower than in the white kraft paper market segments. Furthermore, the concerns  raised  by  customers  during  the  Commission's
    market investigation relate almost entirely to the white kraft paper market segments. Therefore the competitive assessment below focuses  on
    the supply of white sack kraft paper and white MF/UG kraft paper. The competitive assessment will refer to market share estimates  based  in
    volume figures. In any event, market share estimates based in value figures would not alter the competitive assessment.

80. The concentrated nature of the market in white sack kraft paper is also reflected in the results  of  the  application  of  the  Herfindahl-
    Hierschmann Index (HHI),[56] which indicate a level of the HHI of over 3,500 prior to the transaction and over 5,500 after  the  transaction
    with a change in the HHI directly brought about by the merger (the "delta") of nearly 2,000.

81. In the supply of white MF/UG kraft paper, the HHI levels are also very high indicating a concentration level of  over  4,000  prior  to  the
    proposed transaction and over 5,300 after its conclusion with a "delta" of over 1,200.

V.2.2.      The Notifying Party's views regarding the overall kraft paper market

82. The Notifying Party argues that the relevant product market should be defined broadly as the supply of kraft paper in the EEA. The Notifying
    Party also notes that, in addition to competition from current kraft paper producers, there are a number of  other  competitive  constraints
    imposed on kraft paper producers, notably from kraftliner producers, fine paper producers, kraft paper imports into the EEA and, at the  end
    user level, from producers of other materials (most notably plastic).

83. In any event, on the basis of an EEA kraft paper market the Notifying Party argues that the proposed transaction would not raise competitive
    concerns since the Parties' combined market share is limited ([20-30]% based in volume) and  the  concentration  leads  to  a  market  share
    increment of less than [0-5]% (Billerud: [10-20]%, Korsnäs: [0-5]%). Moreover, there is strong competition from a number  of  suppliers,  in
    particular from Mondi (EEA market share of [20-30]%), Smurfit Kappa ([5-10]%), Nordic Paper ([5-10]%), Gascogne Paper ([0-5]%) and  Cartiera
    Lucchese ([0-5]%).

84. According to the Notifying Party, these competitive dynamics would also apply if particular sub-segments of  the  kraft  paper  market  were
    considered to be relevant product markets given the scope for competitors to increase substantially their EEA sales  of  specific  types  of
    kraft paper by diverting production capacity to such sales and the ability of converters and end-users to switch to alternatives.

85. The Notifying Party also notes that kraft paper machines are capital intensive investments and that manufacturers' profitability depends  on
    these machines being used intensively. According to the Notifying Party, kraft paper manufacturers  are  therefore  concerned  not  to  lose
    volume and, similarly, are interested in maximising capacity utilisation and diverting capacity and sales to those products which yield  the
    best profit margins.

V.2.3.      White sack kraft paper

    A. The Notifying Party's views

86. Regarding specifically white sack kraft paper, the Notifying Party argues that (i) white sack kraft  paper  competitors  in  the  EEA  could
    readily increase their sales, (ii) white MF/UG kraft paper producers could produce white flat sack  paper  without  further  investment  and
    trivial time outlay, (iii) imports into the EEA could increase, and  (iv)  brown  sack  kraft  paper  suppliers  could  diversify  into  the
    production of white sack kraft paper.

87. First, the Notifying Party submits that existing EEA competitors supplying white sack kraft paper could readily increase their EEA sales  of
    white sack kraft paper. According to the Notifying Party, competitors based in the EEA are Mondi ([0-5]%), Smurfit Kappa ([0-5]%),  Cartiera
    del Chiese ([0-5]%) and Alier ([0-5]%).

88. The Notifying Party claims that the merged entity would be constrained in particular by Mondi, […],[57] as well as being a major competitive
    constraint due to its own manufacturing activities. According to the Notifying Party, Mondi could easily increase its  production  of  white
    sack kraft paper on existing machines and these volumes could be used either internally or sold on the  merchant  market.[58]  Against  this
    background, higher prices to Mondi would not be sustainable as Mondi would increase its in-house production and the merged entity would lose
    sales. Nor would it be sustainable to raise prices to non-integrated customers (competitors of Mondi downstream), as the merged entity would
    risk losing market share to Mondi. This would not be in the merged entity's interest not only as it would lead to a sales decrease but  also
    as the merged entity would have no interest in increasing its dependence from Mondi.

89. In addition, the Notifying Party submits that there are a number of other EEA  players  who  could  potentially  increase  their  production
    capacity of white sack paper in particular Smurfit Kappa (with a potential added capacity  of  […]  ktpa),  Cartiera  del  Chiese  (with  an
    estimated potential increase of up to […] kpta) and Alier (which would be able to produce up to […] ktpa of extra white sack paper).

90. Second, the Notifying Party argues that all producers of white MF/UG kraft paper can switch quickly to producing flat white sack kraft paper
    using their existing machines without any further investment and trivial time outlay. According to the  Notifying  Party,  white  flat  sack
    kraft paper would represent around […]% of the total white sack kraft paper production[59] and thus white MF/UG kraft paper producers  would
    be able to address a similar percentage of current EEA white sack kraft sales, which would be sufficient to  constrain  the  merged  entity.
    This possibility would be illustrated by Billerud and Korsnäs themselves, […].[60] The Notifying Party further argues that the effectiveness
    of a potential production swing scenario in response to differences in profit margins is confirmed by Korsnäs' own  production  trends  over
    the last three years. […]. During the same period, Korsnäs has increased its output of white sack kraft paper  by  […]9%  by  swinging  this
    capacity. In addition, Korsnäs’ profit margins on brown sack kraft paper […].

91. Third, the Notifying Party argues that post transaction any hypothetical price increase by the merged  entity  would  be  constrained  by  a
    potential increase of imports into the EEA.

92. The Notifying Party submits that, for comparable white sack kraft papers, market prices in North America and South America  are  at  broadly
    the same level as in Europe, as the current price range, expressed as delivered duty paid ("DDP"), is […] in all these regions.[61]  As  for
    Asia, market prices would typically be at the upper half of this range. Therefore, price levels in the EEA would be at least as  interesting
    to a non-EEA producer as those in other regions.

93. The Notifying Party claims that in particular Canfor, a Canadian kraft paper producer already active in the EEA, is an alternative source of
    supply. Canfor would have an overall estimated capacity of […] ktpa, fully dedicated to the merchant market, of which […] ktpa would be used
    for white sack kraft paper production and the remaining for brown sack kraft paper production. In addition, the  Notifying  Party  estimates
    that only […]% of Canfor's white sack kraft paper would currently be sold in the EEA, while historical  trade  data  indicates  that  Canfor
    would have a considerable scope to vary its EEA sales (i.e. to swing additional sales volume back in the EEA) since in 2005  its  EEA  sales
    volume reached a […] kt.[62] In addition to Canfor, other non-EEA based producers of white sack kraft paper currently not active in the EEA,
    such as Georgia Pacific (USA) and Klabin (Brasil), would be able to redirect volumes should exports to  the  EEA  become  more  commercially
    attractive.

94. The Notifying Party also argues that it is implausible to claim that non-EEA producers would generally suffer from quality issues given that
    Canfor's global sales are larger than Korsnäs' and that Canfor's home markets are likely to be at least  as  demanding  as  regards  product
    standards as the EEA.

95. Fourth, the Notifying Party submits that EEA sales of brown sack kraft paper represent more than twice the EEA sales  of  white  sack  kraft
    paper ([…]) and that there is scope for manufacturers focusing on brown sack kraft paper  to  diversify  into  white  sack  kraft  paper  by
    purchasing white market pulp and possibly some pulp shredding equipment (if necessary).

96. The Notifying Party has also stated that at least two brown sack kraft paper producers, […] and […], have been  considering  expanding  into
    the production of white sack kraft paper.

97. In support of the argument concerning the competitive constraint posed by potential entry from  white  MF/UG  and  brown  sack  kraft  paper
    producers, the Notifying Party submitted a study prepared by the paper industry consulting firm Pöyry, which indicates that, in the event of
    a 5% price increase in white sack kraft paper, a number of producers of brown sack kraft paper and a producer of  white  MF/UG  kraft  paper
    ([…]) would find it profitable to switch some of their production volumes to white sack kraft paper.[63] The  relevant  companies  would  be
    […]. The  report  analysis  assumed  a  switch  of  at  least  20%  of  the  production  volume  of  each  machine,  which  would  allegedly
    typically represent a switched volume of around 30 ktpa. The Notifying Party noted that this volume would equate to the total production  of
    Korsnäs in relation to either white sack kraft or white MF/UG kraft paper, and  would  therefore  be  sufficient  to  impose  a  competitive
    constraint on the merged entity post-transaction.[64]

    B. The Commission's Assessment

    (i) The Parties' leading position in the market

98. According to the Horizontal Merger Guidelines, market shares and concentration  levels  provide  useful  first  indications  of  the  market
    structure and of the competitive importance of both the merging parties and their competitors.[65]

99. The total market size for white sack paper amounts to sales of EUR 159 million and 186 ktpa in volume in the EEA. The Parties'  strength  in
    this segment reflects their stated business focus on white sack kraft paper.[66]

100. The Parties' combined market share in the supply of white sack kraft paper would be [70-80]% by volume (Billerud: [50-60]% and Korsnäs  [10-
    20]%). According to the Notifying Party, the next largest competitor in white sack kraft is the Canadian importer  Canfor  Corporation  with
    [10-20]% in the EEA, followed by Mondi ([0-5]%), Smurfit Kappa ([0-5]%) and Cartiera del Chiese ([0-5]%).

101. The proposed transaction therefore results in the merger of the number one and number two players in Europe in white sack kraft  paper  with
    the remaining competitors having significantly smaller market shares. The Parties' combined market share alone, in the context of the  total
    market structure, therefore gives a first indication of a dominant market position.

102. Market players also noted that this transaction follows the acquisition by Billerud of UPM-Kymmene's kraft paper business earlier this  year
    which has led to a more concentrated market in particular in the  white  kraft  paper  segments.  This  acquisition  saw  Billerud  […].  In
    particular, in 2011 the former UPM Pietarsaari mill produced […] kt of white sack kraft paper ([…]% of Billerud's total sales).

103. While some customers have stated that the proposed transaction would not have an impact on their business, the vast  majority  of  customers
    considered that post-merger the market structure would be such that no credible alternatives would exist and prices would rise. For example,
    customers have said that prices would increase "because production in Europe for white kraft sacks will almost be concentrated in  a  single
    dominant group"[67] and "we expect price increase from 20% to 30% in the first months after the merger".[68] Other customers submitted  that
    as a result of the proposed transaction it is likely for "white sack kraft prices to increase more than brown  sack  kraft  prices,  due  to
    there being almost no competition in the white sack kraft market"[69] and that "less competition  and  higher  prices  and  longer  delivery
    times"[70] are expected.

104. Some customers have also highlighted the fact that the remaining producers are not credible alternatives since  they  would  either  not  be
    able to provide the volumes requested or would provide lower quality paper which is not acceptable to the converters' customers.

105. Indeed, the Commission considers the Parties to be particularly close competitors in white sack kraft paper. Both Billerud and Korsnäs  have
    focused on high quality white sack kraft as opposed to brown and neither company is vertically integrated downstream (as opposed to  one  of
    their main European competitors, Mondi). The replies to the Commission's market investigation support the notion of closeness of competition
    between the Parties.[71] According to customers, the Parties have  "similar  products,  high  production  capacity,  good  presence  on  the
    market"[72] and "no other wet strength white sack kraft makers in the world  who  produce  a  similar  quality".[73]  As  explained  by  one
    customer, the proposed transaction "is the union of the two largest producers in  the  market.  No  other  paper  producer...can  today  for
    strength and production capacity counterbalance such a concentration, not even the Mondi Group".[74] In the same vein, a competitor explains
    that post transaction there will not be sufficient alternatives to the merged entity  since  "Mondi  doesn't  sell  because  paper  is  used
    internally."[75]

106. Whilst some customers also considered that Mondi, Smurfit Kappa and Canfor have similar products, a number of  replies  were  qualified.  As
    regards Canfor, customers have also stated that distance may be an issue and that Mondi and Canfor may not have available volumes. Moreover,
    approximately half of the customers have raised concerns in respect of  potentially  having  to  source  from  Mondi  given  that  Mondi  is
    vertically integrated downstream and, as such, also a direct competitor to these customers.

107. Actual and potential competitors are generally not concerned by the transaction and most consider that it will lead to no  change  in  their
    business. Those who raised concerns simply stated that there will be one competitor less in the white sack kraft paper market and  that  the
    white sack kraft segment will be rather concentrated. One interpretation of this is that regardless of what happens in the white sack  kraft
    paper market, actual and potential competitors do not expect to change their current portfolios.

108. In conclusion, the Commission considers that the Parties' high combined EEA market share in white sack kraft and the fact  the  Parties  are
    each other's closest (or at the very least close if not the closest) competitors in white sack kraft paper in the EEA point in the direction
    of the transaction leading to the creation or strengthening of a dominant position for the merged entity in white sack kraft paper.

    (ii) Competition from current competitors

109. Concerning the competitive constraint posed by current  white  sack  kraft  paper  competitors,  the  replies  to  the  Commission's  market
    investigation have indicated that should the merged entity increase prices, current competitors would not have the ability or  incentive  to
    increase output to a sufficient extent to pose a significant constraint on the merged entity.

110. First, current competitors do not have available free capacity to simply increase their production of  white  sack  kraft  paper.  The  only
    exception would be Mondi, but as explained customers have raised concerns in respect of potentially having to source from Mondi  given  that
    the company is also a direct competitor to these customers. In order to increase production, current competitors would  have  to  re-balance
    their product portfolio. In short, they would have to reduce their production in one type of paper and switch  those  volumes  to  producing
    white sack kraft paper.

111. Second, the replies to the Commission's market investigation have indicated that a switch resulting in a re-balancing of these  competitors'
    product portfolios is unlikely except in the case of Mondi. Competitors have stated that a non-temporary 5% to 10% price increase  in  white
    sack kraft paper would not lead them to switch volumes from brown sack paper or MF/UG kraft paper into the production of  white  sack  kraft
    paper. Although a small number of competitors said that theoretically a supplier could have the incentive to make this switch, none  of  the
    competitors who replied to the Commission's market investigation said that they would switch their own volumes in response to such  a  price
    increase in white sack kraft paper.

112. In this respect, the Commission notes that each competitor is constrained by  a  different  set  of  facts.  The  cost  structures  of  each
    competitor are different, as are their portfolios and the balances between  different  paper  types  in  their  portfolios.  The  Commission
    therefore considered the ability and incentive of each of the main current competitors of white sack kraft paper to increase  their  volumes
    of white sack kraft paper in the EEA.

113. As regards Canfor, who the Parties estimate to have a [10-20]%  EEA-wide  market  share  and  thus  to  be  their  largest  competitor,  the
    Commission considers any increase in volumes of white sack kraft paper into Europe by Canfor (which is an importer from  Canada)  as  highly
    unlikely. Canfor itself has submitted that its presence in Europe is limited and will remain so. According to Canfor, its exports to  Europe
    are business driven with the objective of offering its global business a more international scope for marketing  and  reputational  reasons.
    Furthermore, for various reasons, Canfor said it is currently constrained from expanding its offer of kraft paper in Europe  due  to  longer
    lead-times, transport costs, capacity constraints related to the fact that Canfor ships the largest percentage of its  production  to  North
    American markets and is now trying to penetrate deeper into emerging markets, and also  because  of  currency  conversion  related  problems
    (volatility).[76]

114. As regards Mondi, who the Parties estimate to have a [0-5]% EEA-wide  market  share,  the  Commission  considers  that  whilst  Mondi  could
    increase its volumes of white sack kraft paper in the EEA , it is questionable whether such volumes would end  on  the  market  or  be  used
    internally by Mondi in the event of a price rise. However, Mondi is vertically integrated downstream and currently a net buyer of white sack
    kraft paper from the market. Mondi currently uses most of its white sack kraft production internally and sells small volumes to  the  market
    only when it does not need them internally or when the prices on the market are such that it can gain  additional  profit.  Mondi  indicated
    that should prices rise it can increase its own production.[77] However, given Mondi's internal needs, the Commission considers it  unlikely
    that Mondi would provide to the market sufficient amounts of white sack kraft paper to significantly constrain the merged entity.

115. As regards other competitors present in the EEA, the market investigation also indicated that, absent a re-balancing of portfolio,  none  of
    those competitors would have the ability to increase output to  a  sufficient  extent  to  pose  a  significant  constraint  on  the  merged
    entity.[78]

116. Third, while the Notifying Party has submitted that the margins in brown sack kraft paper and white MF/UG kraft paper versus the margins  in
    white sack kraft paper would incentivise competitors to switch volumes into the  production  of  white  sack  kraft  paper,  the  Commission
    considers that the evidence of this provided by the Notifying Party is insufficient to show that such switching would  occur  in  sufficient
    volumes in order to constrain the merged entity. While Mondi has stated that it swings some of its production between brown sack kraft paper
    into white sack kraft paper on an ongoing basis by simply switching from brown to bleached pulp,[79] as explained the  Commission  considers
    it unlikely that Mondi would provide to the market sufficient amounts of white sack  kraft  paper  to  significantly  constrain  the  merged
    entity. Furthermore, competitors who replied to the market investigation have also indicated that the margins in  the  various  kraft  paper
    markets are not static. In addition, documents submitted by the Notifying Party show that the Parties' margins for white sack  kraft  paper,
    brown sack kraft paper, white MF/UG kraft paper and brown MF/UG kraft paper […]Some competitors  also  supported  this  view,  stating  that
    margins vary depending on the conditions of each mill.

117. Moreover, other competitors present in the EEA indicated that for  various  reasons  relating  to  the  particular  circumstances  of  these
    companies they would not switch production to white sack kraft paper even in the event of a non-temporary price increase in white sack kraft
    paper.

118. Fourth, the Notifying Party's arguments that producers of white sack kraft paper currently focused outside the EEA could  and  would  divert
    their sales to the EEA in the event of a price increase are not confirmed by the market investigation and lead the  Commission  to  consider
    this as unlikely. Indeed, of the potential  importers  mentioned  by  the  Notifying  Party,  Georgia-Pacific  considers  such  scenario  as
    unlikely,[80] while Klabin has stated that its business is focused in Brazil and also that it is not active in white sack kraft paper.[81]

119. In the Pöyry study submitted by the Notifying Party, it is argued that companies such as Mondi, SmurfitKappa, Alier,  Cartiera  del  Chiese,
    Klabin and Canfor constitute potential sources of additional volumes of white sack kraft paper. However, for the reasons  already  discussed
    the Commission considers that such companies would not pose a significant constrain on the merged entity.

120. The Commission therefore concludes that current white sack kraft competitors would not have the ability or incentive to increase  output  to
    a sufficient extent to pose a significant constraint on the merged entity

    (iii) Entry from potential competitors

121. According to the Notifying Party, the kraft paper market has shown strong growth (5-10% per annum) in emerging markets in  Asia  and  Africa
    and stable demand in the mature markets in Europe. The Notifying Party also submits that the North American kraft  paper  market  has  shown
    considerable decline over the last decade (some 2-5% per annum). It is therefore clear that  there  is  less  incentive  to  enter  European
    markets given that demand in Europe is stable whereas there is a greater incentive to enter growing markets such as Asia  and  Africa.  Some
    competitors also supported this view.

122. The results of the market investigation show that even if it were the case that switching to white sack kraft may be relatively simple  from
    a technical point of view for the producers of certain products, there are serious doubts as to whether a sufficient number  of  competitors
    would have an economic incentive (due to other cost barriers) to enter into white sack kraft paper even in the situation of  a  hypothetical
    non-temporary 5-10% price increase. Replies to the Commission's market investigation have clarified that no  overall  "one  size  fits  all"
    assumption can be drawn but that the potential entry of each potential competitor into white sack kraft needs to be assessed individually.

123. The Commission considered separately the ability and incentive of current producers of (i) white MF/UG kraft paper; (ii)  brown  sack  kraft
    paper and brown MF/UG kraft paper; (iii) kraftliner; and (iii) fine paper to enter the white sack kraft market.[82]

124. As regards the potential of current white MF/UG kraft paper producers to enter the white sack kraft paper market, the  majority  of  replies
    to the Commission's market investigation indicated that  this  would  involve  additional  investment.  Competitors  stated  that  switching
    production from white MF/UG kraft paper to white sack kraft paper involves the installation of a Clupak unit, which enables the  machine  to
    make the paper extensible. For example, Oyka stated that "It is necessary to have  a  so  called  high  consistency  refining  unit  and  an
    extensible unit available on the same machine for sack paper production." And Alier stated that "sack paper is more demanding  in  terms  of
    mechanical specification. So the changes mean important modifications at machine level and also  at  preparation  line."[83]  The  Notifying
    Party estimates that a Clupak machine would cost around EUR […] but the results of the market investigation indicate that the price would be
    around the upper limit of the estimate. Furthermore, the majority of the competitor responses to  the  market  investigation  indicate  that
    white MF/UG kraft paper producers would not have the incentive to start producing white sack kraft paper  unless  there  would  be  a  price
    increase, but even a non-temporary 5-10% price increase would not lead to a switch of production.[84] The  Pöyry  study  also  includes  the
    analysis of a potential switch from white MF/UG kraft paper to white sack kraft paper, but it limits its analysis to Mondi, whose incentives
    have already been discussed.

125. As regards the possibility of switching from the production of brown kraft paper to the production of white sack kraft  paper,  brown  paper
    producers (both for sack and MF/UG) who replied to the Commission's market investigation said that even in the event of a  non-temporary  5-
    10% price increase in white sack kraft paper, they would not enter this segment due to other cost structure constraints.[85]

126. One of these constraints relates to the potential disadvantage faced by these producers as a result of not having an  integrated  supply  of
    bleached pulp which is the key input in the production of white sack kraft paper. Although bleached pulp is widely available on the  market,
    according to several competitors a company sourcing bleached pulp from the market  is  subject  to  more  price  volatility  than  companies
    producing bleached pulp in-house. The Parties have their own supply of bleached pulp whereas as many producers of brown sack or brown  MF/UG
    would have to resort to purchasing bleached pulp from the market in order to switch production volumes to the production of white sack kraft
    paper. As explained by Canfor "brown sack paper producers which are non-vertically integrated and which do not own a  bleaching  unit  would
    have little or no interest in switching their production to white sack paper. This is because having to acquire bleached pulp from  a  third
    supplier in the open market constrains their profit margin making it less attractive when compared with the margins derived from  the  sales
    of brown sack paper. On the other hand, acquiring a bleaching unit can represent a considerable financial investment not accessible  to  the
    majority of the market players."[86] The Notifying Party's internal documents also confirm that market pulp is a source of  volatility.  For
    example, one such document states that […]."[87]

127. Furthermore, while some brown sack kraft paper producers indicated that although they could theoretically switch part  of  their  production
    to white sack kraft paper following a non-temporary 5-10% price increase, in practice they would not switch their own volumes in response to
    such a price increase in white sack kraft paper. This was due either to the fact that they must be able to internally use  their  production
    of unbleached pulp in order to remain efficient, or that they see no reason to shift from their current profitable business area into a  new
    one which would potentially require additional investments (some have suggested a need for an investment of up  to  EUR  10  million  and  a
    timeframe of one to two years) or the need to familiarise themselves with a new customer base and risk losing existing customers.[88] In any
    event, the volumes that these producers indicated could even be subject to such a switch were limited.

128. The only recent example of entry into the production of white sack paper from brown sack paper is Smurfit Kappa's entry  into  this  segment
    in 2008. However, that entry was prompted by the particular circumstances of the company at the time, which were  not  directly  related  to
    particular incentives to enter into the production of white sack kraft paper. The entry related to the completion of an upgrade  of  one  of
    Smurfit Kappa's machines which consequently increased its capacity.[89] The market investigation indicated that the conditions  and  context
    of other contemporaneous potential examples of entry pointed to by the Notifying Party are not sufficiently certain to materialize.

129. The Pöyry study submitted by the Notifying Party analyses the incentives that brown sack kraft paper producers would have if  the  price  of
    white sack kraft paper were to increase 5% on a non-temporary basis. In particular, the study compares the margins of a number of  companies
    pre- and post-price increase, concluding that, post-price increase, […] margins in white sack kraft paper would be higher than their margins
    for brown sack kraft paper. However, […] white sack kraft paper potential margins prior to the price increase are already higher than  those
    for brown sack kraft paper, which suggests that as discussed there are other barriers which discourage  the  switch.  As  regards  […],  its
    incentives have been discussed. With respect to […], the results of the market investigation have indicated that such  companies  would  not
    have either the ability or the incentive to switch production from brown to white sack kraft paper following  a  5-10%  non-temporary  price
    increase in white sack kraft paper.[90]

130. Overall, the results of the market investigation show that it is unlikely that a sufficient number of brown paper producers would be  likely
    to switch a sufficient amount of volume in order to exert a sufficient and timely constraint on the merged entity.

131. Regarding the possibility of switching  production  from  kraftliner  to  white  sack  kraft  paper,  replies  to  the  Commission's  market
    investigation indicated that this could involve very high entry barriers. Mondi said it has a swing machine on which it produces either sack
    kraft paper or kraftliner depending on market conditions. However, replies from other competitors suggest that Mondi's situation is specific
    to Mondi and that in general such a switch would require major investments related to technical changes.  Competitors  also  indicated  that
    there is a risk of unstable production and low quality. Furthermore, competitors have stated that historically price/margins for  kraftliner
    have been higher than those for sack kraft paper. In addition, some competitors have stated that a non-temporary 5%-10%  price  increase  in
    sack paper would not be sufficient to induce a kraftliner manufacturer to begin producing kraft sack paper.[91]

132. Finally, the Notifying Party also argues that fine paper producers constrain suppliers in the white sack kraft paper market. Fine  paper  is
    mainly printing and writing papers of high quality,  used  for  example  in  office  applications,  commercial  print  (e.g.  brochures  and
    advertising materials). Regarding the possibility of switching production from fine paper to white sack  kraft  paper,[92]  replies  to  the
    Commission's market investigation indicated that this would also involve very high entry barriers. For example, as explained by  Mondi  "the
    production of fine paper uses a different set-up and pulp input with regards to the paper machines and  pulp  input  of  kraft  papers."[93]
    While the costs of switching from the production of fine paper to kraft paper may again be different for each producer, the vast majority of
    competitors considered that such a switch would require significant investments in equipment.

133. One fine paper producer, Lenzing, said that it would only consider entering the market for the supply of white sack kraft paper if  (i)  the
    markets were growing; (ii) it had spare capacity and (iii) it was able to make the investment.

134. Another fine paper producer, Lecta, said that "a switch to white sack kraft paper would require a very high investment [10-50]  EUR  million
    to be competitive, since many parts of the company's machines would need to be changed. […]  Furthermore,  this  cost  estimate  relates  to
    rebuilding the machine and does not take account of the time and investment necessary to look for a market for these new products. Cost  and
    length of time vary from machine to machine." In addition, when there is more than one machine at a site all  machines  "are  connected  and
    converting only one machine would not work since the connecting circuits would need to be isolated to ensure no  mixing  of  most  kinds  of
    kraft pulp and chemical pulp."[94]

135. Furthermore, some competitors have indicated that in particular a 5-10% price increase would not  be  sufficient  to  induce  a  fine  paper
    producer to begin producing kraft sack paper given the substantial investments required.

136. In light of the evidence analysed in the market investigation, the Commission considers that fine paper producers would at  least  not  have
    the incentive to switch sufficient volumes to white sack kraft paper in order to constrain the merged entity.

137. Overall, the Commission therefore considers that the potential entry into the white sack kraft paper market from producers  of  white  MF/UG
    kraft paper, brown sack kraft paper, brown MF/UG kraft paper, kraftliner and fine paper would not  be  sufficiently  likely  and  timely  to
    significantly constrain the merged entity.[95]

    (iv) Countervailing buyer power

138. The Commission does not consider that customers in white sack kraft have strong buyer power with the potential exception of  Mondi  (who  is
    also a competitor in white sack kraft paper). The majority of customers who have raised concerns are smaller,  often  family-owned  European
    converting businesses who have limited buyer power.

139. As regards Mondi, and the Notifying Party's argument that Mondi alone, […], could constrain the  Parties  post-transaction,  the  Commission
    considers that although Mondi may have buyer power, this relates to the fact that Mondi is a vertically integrated  competitor/customer  who
    is able to increase its own white sack kraft production to satisfy its converting needs in the event of a price rise.

140. Any buyer power attributed to Mondi would not, however, in the Commission's view, prevent the merged entity from  raising  prices  vis-à-vis
    its other customers who are very unlikely to have the ability to vertically integrate upstream or find alternative suppliers. In this sense,
    the Commission refers to paragraph 67 of the Horizontal Merger Guidelines which specifically states that countervailing buyer  power  cannot
    be found to sufficiently off-set potential adverse effects of a merger if it only ensures that  a  particular  segment  of  customers,  with
    particular bargaining strength, is shielded from significantly higher prices or deteriorated conditions after the merger.

    (v) Conclusion on white sack kraft paper

141. Overall, the Commission considers that the Parties' high combined EEA market share in white sack kraft paper, the fact the Parties are  each
    other's closest (or at the very least close if not the closest) competitors in white  sack  kraft  paper  in  the  EEA,  customers'  limited
    countervailing buyer power, and the limited competitive constraint imposed by existing and potential entrants on the EEA  market  for  white
    sack kraft paper on the Parties post-transaction raises serious doubts as to the compatibility of the transaction with the  internal  market
    in relation to the supply of white sack kraft paper.

142.  Indeed, the Commission considers that the transaction would risk leading to the creation or strengthening of a dominant  position  for  the
    merger entity in white sack kraft paper. Moreover, given the limitations on producers to simply increase  volumes  without  making  a  focus
    switch from one paper type to another, the Commission considers there is a risk that as long as there is demand for the other  paper  types,
    any increase in white sack kraft paper prices by the merged entity could be followed by other remaining producers thus leading to an overall
    price increase in the market.

V.2.4. White MF/UG kraft paper

    A. The Notifying Party's views

143. In relation to white MF/UG kraft paper, the Notifying Party argues that the overall assessment is similar  to  that  for  white  sack  kraft
    paper. Notably, it argues that (i) white MF/UG kraft paper competitors in the EEA could readily increase their sales,  (ii)  recycled  MF/UG
    kraft paper producers could produce white MF/UG kraft paper without further investment, (iii) white  MF/UG  kraft  paper  faces  substantial
    competition from white MG paper with particular grammage and surface characteristics, (iv) imports into the  EEA  could  increase,  and  (v)
    entry from fine paper suppliers is expected.

144. First, as regards competition from current white MF/UG kraft paper suppliers, the merged entity  would  face  substantial  competition  from
    Mondi, which has a market share of [20-30]%. According to the Notifying Party, six of the nine machines which Mondi currently  allocates  to
    the production of fine paper would also be suitable for supplying MF/UG paper. Furthermore, the  three  next  largest  competitors  in  this
    segment (Iberpapel with [0-5]%, Crown Van Gelder with [0-5]% and Lenzing with [0-5]%)  would  have  considerable  scope  to  increase  their
    production capacity since they diversified into the supply of white MF/UG kraft paper from the  supply  of  fine  paper.  According  to  the
    Notifying Party, such entry did not require an appreciable investment since fine paper and MF products can be manufactured on the same paper
    machines.

145. Furthermore, the Notifying Party submits that Heinzel recently invested in a new paper  machine  at  its  mill  in  Pöls,  Austria,  with  a
    capacity of […] ktpa, thereby increasing its capacity by […] ktpa. This machine would produce both  white  MG  and  MF/UG  kraft  paper  and
    production would be expected to commence in the fourth quarter of 2013.

146. Second, the Notifying Party argues that Alier and Cartiera del Chiese, both suppliers of recycled sack and MF/UG paper, could switch  easily
    to producing white MF/UG kraft paper without any substantial investment by sourcing white market pulp or white clippings  as  raw  material.
    This switch would account for an extra […] ktpa of capacity into the white MF/UG kraft paper market.

147. The Notifying Party argues that the effectiveness of a potential production swing scenario in response to differences in profit  margins  is
    confirmed by Korsnäs' own production trends over the last three years. […]

148. Third, the Notifying Party submits that for certain grammages and surface characteristics, notably for the “form and fill” flour  and  sugar
    applications as well as for fashion bags, white MF/UG kraft paper faces substantial competition from  white  MG  kraft  paper.[96]  In  this
    context, according to the Notifying Party various customers swing frequently between the purchase of white MF kraft paper and white MG kraft
    paper (e.g. Fiorini, Poligrafica and Sentrex).

149. Fourth, the Notifying Party argues that current non-EEA sales could be diverted to the EEA should conditions  be  favourable  and  therefore
    post transaction any hypothetical white MF/UG kraft paper price increase by the merged entity would be constrained by a  potential  increase
    of imports into the EEA.[97] The Notifying Party submits that though market prices in North and South America for papers comparable to white
    MF/UG kraft paper are around 5-10% lower than in Europe, there are important differences in end-use between Europe and the  Americas,  which
    makes a price comparison difficult.[98] Furthermore, the Notifying Party argued that in Asia, with the exception of Japan where  prices  are
    in line with Europe, white MF/UG kraft paper is of little importance since plastic is the commonly used packaging  material.  Therefore  the
    Notifying Party argues that, as for white sack kraft paper, price levels of white MF/UG kraft paper in the EEA are at least  as  interesting
    to a non-EEA producer as those in other regions. Furthermore, non-EEA producers are highly  cost  competitive  on  a  delivered  basis  when
    selling into the EEA.

150. The Notifying Party illustrates this argument with the  Russian  Troitskaya  paper  mill  a  joint  venture  between  Ahlström  and  Russian
    Continental Management, which allegedly would have increased its capacity from 30 ktpa to 50  ktpa  in  2007,  and  with  Ilim  which  would
    increasingly be selling white MF/UG kraft paper in the EEA.

151. Fifth, the Notifying Party considers that further entry from fine paper producers can be expected given that several small  to  medium-sized
    fine paper producers struggle to remain profitable in the fine market paper market, which is characterised by large volumes, low margins and
    economies of scale. This possibility would be illustrated by Ilim Pulp (Russia), with a total fine paper capacity of […]  ktpa,  and  Lecta,
    the fifth largest fine paper player, which would now be in the process of, or considering, entering the white MF/UG business.  According  to
    the Notifying Party, there are currently about 90 fine paper machines in Europe which would be suitable for  swinging  production  to  kraft
    paper.[99] In support of this argument, the Pöyry study submitted by the Notifying Party indicates that Iberpapel, Crown van Gelder  Lenzing
    and Ilim would have the incentive to switch their fine paper production into the production of white MF/UG kraft paper already prior to  the
    proposed transaction.

152. The Notifying Party also supplied a number of internal documents in order to show that there has been new entry, or there is  potential  new
    entry, into white MF/UG kraft paper, with new entry representing more than twice the sales of Korsnäs. The Notifying Party notes  that  this
    has been a concern in particular for Billerud for quite some time.[100] 

    B. The Commission's assessment

    (i) The Parties' leading position in the market

153. The total market size for white MF/UG kraft paper amounts to sales of EUR 218 million and 246 ktpa  in  volume  in  the  EEA.  The  Parties'
    combined market share would be [60-70]% in volume (Billerud: [50-60]%, Korsnäs: [5-10]%) with only one other  relatively  strong  competitor
    (Mondi with [20-30]%) although there are a number of smaller players (Iberpapel and Crown van Gelder both with [0-5]% and Lenzing  with  [0-
    5]%).

154. The proposed transaction therefore results in the merger of the number one and number three players in Europe in  white  MF/UG  kraft  paper
    with the remaining competitors, with the exception of Mondi (who sells the majority of  its  production  to  the  merchant  market),  having
    significantly smaller market shares. The Parties' combined market share alone, in the context of the total market structure, therefore gives
    a first indication of a dominant market position.

155. Again, as in relation to white sack kraft paper, Billerud's recent acquisition of the UPM-Kymmene  kraft  paper  business  earlier  in  2012
    already strengthened Billerud's market position in relation to white MF/UG kraft paper. In particular, in 2011 the  former  UPM  Pietarsaari
    mill produced […] kt of white MF/UG kraft paper, which amount to […]% of Billerud's total sales.

156. While most of the competitors have not raised concerns, the majority of the customers who replied to the Commission's  market  investigation
    raised concerns in relation to white MF/UG kraft paper due to the small number of remaining competitors. For example,  one  customer  stated
    that the proposed transaction would reduce competition because the remaining potential suppliers would be few and this would result  in  the
    merged entity having an extremely dominant position in the EEA. Furthermore, the merged entity's post-transaction  dominant  position  would
    allow it to increase prices disproportionately.[101] One customer said that, as a result of the proposed transaction, "Billerud will  impose
    its prices" while according to another "Service will decline, prices will go up, and the market will have less choice".[102]

157. Generally, customers have indicated that Mondi is the closest competitor to the Parties though Crown van  Gelder  and  Iberpapel  were  also
    listed as potential alternatives for the supply of white MF/UG kraft paper. In addition, some customers have also indicated that Billerud is
    the closest competitor to Korsnäs following its acquisition of the UPM mills. This underlines the fact that the market structure  for  white
    MF/UG kraft paper is very concentrated and that the transaction would effectively create a market leader with  only  one  relatively  strong
    competitor. Indeed, as explained, the HHI levels are very high indicating a  concentration  level  of  over  4,000  prior  to  the  proposed
    transaction and over 5,300 after its conclusion with a "delta" of over 1,200.

158. In conclusion, the Commission considers that the Parties' high combined EEA market share in white MF/UG kraft paper, as  well  as  the  fact
    that with the exception of Mondi, which is vertically integrated, all existing competitors in the EEA are  very  small  with  less  than  5%
    market shares, clearly point in the direction of the transaction leading to the creation or strengthening of a  dominant  position  for  the
    merged entity in white MF/UG kraft paper.

    (ii) Competition from current competitors

159. As in white sack kraft paper, the replies to the Commission's market investigation in relation to white MF/UG kraft paper  have  also  shown
    that current competitors in this segment are capacity constrained and could not simply increase their production of white MF/UG kraft  paper
    without re-balancing their product portfolio and switch volumes of other types of paper into white MF/UG kraft  paper.  The  only  exception
    would be Mondi, but as explained customers have raised concerns in respect of potentially having to source from Mondi given that the company
    is also a direct competitor to these customers. There is a recent example of a capacity expansion by a producer of white MF/UG kraft  paper,
    the Austrian company Heinzel, who is in the process of expanding its production capacity from 13.5 ktpa to 80 ktpa. This capacity  is  split
    between MG kraft paper and MF/UG kraft paper with a clear focus on MG kraft paper. The expansion has  required  an  investment  of  EUR  115
    million and the company plans to start production in October 2013, i.e. within a year and half of its decision to expand.[103] This  example
    illustrates the investment and time requirements for capacity expansion.

160. Regarding a potential switch by current suppliers of white MF/UG kraft paper from other kraft paper products into white MF/UG  kraft  paper,
    as in relation to white sack kraft paper, the Commission notes that each competitor is constrained by a different set  of  facts.  The  cost
    structures of each competitor are different, as are their portfolios and the balances between different paper types in their portfolios.

161. The replies to the Commission's market investigation clearly  indicated  that  a  switch  requiring  the  re-balancing  of  current  product
    portfolios by most existing competitors is unlikely. Competitors submit that a non-temporary 5-10% price increase in white MF/UG kraft paper
    would not lead them to switch volumes from brown MF/UG kraft paper or sack kraft paper into the production of white MF/UG kraft paper.[104]

162. As mentioned in relation to white sack kraft paper, white MF/UG kraft paper  competitors  who  replied  to  the  market  investigation  have
    indicated that the margins in the various segments of kraft paper are not static. In addition, documents submitted by  the  Notifying  Party
    show that the Parties' margins for white sack kraft paper, brown sack kraft paper, white MF/UG kraft paper and brown MF/UG kraft paper […]

163. As regards the Notifying Party's arguments that existing non-EEA suppliers would, in the event of a  non-temporary  price  increase,  divert
    volumes to the EEA, the replies to the Commission's market investigation indicated that such scenario is unlikely and non-EEA producers have
    no intention of switching volumes to satisfy European needs. For example, Klabin has clearly stated that it is  not  able  to  supply  white
    MF/UG kraft paper to the EEA. In fact, Klabin is completely focused in the paper production and converting business in Brazil and its stated
    long term strategic plan does not include the internationalization of its business.[105] Another ex-EEA producer of white MF/UG kraft paper,
    Georgia-Pacific, sells less than 1% of its total sales into the EEA and although it does produce white MF/UG kraft paper, has stated that it
    does not make significant production decisions regarding the configuration and usage of its Palatka, Florida facilities based on an analysis
    of demand in the EU/EEA.[106]

    (iii) Entry from potential competitors

164. As regards potential new entry from competitors not active in white MF/UG kraft paper, the Commission again considered this potential  entry
    not only from producers of brown sack kraft paper or brown MF/UG kraft paper, but also from producers of MG kraft paper and fine paper.[107]

165. Regarding the possibility of switching from the production of brown sack kraft paper or brown MF/UG kraft paper to the production  of  white
    MF/UG kraft paper, brown paper producers who replied to the Commission's market investigation said  that,  even  in  the  event  of  a  non-
    temporary 5%-10% price increase in white MF/UG kraft paper, they would not enter this segment due to the lack of any  incentive  to  do  so.
    First, the majority of potential entrants are capacity constrained.

166. Second, as explained with respect to white sack kraft paper, producers who do not have an  integrated  bleached  pulp  operation  are  at  a
    disadvantage and their incentives to enter the production of white MF/UG kraft paper are likely to be more limited due to the risks  related
    to bleached pulp price volatility. Canfor explains that "having to acquire bleached pulp from a third supplier in the open market constrains
    their profit margin" and "acquiring a bleaching unit can represent a considerable financial investment not accessible to the majority of the
    market players."[108] In addition, as explained by Georgia-Pacific, "Most mills cannot efficiently complete this transition [from  brown  to
    white] without adding bleaching capability (which is expensive)".[109] The Pöyry study submitted by the Notifying Party indicates  that  the
    cost of such unit would be around […], but the results of the market investigation indicate that the installation cost is higher  and  could
    be up to EUR 10 million.

167. As regards Canfor, who is not active in white MF/UG kraft paper, the reasoning applied regarding white  sack  kraft  paper  applies  to  its
    expansion into white MF/UG kraft paper in Europe. Therefore, the Commission considers that such a scenario is unlikely.

168. Third, changing between bleached and unbleached pulp can also result in costs and time delays. While some  paper  producers  explained  that
    such a switch is technically possible and could be relatively quickly done, this may depend on each producer's particular situation relating
    to its equipment and products. As explained by one producer of brown sack kraft paper, exchanging pulp from brown to white requires  a  long
    shutdown time to clean the machine and could cause production losses and production cost increases.[110]

169. Regarding the possibility of switching from MG kraft paper to white MF/UG kraft paper, some current MG kraft  paper  producers  could  carry
    out such a switch with relative ease. However, the market investigation does not give sufficient clarity as to whether volumes that might be
    the object of any switch would be of a sufficient size to effectively constrain the merged entity post-transaction.

170. Regarding the possibility of switching production from fine paper to white MF/UG kraft paper, those fine paper producers who replied to  the
    Commission's investigation indicated that whilst some fine paper producers could switch to producing white MF/UG  kraft  paper  (and  indeed
    some fine paper producers have recently entered this market[111]), the extent to which each fine paper producer could and would be likely to
    do so varies according to their existing paper machines and the specific investments each fine paper producer would have to make.

171. For example, one fine paper producer stated that pulp used for most kraft papers is different (chemical pulp) and that it  is  not  possible
    to operate production lines within one mill without isolating the different production lines using different pulp since  different  pulp  or
    the waste created cannot be mixed. Such isolation would create additional costs to  the  adaptation/rebuilding  of  the  machine  itself  to
    produce white sack kraft paper or white MF/UG kraft paper.[112] Although some fine paper producers did  indicate  that  switching  to  white
    MF/UG kraft paper could be carried out relatively easily, none of them could quantify  the  exact  level  of  investments  needed,  nor  the
    efficiency losses they might incur, nor indeed suggested that they were considering such a switch or were likely to consider such  a  switch
    in the short-term even if white MF/UG kraft paper prices were to rise.

172. A regards Heinzel and its current plans to start supplying white MF/UG kraft paper in the last quarter of 2013, the current plans foresee  a
    production volume which the Commission considers is not sufficient to impose a significant constraint on the merged entity. Furthermore, the
    market investigation indicated that the conditions and context of other contemporaneous potential  examples  of  entry  pointed  to  by  the
    Notifying Party are not sufficiently certain to materialize.

173. Overall, although there has been some recent entry by fine paper producers into the market for white MF/UG kraft paper and there  are  clear
    indications of upcoming increased capacity allocated to this market e.g. by Heinzel or indeed potential for a  few  others  to  switch,  the
    Commission has serious doubts as to whether these volumes would be sufficient or indeed be carried out in a  sufficiently  swift  manner  to
    constrain the merged entity post transaction. This is also in light of the fact that in general fine paper producers  contacted  during  the
    Commission's market investigation have stated that they would not have a sufficient incentive to enter the production of white  MF/UG  kraft
    paper or at least to switch significant volumes to the production of white MF/UG kraft paper.

    (iv) Countervailing buyer power

174. The Commission does not consider that customers in white MF/UG kraft have strong buyer power except for Mondi.  The  majority  of  customers
    who have raised concerns are smaller European converting businesses who have limited buyer power.

175. Even considering Mondi's buyer power, or if there was a group of customers who would have buyer power, quod  non,  this  would  not  in  the
    Commission's view prevent the merged entity from raising prices vis-à-vis its other customers who are unlikely to find alternative suppliers
    with sufficient volumes. In this sense the Commission refers to paragraph 67 of the Horizontal Merger Guidelines  which  specifically  state
    that countervailing buyer power cannot be found to sufficiently off-set potential adverse effects of a merger if  it  only  ensures  that  a
    particular segment of customers, with particular  bargaining  strength,  is  shielded  from  significantly  higher  prices  or  deteriorated
    conditions after the merger.

    (v) Conclusion on white MF/UG kraft paper

176. Overall therefore, the Commission considers that even if some increased capacity is planned for the market and a few  fine  paper  producers
    could switch with relative ease, the Parties' high combined EEA market share in white MF/UG kraft paper, customers'  limited  countervailing
    buyer power and the questionable competitive constraint imposed by existing and potential entrants on the EEA market for white  MF/UG  kraft
    paper on the Parties post-transaction raises serious doubts as to the compatibility of the transaction with the internal market in  relation
    to the supply of white MF/UG kraft paper. Indeed, the Commission considers that the transaction  would  risk  leading  to  the  creation  or
    strengthening of a dominant position for the merger entity in white MF/UG kraft paper.

V.3.  CCM

177. Billerud's activities encompass both kraftliner  and  fluting  (although  fluting  is  a  considerably  larger  product  for  Billerud  than
    kraftliner). Korsnäs, on the other hand, only sells white top kraftliner. Billerud also manufactures this product, meaning that the  overlap
    between the Parties' activities is limited to this segment of the overall CCM  market.  In  addition,  Billerud  provides  off-line  coating
    services at its Karlsborg (north Sweden) facility, relating to white top kraftliner manufactured by a third party producer.

178. The Parties' combined market share on a volume basis on an EEA wide market for CCM is [0-5]% (Billerud: [0-5]% and Korsnäs [0-5]%)  and  the
    increment is less than [0-5]%. Even on a hypothetical market for kraftliner and s/c fluting, the Parties' combined market share is  moderate
    at [10-20]% (Billerud: [10-20]% and Korsnäs: [0-5]%). On the narrowest possible market for the supply of white top kraftliner the  Notifying
    Party estimates their combined market share to reach [30-40]% in the EEA (Billerud: [10-20]% and Korsnäs [10-20]%).

179. The Notifying Party submits that since the combined market share on an overall CCM market in the EEA would be  less  than  [5-10]%  with  an
    increment of less than [0-5]%, the transaction will not lead to any significant change in the market structure. Furthermore, there is strong
    competition in the EEA from both EEA and non-EEA suppliers, including those active in the area of white  top  kraftliner.  Such  competitors
    include Smurfit Kappa, SCA, Metsä Board and Mondi (importing into the EEA from its mill in Syktyvkar, Russia).

180. The Commission considers that given that even on the narrowest possible market definition for white top kraftliner in the EEA, the  combined
    market share remains modest at around [30-40]% and there remain a number of competitors active in the production of  white  top  kraftliner,
    the proposed transaction does not raise serious doubts regarding the supply of CCM (or indeed white top kraftliner) in the EEA.[113]

V.4.  LPB

181. In the EEA, Korsnäs supplies primarily LPB in the sense that LPB represents approximately [50-60]% of its  EEA  turnover.  Korsnäs  supplies
    various types of LPB as well as, to a limited extent, liquid bag paper. Billerud's sales of LPB (including both rigid  LPB  and  liquid  bag
    paper) in the EEA […]. This includes small volumes of LPB for the production of small tetrahedral packages for e.g. coffee milk ([…] EUR  in
    2011) and liquid bag paper ([…] EUR in 2011). Billerud also sells […].

182. The Parties' combined market share in the market for the supply of LPB in the  EEA  by  volume  would  be  [30-40]%  (Billerud:  [0-5]%  and
    Korsnäs: [30-40]%). The increment is therefore de minimis. Furthermore, the Notifying Party considers that the combined entity  would  post-
    merger continue to face competition from players such as Stora Enso (with an estimated market share of  [60-70]%)  as  well  as  actual  and
    potential competition from importers such as Klabin (Brazil) and International Paper/Sun Paper (China). Finally, the Notifying Party submits
    that the LPB market is characterised by the presence of a small number of very powerful converter customers such as Tetra Pak who  are  able
    to support new entry should they wish to do so.

183. The market investigation raised one isolated concern in relation to the supply of LPB.  This  relates  to  the  removal  of  Billerud  as  a
    potential competitive force on the market for the supply of LPB in particular for  aseptic  packaging  in  the  EEA  through  expansion  and
    increased production volumes. The complainant has submitted imports are not a real alternative given that imported LPB  is  heavier  and  of
    poorer quality than that available from producers in the EEA. The complainant also raised the concern that the  proposed  transaction  would
    lead to a duopoly in the supply of LPB between Stora Enso and the merged entity.

184. The Commission considers that given the de minimis increment added by Billerud, the only situation in  which  a  competition  concern  could
    arise would be if Billerud was about to expand its LPB operations and thus the  merger  would  have  the  effect  of  removing  a  potential
    significant competitor from the market. However, following analysis of Billerud's internal contemporaneous documents, the  Commission  found
    no evidence of […]. Moreover, [reference to customer significant buyer power]. Billerud's internal documents show that it has […][114]

185. As regards arguments that the merger would result in or enforce a duopoly between Stora Enso and the merged  entity,  the  Commission  notes
    that Stora Enso will remain significantly larger than the merged entity and the transaction does not  in  effect  change  the  market  share
    proportions. Furthermore, it is difficult to see how the merger could create more symmetry between Stora  Enso  and  the  merged  entity  in
    relation to LPB merely because the transaction enlarges the merged entity's product portfolio. Given that the merger will result in  only  a
    de minimis increment, it cannot lead to any significant change in the market structure or indeed increase symmetry between Korsnäs and Stora
    Enso as regards LPB.

186. In light of the above, the Commission considers that the proposed transaction does not raise serious doubts regarding the supply of  LPB  in
    the EEA.

V.5.  Wood pulp

187. Korsnäs does not supply pulp to the open market and there is currently no supply relationship between  Billerud  and  Korsnäs  […].  Korsnäs
    purchases approximately [0-5]% of its total wood pulp consumption on the open market and produces the rest of its needs internally. Billerud
    sells wood pulp on the open market but its market share remains below [5-10]% under any plausible market definition. It also purchases  some
    wood pulp on the open market (in 2011, it purchased just under [0-5]% of its requirements).

188. The Notifying Party submits that there will be no material effect on suppliers of wood pulp as the Parties' combined position as  purchasers
    of pulp is not such that the combined entity will be able to significantly leverage their position against suppliers  of  wood  pulp  (their
    purchases representing less than [0-5]% of the total market). Furthermore, purchasers have access to supplies of  pulp  from  other,  larger
    players such as Fibria (c. [10-20]% EEA market share), Södra Cell AB (c. [5-10]% EEA market share),  Metsä  Fibre  (c.  [5-10]%  EEA  market
    share) and ENCE (c. [5-10]% EEA market share).

189. Even on the assumption that the combined entity would seek to minimise its purchases of pulp from third parties, by  replacing  third  party
    pulp purchases with the excess pulp production of Billerud, such a reduction in purchases would represent only a small proportion  of  total
    demand, and is unlikely to have any material effect on suppliers.

190. Therefore, the Commission considers that the proposed transaction does not raise serious doubts regarding the supply of  wood  pulp  in  the
    EEA.

V.6.  Purchase and sale of wood

191. The Parties' combined market share in the purchase of wood is 7% on a Nordic/Baltic market level (Billerud:  [0-5]%  and  Korsnäs:  [0-5]%).
    The Parties' combined market share for the sale of wood in the same region would be just over [0-5]%.

192. In fact, the only horizontally affected market would arise as a result of the proposed transaction is on the  hypothetical  market  for  the
    purchase of pulpwood (i.e. wood used for the production of pulp) in Sweden, where the Parties' combined share of  purchases  would  be  just
    under [20-30]%. However the Notifying Party argues that the Commission has previously defined the market for the acquisition of pulpwood  to
    be regional (wider than national), that imports represent a large part of domestic consumption (around  15%),  the  wood  purchased  form  a
    Swedish supplier may originate from another country and in fact be an import thus overstating the Parties' Swedish purchases, and last,  the
    Parties operate only […] pulp mills out of a total of 35  located  in  Sweden  which  means  that  even  if  the  Parties  represent  a  not
    insignificant proportion of total purchases within Sweden, sellers have access to a large number of alternative outlets, even within Sweden.

193. During the market investigation, the Commission received one isolated concern relating to the purchase of wood by  the  merged  entity  post
    transaction. However, the Commission considers that even on the narrowest possible product and geographic market definition  (i.e.  purchase
    of pulpwood in Sweden), wood suppliers would have alternative customers even if the merged entity stopped purchasing from them as  a  result
    of changed purchasing patterns. The Commission does not consider there to be any evidence that a narrower than  national  geographic  market
    definition would be plausible.

194. Finally, although no vertically affected market arises as a result of the proposed transaction,  the  Commission  notes  that  there  is  an
    existing supply relationship between the Parties in relation to the supply and purchase of wood  […]  The  supply  in  question  is  however
    limited.[115]

195. In conclusion, the Commission considers that the proposed transaction does not give rise to any concerns related to the purchase and  supply
    of wood.

VI.   COMMITMENTS

VI.1. Procedure

196. Where a concentration raises serious doubts which could lead to a  significant  impediment  to  effective  competition,  the  Parties  to  a
    transaction may seek to modify the concentration so as to address the serious doubts identified by the Commission with a view to having  the
    merger cleared.

197. In order to address the concerns identified following the first phase market investigation in the markets for white  sack  kraft  paper  and
    white MF/UG kraft paper in the EEA, and therefore render the concentration compatible with the internal market, the  undertakings  concerned
    submitted commitments pursuant to Article 6(2) of the Merger Regulation on  6  November  2012  (the  "6  November  2012  Commitments").  The
    Commission launched a market test of this set of commitments on 7 November 2012 to gather the views of relevant market participants on their
    effectiveness and their ability to restore effective competition in the markets where competition  concerns  were  identified  (the  "market
    test").

198. In light of the results of the market test, the Notifying Party submitted a revised set of commitments  on  21  November  2012  (the  "Final
    Commitments").

199. The Commission assessed these commitments and their ability to eliminate the competition concerns  in  line  with  its  Notice  on  remedies
    acceptable under Council Regulation (EC) No 139/2004 and under Commission Regulation (EC) No 802/2004 (the "Remedies Notice").[116]

VI.2. Description of the 6 November 2012 Commitments

200. To address the serious doubts raised by the Commission with regard to white sack kraft paper and white MF/UG  kraft  paper,  on  6  November
    2012 the Notifying Party proposed to divest Korsnäs' white sack kraft paper and white MF/UG kraft paper machine situated  in  Gävle,  Sweden
    ("PM2"), as well as the associated manufacture and sales assets, such as  trade  names  and  intellectual  property  rights,  personnel  and
    customer goodwill (hereafter the "Divestment Business"). PM2 is the only paper machine on which Korsnäs manufactures the products concerned.
    Korsnäs also owns other paper machines in Gävle and in Frövi, Sweden, all of which are dedicated to other paper products and pulp.  Kinnevik
    (through Korsnäs) will retain its interest in those other assets, which are not part of the proposed commitments.

201. According to the 6 November 2012 Commitments, the Divestment Business would include the following:

    (a) All tangible and intangible assets (including trade names) which contribute to the current operation or  are  necessary  to  ensure  the
    viability and competitiveness of the Divestment Business;

    (b) All contracts, leases, commitments and customer orders of the Divestment Business;

    (c) All customer, credit and other records of the Divestment Business;

    (d) All personnel currently fully employed within the Divestment Business, including the personnel deemed key for maintaining the  viability
    and competitiveness of the Divestment Business;

    (e) The benefit, at the option and discretion of the purchaser, of a number of contractual arrangements under which the merged entity  would
    supply products or services to the Divestment Business, including transitional services (for up to […]), pulp (for up to […]), steam, water,
    pressurised air, chemicals, access to storage, maintenance and site services (all for up to […]); […];

    (f) A contract giving access to the merged entity to one of the two "re-winders" which are part of the Divestment Business  and  located  at
    its site, as this equipment is common to the whole Gävle facility;

    (g) The supply of electricity for up to […];

    (h) A long-term lease for […] years between the merged entity and the purchaser for the building in which PM2 is located.

202. According to the 6 November 2012 Commitments, the Divestment Business would not include:

    (a) The "Korsnäs" name and any rights thereto; and

    (b) Any resources, contracts or know-how specifically relating to the small volumes of […] that has also been produced on PM2.

VI.3. Results of the market test of the 6 November 2012 Commitments

VI.3.1.     The scope of the proposed commitments

203. The majority of the respondents to the market test were positive with respect to the suitability of  the  6  November  2012  Commitments  to
    remove the competition concerns with regard to white sack kraft paper and white MF/UG kraft paper.[117]

204. In particular, the respondents to the market test were of the view that the commitments would be viable and that a suitable purchaser  would
    be able to effectively compete in the supply of white sack kraft paper and white MF/UG kraft paper on a lasting  basis.[118]  Moreover,  the
    respondents also viewed the commitments to be sufficiently clear.[119]

205. As regards the additional contractual arrangements to be concluded between the merged entity  and  the  purchaser,  respondents  in  general
    deemed the duration and terms of the supply agreements proposed by the Notifying Party to be sufficient and acceptable  with  the  potential
    exception of the pulp supply agreement.[120]

206. With respect to the pulp supply agreement, various competitors noted that a duration of […]years may be insufficient and that a longer  pulp
    supply agreement could further strength the viability and effectiveness of the Divestment Business. It was also  argued  by  one  competitor
    that the price should pass the risk of variances in the pulp production costs to the merged entity.

207. Regarding the other agreements, some competitors pointed out that the purchaser should have the  possibility  to  terminate  such  long-term
    agreements before their expiration date in order to give the purchaser the necessary flexibility to transfer the machine to another mill  if
    necessary or to source these inputs from elsewhere should this become more cost effective.[121]

208. A few customers also questioned whether the purchaser would be truly independent from the merged entity were it to remain at the Gävle  site
    and source all the various products and services from the merged entity.[122]

209. Competitors, however, indicated that in their view keeping the paper machine within  the  Gävle  mill  would  not  harm  the  viability  and
    effectiveness of the Divestment Business.[123] According to some respondents the relocation of the paper  machine  could  translate  into  a
    considerable loss of efficiency and productiveness due to the inherent disruption of the production lines and customer relationships  for  a
    period that could extend up to 18 months. Furthermore, such relocation would make the purchaser incur in additional costs which could amount
    to EUR 10 million (about 10% of the cost of a new machine).[124]

VI.3.2.     Purchaser criteria and interest from potential purchasers to acquire the Divestment Business

210. As regards the type of the purchaser which would be suitable to acquire and develop the Divestment Business, the market test indicated  that
    the Divestment Business should be acquired by a company already active in the paper industry. Some respondents highlighted the fact  that  a
    financial investor would not be a suitable purchaser as it would lack the necessary know-how and experience and would  not  be  a  long-term
    strategically driven player. The market test also revealed some examples where  the  business  had  deteriorated  following  purchase  by  a
    financial investor. On the other hand, some respondents also pointed to examples of successful paper businesses owned by financial investors
    (indeed, Korsnäs is currently owned by the Notifying Party who is a financial investor).[125]

211. Finally, the respondents to the market test were of the view that the proposed commitments would attract suitable purchasers.[126]  This  is
    also confirmed by the fact that a number of respondents indicated that they would be interested in buying the Divestment Business.[127]

VI.4. Final Commitments

212. The Commission informed the Notifying Party of the results of the market test and of its own views on  16  November  2012.  To  address  the
    shortcomings identified by the Commission, the Notifying Party offered a revised set of commitments on 21 November 2012.

213. The main amended features of the Final Commitments include the following:

    (a) The purchaser shall have a presence in the paper or packaging board industry (including in, but not limited  to,  the  manufacturing  or
    converting, but in the latter case not relating to sack kraft or MF/UG kraft papers);

    (b) The purchaser shall have the right to terminate the transitional agreements with six  months'  notice,  and  the  remaining  supply  and
    service provision agreements with […] notice;

    (c) The […] taken into account to calculate the price of the supply agreements  will  be  negotiated  between  the  merged  entity  and  the
    purchaser, under the supervision of the monitoring trustee to ensure that […];

    (d) The monitoring trustee shall ensure that the methodology by which the […] is calculated is reasonable, taking into account  the  […]  as
    well as the […] in the paper manufacturing industry in general;

    (e) The monitoring trustee shall also in particular review and approve proposed agreements between the merged entity and the  purchaser  for
    the supply of inputs for PM2 (such as pulp, steam, water, pressurised air and electrical energy), for the use of joint  infrastructure,  for
    the provision of site services, maintenance services and/or transitional services, for the allocation of environmental rights, for  granting
    access to the re-winders, as well as for the coordination of the production at PM2 with the  rest  of  the  mill  in  terms  of  maintenance
    shutdown, to ensure compliance of such agreements with the commitments;

    (f) As regards the mentioned agreements for site services, the monitoring trustee will ensure in particular that  these  agreements  include
    appropriate safeguards to maintain confidentiality, as foreseen under clause 2.16 of the Schedule to the commitments;

    (g) As regards the pulp supply agreement, at the option of the purchaser, for a duration of […] the merged entity will supply the  purchaser
    a volume […] up to the current annual requirement of PM2,[…]; at the end of this period, the merged entity will for […] supply the purchaser
    with up to the same volume […];

    (h) Regarding the building lease, the rent payable under such lease shall be based on the merged entity's cost, consisting of  direct  costs
    relating to the building such as normal maintenance, real estate tax or heating, as well as a reasonable amount of common real estate  costs
    for the Gävle mill site, such as snow removal and others;

    (i) The agreement for the supply of electricity is also made optional upon the purchaser; and

    (j) The purchaser shall have the right to relocate PM2 to another location, provided that the  purchaser  so  wishes  and  bears  all  costs
    related thereto.

VI.5. Commission's assessment of the Final Commitments

VI.5.1.     Legal test for acceptability of commitments offered in Phase I

214. Under the Merger Regulation, the Commission has the power to accept commitments that are  deemed  capable  of  rendering  the  concentration
    compatible with the common market so that they will prevent a significant impediment of effective competition.

215. As indicated in point 9 of the Remedies Notice,[128] the commitments have to eliminate the competition concerns  entirely  and  have  to  be
    comprehensive and effective from all points of view. The Commission considers, inter alia, the type, scale and  scope  of  the  remedies  by
    reference to the structure and the particular characteristics of the market in which these serious doubts arise.

216. In merger cases, divestment commitments having a structural  effect  on  the  market  are  typically  preferable.[129]  In  the  case  of  a
    divestment, it is important that the divested activities consist of a viable business which,  if  operated  by  a  suitable  purchaser,  can
    compete effectively with the merged entity on a lasting basis.

217. In Phase I, commitments must clearly dispel all serious doubts.[130] It is also settled case law that  in  assessing  whether  the  remedies
    constitute a direct and sufficient response capable of dispelling serious doubts, the Commission enjoys  a  broad  discretion.[131]  In  its
    analysis the Commission relies on responses to the market test of remedies, submission of the Parties as well as additional evidence on  the
    file.

VI.5.2.     Suitability of the proposed commitments to remedy serious doubts in this case

218. In the present case, the Commission considers that the Final commitments are suitable to remove the  serious  doubts  raised  regarding  the
    markets for white sack kraft paper and white MF/UG kraft paper. The Final Commitments would remove  the  entire  overlap  arising  from  the
    proposed transaction in the supply of white sack kraft paper and white MF/UF kraft paper in the EEA. Thus the scale and scope of  the  Final
    Commitments will restore the market structure which exists pre-merger.

219. Since the Divestment Business is not a stand-alone legal entity but forms part of Korsnäs, it has necessarily to  be  “carved  out”  of  the
    remaining business. In such “carve out” operations, it is of utmost importance for the viability of the transferred  business  that  it  has
    access to all inputs and other resources, such as R&D or distribution networks, which are necessary for its independent operation.

220. As regards the viability of the Divestment Business and its ability to compete effectively with the merged entity on a  lasting  basis,  the
    Commission considers that these conditions are in principle met.

221. First, the Divestment Business is a profitable business and consists of Korsnäs' total business in white sack kraft and white MF/UG  papers.
    It would therefore have a structural effect on the market.

222. Second, although the paper machine to be divested is part of a production mill operated by the merged entity and would  remain  there  post-
    transaction (unless the purchaser opted to relocate the machine), this would not, in the Commission's view, hinder the  Divestment  Business
    from being operated independently in a viable and effective manner. In fact, there are a number of such arrangements  currently  present  in
    the industry.[132] In particular, the Divestment Business would have the necessary know-how and brands to operate a viable activity  on  the
    market on a stand-alone basis since the Divestment Business includes all trade names (except for the  Korsnäs  reference)  and  intellectual
    property rights which contribute to its current operation.

223. Third, in relation to the potential input supply agreements, the Commission does not consider  that  this  structure  is  likely  to  affect
    negatively the effectiveness of the remedy for the following reasons.  According  to  the  Notifying  Party,  the  costs  related  to  pulp,
    electricity, steam, water, pressurised air, chemicals, maintenance and site services, and the building  represent  about  […]%  of  Korsnäs'
    production costs of white kraft sack paper and white MF/UG kraft paper. However, the commitments  structure,  and  in  particular  the  role
    assigned to the monitoring trustee, would protect the purchaser from having to face inflated costs. Therefore, the merged entity  would  not
    be able to reduce the Divestment Business' competitiveness by increasing its costs post-transaction. In addition, though the  merged  entity
    might have visibility to the purchaser's costs covered by the input supply agreements, there would still be a sufficient proportion  of  the
    costs regarding which the purchaser and the merged entity would compete, for example those regarding […]. Furthermore, the  Notifying  Party
    submitted that costs for pulp and energy (steam and electricity), which represent […]% of the total costs, are publicly known. This has been
    confirmed by competitors during the market investigation[133] and therefore the parameters  of  competition  which  normally  exist  in  the
    industry would also exist between the merged entity and the purchaser.  The  Commission  therefore  considers  that  the  operation  of  the
    Divestment Business in premises shared with the merged entity, even with agreements that create long-term relationships between  the  merged
    entity and the purchaser would not prevent the development of a new independent competitive force.

224. The Commission also assessed whether a third party would be interested in acquiring a machine which is located in a  competitor's  mill,  or
    whether relocating the machine would for that reason be necessary and viable. As explained, market test respondents  do  not  consider  that
    operating the paper machine at the Gävle site would have a negative effect on the purchaser's production and  independence,  and  have  also
    explained that relocating the machine might also have economic disadvantages. Considering the above, the Commission is of the view that  the
    Divested Business can operate effectively and efficiently from its current location and that the relocation should be left as an option  for
    the purchaser.

225. For the reasons outlined above, the Final Commitments entered into by the Notifying Party are sufficient to eliminate the serious doubts  as
    to the compatibility of the transaction with the internal market.

VI.5.3.     Purchaser criteria

226. As regards the purchaser criteria, the market test indicated that knowledge of the paper industry is essential for any purchaser to  acquire
    the business and run it on a sustainable basis with a longer-term strategy.

227. The Final Commitments address this point since they require that the Divestment Business will be sold to a purchaser who has a  presence  in
    the paper or packaging board industry.

228. Any purchaser complying with the specific requirement regarding presence in the paper or packaging board industry will in addition  have  to
    comply with the general requirements, such as (i) to be independent from the merged entity, (ii) to have  the  financial  resources,  proven
    expertise and incentive to maintain and develop the Divestment Business as a viable and active competitive force  in  competition  with  the
    merged entity and other competitors, and (iii) neither to be likely to create prima facie competition concerns nor to give rise  to  a  risk
    that the implementation of the Commitments will be delayed, and it must, in particular, reasonably  be  expected  to  obtain  all  necessary
    approvals from the relevant regulatory authorities for the acquisition of the Divestment Business .

229. Furthermore, if a purchaser has a significant captive use the Commission may consider that the transfer of the Divestment Business  to  such
    a purchaser may not ensure the immediate restoration of effective competition because this might limit  the  quantities  available  for  the
    merchant market and therefore the competitive force of the purchaser.

VII.  CONDITIONS AND OBLIGATIONS

230. Under the first sentence of the second subparagraph of Article 6(2) of the Merger Regulation, the Commission  may  attach  to  its  decision
    conditions and obligations intended to ensure that the undertakings concerned comply with the commitments they have entered  into  vis-à-vis
    the Commission with a view to rendering the concentration compatible with the internal market.

231. The fulfillment of the measure that gives rise to the structural change of the market is a condition, whereas the implementing  steps  which
    are necessary to achieve this result are generally obligations on the parties. Where a condition is not fulfilled, the Commission’s decision
    declaring the concentration compatible with the internal market and the EEA Agreement no longer stands.  Where  the  undertakings  concerned
    commit a breach of an obligation, the Commission may revoke the clearance  decision  in  accordance  with  Article  8(6)(b)  of  the  Merger
    Regulation. The undertakings concerned may also be subject to fines and periodic penalty payments under Articles  14(2)  and  15(1)  of  the
    Merger Regulation.

232. In accordance with the basic distinction between conditions and obligations described in  paragraph  231,  the  decision  in  this  case  is
    conditional on full compliance with the requirements set out in Section B of the Final Commitments,  which  constitute  conditions,  whereas
    Sections C to F of the Final Commitments constitute obligations on the Notifying Party.

233. The full text of the Final Commitments is annexed to this decision as Annex I and forms an integral part thereof.

VIII. CONCLUSION

234. For the above reasons, the Commission has decided not to oppose the notified operation as modified by the  commitments  and  to  declare  it
    compatible with the internal market and with the functioning of the EEA Agreement, subject to full compliance with the conditions in Section
    B of the commitments annexed to the present decision and with the obligations contained in the other sections of the said commitments.  This
    decision is adopted in application of Article 6(1)(b) in conjunction with Article 6(2) of the Merger Regulation.

For the Commission
(signed)
Joaquín ALMUNIA
Vice-President

                                                                     Annex I

By hand and by fax: 00 32 2 296 4301
European Commission - Merger Task Force
DG Competition
Rue Joseph II 70 Jozef-II straat
B-1000 BRUSSELS

                                                    Case M.6682 – Kinnevik / Korsnäs /Billerud

                                                      COMMITMENTS TO THE EUROPEAN COMMISSION

PURSUANT TO ARTICLE 6(2) OF COUNCIL REGULATION (EC) NO. 139/2004 AS AMENDED ("THE MERGER REGULATION"), INVESTMENT  AB  KINNEVIK  ("KINNEVIK"),  A
COMPANY INCORPORATED UNDER THE LAWS OF SWEDEN, WITH ITS REGISTERED OFFICE AT SKEPPSBRON 18, SE-103 13 STOCKHOLM AND REGISTERED WITH  THE  SWEDISH
COMPANY REGISTER UNDER REGISTRY NUMBER 556047-9742, HEREBY PROVIDES THE  FOLLOWING  COMMITMENTS  (THE  "COMMITMENTS")  IN  ORDER  TO  ENABLE  THE
EUROPEAN COMMISSION (THE "COMMISSION") TO DECLARE THE PROPOSED ACQUISITION BY KINNEVIK  OF  SOLE  CONTROL  OVER  BILLERUD  ("THE  CONCENTRATION")
COMPATIBLE WITH THE COMMON MARKET AND THE EEA AGREEMENT BY ITS DECISION PURSUANT TO ARTICLE 6(1)(B) OF THE MERGER REGULATION (THE "DECISION").

The Commitments shall take effect upon the date of adoption of the Decision.

Whilst Kinnevik is the notifying party in case M.6682, and therefore it is Kinnevik who submits these Commitments and is  responsible  for  their
correct implementation, at the time these Commitments are implemented the owner of the Divestment Business is  the  Combined  Entity.  Therefore,
references in these Commitments to Kinnevik shall be understood to refer also to the Combined  Entity  where  appropriate.  In  particular,  when
these Commitments make reference to Kinnevik taking certain action, this should be understood as either Kinnevik taking  such  action  itself  or
Kinnevik causing the Combined Entity to take such action, as the case may be. Likewise, references to Kinnevik's compliance with the  Commitments
shall include the Combined Entity's compliance therewith.

This text shall be interpreted in the light of the Decision to the extent that the Commitments are attached as  conditions  and  obligations,  in
the general framework of Community law, in particular in the light of the Merger Regulation,  and  by  reference  to  the  Commission  Notice  on
remedies acceptable under Council Regulation (EC) No. 139/2004 and under Commission Regulation (EC) No. 802/2004.

Section A.  Definitions

For the purpose of the Commitments, the following terms shall have the following meaning:

Affiliated Undertakings: undertakings controlled by the Parties (as defined below) and/or by the ultimate parents of  the  Parties,  whereby  the
notion of control shall be interpreted pursuant to Article 3 Merger Regulation and in the light of the section on the  concept  of  concentration
in the Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No. 139/2004.

Billerud: Billerud AB, a company incorporated under the laws of Sweden, with its registered office at PO Box 703, SE-169  27  Solna,  Sweden  and
registered with the Swedish Company Register under registry number 556025-5001.

Closing: the transfer of the legal title of the Divestment Business to the Purchaser.

Combined Entity: the entity comprising Billerud and Korsnäs (which will change its trading name to "BillerudKorsnäs") together to be formed as  a
result of the implementation of the Concentration.

Divestment Business: manufacture and sale of the Products at Korsnäs' Gävle mill and associated assets personnel, intangible resources,  customer
goodwill and other resources, that the Parties commit to divest, as set out in the Schedule.

Divestiture Trustee: one or more natural or legal person(s), independent from the Parties, who is approved by the  Commission  and  appointed  by
Kinnevik and who has received from Kinnevik the exclusive Trustee Mandate to sell the Divestment Business to a Purchaser at no minimum price.

Effective Date: the date of adoption of the Decision.

First Divestiture Period: the period of […] from the Effective Date subject to any extension  thereto  granted  by  the  Commission  pursuant  to
paragraph 33 of these Commitments.

Hold Separate Manager: the person appointed by Kinnevik for the Divestment Business to manage the day-to-day business under  the  supervision  of
the Monitoring Trustee.

Key Personnel: all personnel necessary to maintain the viability and competitiveness of the Divestment Business, as listed in the Schedule.

Korsnäs: Korsnäs AB, a company incorporated under the laws of Sweden, with its registered office at Korsnäsvägen 181  -  187,  SE-801  81  Gävle,
Sweden and registered with the Swedish Company Register under registry number 556023-8338.

Monitoring Trustee: one or more natural or legal person(s), independent from the Parties, who is approved by  the  Commission  and  appointed  by
Kinnevik, and who has the duty to monitor Kinnevik's compliance with the conditions and obligations attached to the Decision.

Parties: Kinnevik, Korsnäs and Billerud (and following implementation of the Concentration, Billerud after name change to BillerudKorsnäs AB).

Personnel: all personnel currently fully employed within the Divestment Business, including Key Personnel, all as listed in the Schedule.

PM2: Paper machine no. 2 at Korsnäs' Gävle mill.

Products: White MF/UG Paper of normal industry standard, of various grammages, and white sack Paper  of  normal  industry  standard,  of  various
grammages.

Purchaser: the entity approved by the Commission as acquirer of the Divestment Business in accordance with the criteria set out in Section D.

Trade Names: the trade names, whether registered or not, under which Korsnäs offers for sale the Products at the date of  these  Commitments,  as
set out in the Schedule.

Trustee(s): the Monitoring Trustee and the Divestiture Trustee.

Trustee Divestiture Period: the period of […] from the end of the First Divestiture Period subject  to  any  extension  thereto  granted  by  the
Commission pursuant to paragraph 33 of these Commitments.

Section B.  The Divestment Business

      Commitment to divest

   1. In order to restore effective competition, Kinnevik commits to divest, or procure the divestiture of the Divestment Business by the end of
      the Trustee Divestiture Period as a going concern to a purchaser and on terms of sale approved by the Commission in  accordance  with  the
      procedure described in paragraph 14. To carry out the divestiture, Kinnevik commits to find a purchaser and to enter into a final  binding
      sale and purchase agreement for the sale of the Divestment Business within the First Divestiture Period. If Kinnevik has not entered  into
      such an agreement at the end of the First Divestiture Period, Kinnevik shall grant the Divestiture Trustee an exclusive  mandate  to  sell
      the Divestment Business in accordance with the procedure described in paragraph 23 in the Trustee Divestiture Period.

   2. Kinnevik shall be deemed to have complied with this commitment if, by the end of the Trustee Divestiture Period, Kinnevik has entered into
      a final binding sale and purchase agreement, if the Commission approves the Purchaser and the  terms  in  accordance  with  the  procedure
      described in paragraph 14 and if the closing of the sale of the Divestment Business takes place within a period not  exceeding  […]  after
      the approval of the purchaser and the terms of sale by the Commission.

   3. In order to maintain the structural effect of the Commitments, the Parties shall, for a period of 10 years after the Effective  Date,  not
      acquire direct or indirect influence over the whole or part of the Divestment Business, unless the Commission has  previously  found  that
      the structure of the market has changed to such an extent that the absence  of  influence  over  the  Divestment  Business  is  no  longer
      necessary to render the proposed concentration compatible with the common market.

      Structure and definition of the Divestment Business

   4. The present legal and functional structure of the Divestment Business as operated to date is described in  the  Schedule.  The  Divestment
      Business includes the following elements, as further detailed in the Schedule:

        a) all tangible and intangible assets (including Trade Names and intellectual property rights insofar as they exist), which contribute to
           the current operation or are necessary to ensure the viability and competitiveness of the Divestment Business;

        b) all contracts, leases, commitments and customer orders of the Divestment Business; all customer,  credit  and  other  records  of  the
           Divestment Business (items referred to under (a)-(c) hereinafter collectively referred to as "Assets");

        c) the Personnel;

        d) the benefit, should the Purchaser so require and at the option and discretion  of  the  Purchaser  […]  of  a  number  of  contractual
           arrangements under which the Combined Entity or Affiliated Undertakings will supply products or services to the  Divestment  Business,
           as detailed in the Schedule.

Section C.  Related commitments

      Preservation of Viability, Marketability and Competitiveness

   5. From the Effective Date until Closing, Kinnevik shall preserve the economic viability, marketability and competitiveness of the Divestment
      Business, in accordance with good business practice, and shall minimise as far as possible any risk of loss of  competitive  potential  of
      the Divestment Business. In particular Kinnevik undertakes:

        a) not to carry out any act upon its  own  authority  that  might  have  a  significant  adverse  impact  on  the  value,  management  or
           competitiveness of the Divestment Business or that might alter the nature and scope of  activity,  or  the  industrial  or  commercial
           strategy or the investment policy of the Divestment Business;

        b) to make available sufficient resources for the development of the Divestment Business, on the basis and continuation of  the  existing
           business plans

        c) to take all reasonable steps, including appropriate incentive schemes (based on industry practice), to encourage all Key Personnel  to
           remain with the Divestment Business.

      Hold-separate obligations of Parties

   6. Kinnevik commits, from the Effective Date until Closing, to keep the Divestment Business separate from the businesses it is retaining  and
      to ensure that Key Personnel of the Divestment Business - including the Hold Separate Manager  -  have  no  involvement  in  any  business
      retained and vice versa. Kinnevik shall also ensure that the Personnel does not report to any individual outside the Divestment Business.

   7. Until Closing, Kinnevik shall assist the Monitoring Trustee in ensuring that the Divestment Business is managed as a distinct and saleable
      entity separate from the businesses retained by the Parties. Kinnevik shall appoint a Hold Separate Manager who shall be  responsible  for
      the management of the Divestment Business, under the supervision of the Monitoring Trustee. The Hold Separate  Manager  shall  manage  the
      Divestment Business independently and in the best interest of the business with a view  to  ensuring  its  continued  economic  viability,
      marketability and competitiveness and its independence from the businesses retained by the Parties.

      Ring-fencing

   8. Kinnevik shall implement all necessary measures to ensure that it does not after the Effective Date obtain any business secrets, know-how,
      commercial information, or any other information of a  confidential  or  proprietary  nature  relating  to  the  Divestment  Business.  In
      particular, the participation of the Divestment Business in a central information technology  network  shall  be  severed  to  the  extent
      possible, without compromising the viability of the Divestment Business. Kinnevik  may  obtain  information  relating  to  the  Divestment
      Business which is reasonably necessary for the divestiture of the Divestment Business or whose disclosure to Kinnevik is required by law.

      Non-solicitation clause

   9. The Parties undertake, subject to customary limitations, not to solicit, and to procure that Affiliated Undertakings do not  solicit,  the
      Personnel transferred with the Divestment Business for a period of thirty-six (36) months after Closing.

      Due Diligence

  10. In order to enable potential purchasers to carry out a reasonable due diligence of the Divestment Business,  Kinnevik  shall,  subject  to
      customary confidentiality assurances and dependent on the stage of the divestiture process:

        a) provide to potential purchasers sufficient information as regards the Divestment Business, including allowing reasonable access to the
           Gävle site;

        b) provide to potential purchasers sufficient information relating to  the  Personnel  and  allow  them  reasonable  access  to  the  Key
           Personnel.

      Reporting

  11. Kinnevik shall submit written reports in English on potential purchasers of the Divestment Business and developments in  the  negotiations
      with such potential purchasers to the Commission and the Monitoring Trustee no later than 10 days after the end of every  month  following
      the Effective Date (or otherwise at the Commission's request).

  12. Kinnevik shall inform the Commission and the Monitoring Trustee on the preparation of the data room documentation and  the  due  diligence
      procedure and shall submit a copy of an information memorandum to the Commission and the Monitoring Trustee before sending the  memorandum
      out to potential purchasers.

Section D.  The Purchaser

  13. In order to ensure the immediate restoration of effective competition, the Purchaser, in order to be approved by the Commission, must:

        a) be independent of and unconnected to the Parties;

        b) have the financial resources, a presence in the paper or packaging board  industry  (including  but  not  limited  to  manufacture  or
           converting, but in the latter case not of sack or MF/UG paper), proven expertise and incentive to maintain and develop the  Divestment
           Business as a viable and active competitive force in competition with the Parties and other competitors;

        c) neither be likely to create, in the light of the information available to the Commission, prima facie competition  concerns  nor  give
           rise to a risk that the implementation of the Commitments will be delayed, and must, in particular, reasonably be expected  to  obtain
           all necessary approvals from the relevant regulatory authorities for the acquisition of the Divestment Business (the  before-mentioned
           criteria for the purchaser hereafter the "Purchaser Requirements").

  14. The final binding sale and purchase agreement shall be conditional on the Commission's approval. When Kinnevik has  reached  an  agreement
      with a purchaser, it shall submit a fully documented and reasoned proposal, including a copy of the final agreement(s), to the  Commission
      and the Monitoring Trustee. Kinnevik must be able to demonstrate to the Commission that the purchaser meets the Purchaser Requirements and
      that the Divestment Business is being sold in a manner consistent with the Commitments. For the approval, the Commission shall verify that
      the purchaser fulfils the Purchaser Requirements and that the  Divestment  Business  is  being  sold  in  a  manner  consistent  with  the
      Commitments. The Commission may approve the sale of the Divestment Business without one or more Assets or parts of the Personnel, if  this
      does not affect the viability and competitiveness of the Divestment Business after the sale, taking account of the proposed purchaser.

Section E.  Trustee

      I.    Appointment Procedure

  15. Kinnevik shall appoint a Monitoring Trustee to carry out the functions specified in the Commitments for a Monitoring Trustee. If  Kinnevik
      has not entered into a binding sales and purchase agreement one month before the end of the First Divestiture Period or if the  Commission
      has rejected a purchaser proposed by Kinnevik at that time or thereafter, Kinnevik shall appoint a Divestiture Trustee to  carry  out  the
      functions specified in the Commitments for a Divestiture Trustee. The appointment of the Divestiture Trustee shall take  effect  upon  the
      commencement of the Trustee Divestment Period.

  16. The Trustee shall be independent of the Parties, possess the necessary qualifications  to  carry  out  its  mandate,  for  example  as  an
      investment bank or consultant or auditor, and shall neither have nor become exposed to a  conflict  of  interest.  The  Trustee  shall  be
      remunerated by the Parties in a way that does not impede the independent and effective fulfilment of its mandate. In particular, where the
      remuneration package of a Divestiture Trustee includes a success premium linked to the final sale value of the  Divestment  Business,  the
      fee shall also be linked to a divestiture within the Trustee Divestiture Period.

      Proposal by Kinnevik

  17. No later than one week after the Effective Date, Kinnevik shall submit a list of one or more persons whom Kinnevik proposes to appoint  as
      the Monitoring Trustee to the Commission for approval. No later than one month before the end of the First  Divestiture  Period,  Kinnevik
      shall submit a list of one or more persons whom Kinnevik proposes to appoint as Divestiture Trustee to the Commission  for  approval.  The
      proposal shall contain sufficient information for the Commission to verify that the proposed Trustee fulfils the requirements set  out  in
      paragraph 16 and shall include:

        a) the full terms of the proposed mandate, which shall include all provisions necessary to enable the Trustee to fulfil its duties  under
           these Commitments;

        b) the outline of a work plan which describes how the Trustee intends to carry out its assigned tasks;

        c) an indication whether the proposed Trustee is to act as both Monitoring Trustee and Divestiture Trustee or whether different  trustees
           are proposed for the two functions.

      Approval or rejection by the Commission

  18. The Commission shall have the discretion to approve or reject the proposed Trustee(s) and to approve the proposed mandate subject  to  any
      modifications it deems necessary for the Trustee to fulfil its obligations. If only one individual or institution  is  approved,  Kinnevik
      shall appoint or cause to be appointed, the individual or institution concerned as Trustee, in accordance with the mandate approved by the
      Commission. If more than one individual or institution is approved, Kinnevik shall be free to choose the  Trustee  to  be  appointed  from
      among the individuals or institutions approved. The Trustee shall be appointed within one week of the Commission's approval, in accordance
      with the mandate approved by the Commission.

      New proposal by Kinnevik

  19. If all the proposed Trustees are rejected, Kinnevik shall submit the names of at least two more individuals  or  institutions  within  one
      week of being informed of the rejection, in accordance with the requirements and the procedure set out in paragraphs 16 and 19.

      Trustee nominated by the Commission

  20. If all further proposed Trustees are rejected by the Commission, the Commission shall nominate a Trustee, whom Kinnevik shall appoint,  or
      cause to be appointed, in accordance with a trustee mandate approved by the Commission.

      II.   Functions of the Trustee

  21. The Trustee shall assume its specified duties in order to ensure  compliance  with  the  Commitments.  The  Commission  may,  on  its  own
      initiative or at the request of the Trustee or Kinnevik, give any orders or instructions to the Trustee in order to ensure compliance with
      the conditions and obligations attached to the Decision.

      Duties and obligations of the Monitoring Trustee

  22. The Monitoring Trustee shall:

        i) propose in its first report to the Commission a detailed  work  plan  describing  how  it  intends  to  monitor  compliance  with  the
           obligations and conditions attached to the Decision.

       ii) oversee the on-going management of the Divestment Business with a view to ensuring its continued economic viability, marketability and
           competitiveness and monitor compliance by Kinnevik with the conditions and obligations attached to  the  Decision.  To  that  end  the
           Monitoring Trustee shall:

           (a)   monitor the preservation of the economic viability, marketability and  competitiveness  of  the  Divestment  Business,  and  the
                  keeping separate of the Divestment Business from the business retained by the Parties, in accordance with paragraphs 5 and 6 of
                  the Commitments;

           (b)   supervise the management of the Divestment Business as a distinct and saleable entity, in accordance with  paragraph  7  of  the
                  Commitments;

           (c)   (i) in consultation with Kinnevik, determine all necessary measures to ensure that Kinnevik does not after  the  effective  date
                  obtain any business secrets, know-how, commercial information, or any other information of a confidential or proprietary nature
                  relating to the Divestment Business, in particular strive for the severing of  the  Divestment  Business'  participation  in  a
                  central information technology network to the extent possible, without compromising the viability of the  Divestment  Business,
                  and (ii) decide whether such information may be disclosed to Kinnevik as  the  disclosure  is  reasonably  necessary  to  allow
                  Kinnevik to carry out the divestiture or as the disclosure is required by law;

           (d)   monitor the splitting of assets and the allocation of Personnel between the  Divestment  Business  and  Kinnevik  or  Affiliated
                  Undertakings;

           (e)   review and approve proposed agreements between the Combined Entity and the Purchaser for the supply of inputs for PM2  (such  as
                  pulp, steam, water, pressurised air and electrical energy), for the use of joint infrastructure,  for  the  provision  of  site
                  services, maintenance services and/or transitional services, for the allocation of environmental rights, for granting access to
                  the re-winders, as well as for the coordination of the production at PM2 with the rest of the  mill  in  terms  of  maintenance
                  shutdown, to ensure compliance of these agreements with these Commitments.

      iii) assume the other functions assigned to the Monitoring Trustee under the conditions and obligations attached to the Decision;

       iv) propose to Kinnevik such measures as the Monitoring Trustee considers necessary to ensure Kinnevik's compliance  with  the  conditions
           and obligations attached  to  the  Decision,  in  particular  the  maintenance  of  the  full  economic  viability,  marketability  or
           competitiveness of the Divestment Business, the holding separate of the Divestment Business and the  non-disclosure  of  competitively
           sensitive information;

        v) review and assess potential purchasers as well as the progress of the divestiture process and verify that, dependent on the  stage  of
           the divestiture process, (a) potential purchasers receive sufficient information relating to the Divestment Business and the Personnel
           in particular by reviewing, if available, the data room documentation, the information memorandum and the due diligence  process,  and
           (b) potential purchasers are granted reasonable access to the Personnel;

       vi) provide to the Commission, sending Kinnevik and the Combined Entity a non-confidential copy at the same time, a written report  within
           15 days after the end of every month. The report shall cover the operation and management of  the  Divestment  Business  so  that  the
           Commission can assess whether the business is held in a manner consistent with the Commitments and the  progress  of  the  divestiture
           process as well as potential purchasers. In addition to these reports, the Monitoring Trustee shall promptly report in writing to  the
           Commission, sending Kinnevik and the Combined Entity a non-confidential copy at the same time, if it concludes on  reasonable  grounds
           that Kinnevik is failing to comply with these Commitments;

      vii) within one week after receipt of the documented proposal referred to in paragraph 17, submit to the Commission a reasoned  opinion  as
           to the suitability and independence of the proposed purchaser and the viability of the Divestment Business after the Sale  and  as  to
           whether the Divestment Business is sold in a manner consistent with the conditions  and  obligations  attached  to  the  Decision,  in
           particular, if relevant, whether the Sale of the Divestment Business without one or more Assets or not all of  the  Personnel  affects
           the viability of the Divestment Business after the sale, taking account of the proposed purchaser; and

     viii) during the period of validity of these Commitments, ensure that the methodology by which the cost of capital referred to in  paragraph
           2.20 of the Schedule is calculated is reasonable (taking into account the proportionate capital of Korsnäs' Gävle mill as well as cost
           of capital in the paper manufacturing industry in general).

      Duties and obligations of the Divestiture Trustee

  23. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no minimum price the  Divestment  Business  to  a  purchaser,
      provided that the Commission has approved both the purchaser and the final binding sale and purchase  agreement  in  accordance  with  the
      procedure laid down in paragraph 14. The Divestiture Trustee shall include in the sale and purchase agreement such terms and conditions as
      it considers appropriate for an expedient sale in the Trustee Divestiture Period. In particular, the Divestiture Trustee  may  include  in
      the sale and purchase agreement such customary representations and warranties and indemnities as are reasonably  required  to  effect  the
      sale. The Divestiture Trustee shall protect the legitimate financial interests of Kinnevik and the Combined Entity, subject to  Kinnevik's
      unconditional obligation to divest at no minimum price in the Trustee Divestiture Period.

  24. In the Trustee Divestiture Period (or otherwise at the Commission's request), the Divestiture Trustee shall provide the Commission with  a
      comprehensive monthly report written in English on the progress of the divestiture process. Such reports shall be submitted within 15 days
      after the end of every month with a simultaneous copy to the Monitoring Trustee and a non-confidential copy to Kinnevik and  the  Combined
      Entity.

      III.  Duties and obligations of Kinnevik

  25. Kinnevik shall provide and shall cause its advisors to provide the Trustee with all such co-operation, assistance and information  as  the
      Trustee may reasonably require to perform its tasks. The Trustee shall have full and complete access to any of and the  Combined  Entity's
      or the Divestment Business' books, records, documents,  management  or  other  personnel,  facilities,  sites  and  technical  information
      necessary for fulfilling its duties under the Commitments and Kinnevik and the Divestment Business shall provide the Trustee upon  request
      with copies of any document. Kinnevik and the Divestment Business shall make available to  the  Trustee  one  or  more  offices  on  their
      premises and shall be available for meetings in order to provide the Trustee with all information necessary for  the  performance  of  its
      tasks.

  26. Kinnevik shall provide the Monitoring Trustee with all managerial and administrative support that it may reasonably request on  behalf  of
      the management of the Divestment Business. This shall include all administrative support functions relating  to  the  Divestment  Business
      which are currently carried out at Korsnäs' headquarters level. Kinnevik shall provide  and  shall  cause  its  advisors  to  provide  the
      Monitoring Trustee, on request, with the information submitted to potential purchasers, in particular give the Monitoring  Trustee  access
      to the data room documentation and all other information granted to potential purchasers in the due diligence  procedure.  Kinnevik  shall
      inform the Monitoring Trustee on possible purchasers, submit a list of potential purchasers, and keep the Monitoring Trustee  informed  of
      all developments in the divestiture process.

  27. Kinnevik shall grant or procure Affiliated Undertakings to grant comprehensive powers of  attorney,  duly  executed,  to  the  Divestiture
      Trustee to effect the sale, the Closing and all actions and declarations which the Divestiture Trustee considers necessary or  appropriate
      to achieve the sale and the Closing, including the appointment of  advisors  to  assist  with  the  sale  process.  Upon  request  of  the
      Divestiture Trustee, Kinnevik shall cause the documents required for effecting the sale and the Closing to be duly executed.

  28. Kinnevik shall indemnify the Trustee and its employees and agents (each an "Indemnified Party") and hold each Indemnified  Party  harmless
      against, and hereby agrees that an Indemnified Party shall have  no  liability  to  Kinnevik  for  any  liabilities  arising  out  of  the
      performance of the Trustee's duties under the Commitments, except to the extent that such liabilities  result  from  the  wilful  default,
      recklessness, gross negligence or bad faith of the Trustee, its employees, agents or advisors.

  29. At the expense of Kinnevik, the Trustee may appoint advisors (in particular for corporate finance or legal advice), subject to  Kinnevik's
      approval (this approval not to be unreasonably withheld or delayed) if the Trustee considers the appointment of such advisors necessary or
      appropriate for the performance of its duties and obligations under the Mandate, provided that any fees and other expenses incurred by the
      Trustee are reasonable. Should Kinnevik refuse to approve the advisors proposed by the Trustee the Commission may approve the  appointment
      of such advisors instead, after having heard Kinnevik. Only the Trustee shall be entitled to issue instructions to the advisors. Paragraph
      28 shall apply mutatis mutandis. In the Trustee Divestiture Period, the Divestiture Trustee may use advisors who  served  Kinnevik  during
      the Divestiture Period if the Divestiture Trustee considers this in the best interest of an expedient sale.

      IV.   Replacement, discharge and reappointment of the Trustee

  30. If the Trustee ceases to perform its functions under the Commitments or for any other good cause, including the exposure of the Trustee to
      a conflict of interest:

        a) the Commission may, after hearing the Trustee, require Kinnevik to replace the Trustee; or

        b) Kinnevik, with the prior approval of the Commission, may replace the Trustee.

  31. If the Trustee is removed according to paragraph 30, the Trustee may be required to continue in its function until a  new  Trustee  is  in
      place to whom the Trustee has effected a full hand over of all relevant information. The new Trustee shall be appointed in accordance with
      the procedure referred to in paragraphs 15-20.

  32. Beside the removal according to paragraph 30, the Trustee shall cease to act as Trustee only after the Commission has discharged  it  from
      its duties after all the Commitments with which the Trustee has been entrusted have been implemented. However, the Commission may  at  any
      time require the reappointment of the Monitoring Trustee if it subsequently appears that the relevant remedies might not have  been  fully
      and properly implemented.

Section F.  The Review Clause

  33. The Commission may, where appropriate, in response to a request from Kinnevik showing good cause and accompanied  by  a  report  from  the
      Monitoring Trustee:

        i) Grant an extension of the time periods foreseen in the Commitments, or

       ii) Waive, modify or substitute, in exceptional circumstances, one or more of the undertakings in these Commitments.

         Where Kinnevik seeks an extension of a time period, it shall submit a request to the Commission no  later  than  one  month  before  the
         expiry of that period, showing good cause. Only in exceptional circumstances shall Kinnevik be entitled to request an  extension  within
         the last month of any period.

Brussels, 21 November 2012

…………………………………………………………..
duly authorised for and on behalf of
Investment AB Kinnevik

                                                                     SCHEDULE

   1. The Divestment Business as operated to date has the following legal and functional structure:

   1. The Divestment Business comprises the PM2 paper machine in Korsnäs' Gävle paper mill, consisting  in  the  manufacture  and  sale  of  the
      Products from PM2, and including PM2 together with associated assets, personnel, contracts and other resources.  The  Divestment  Business
      comprises all of Korsnäs' production and sales of the Products.

   2. The Divestment Business is not incorporated separately. It is currently operated as a unit within Korsnäs.

   3. The Divestment Business is entirely based in and around the production facility in Korsnäs' Gävle mill, located at  Korsnäsverken,  SE-801
      11 Gävle, Sweden, with both Gävle PM2 and related employees being based there.

   4. The Divestment Business produces and sells the Products.

   5. The Divestment Business will be divested in its entirety, with all […] required for the Purchaser of the  Divestment  Business  to  assume
      PM2's current business activities of manufacturing and supplying the Products.

   6. At the Purchaser's option and discretion, the Combined Entity will in addition enter into arrangements with the  Divestment  Business  for
      the supply of inputs for PM2, such as […] on terms and conditions set out below.

   7. The Combined Entity will also, at the Purchaser's option and discretion, enter into certain other agreements for  matters  common  to  the
      Gävle mill, such as […].

   8. The Purchaser shall have the right to relocate PM2 to another location, provided that he so wishes and bears all  costs  related  thereto,
      and that the provisions of paragraphs 2.8 to 2.16 regarding notice periods shall apply.

  34. The Divestment Business includes the following Assets and Personnel:

      (a)  Tangible assets

         (i)      the following principal pieces of production equipment: […];

         (ii)     a lease contract for the building housing PM2, as per the attached drawing (cf. Annex 1), including […]

         (iii)    Inventory kept within the boundaries of the building referred to under (ii) immediately above, including items  such  as  pulp,
             chemicals, wires and felts, packaging materials, spare parts, work in progress, semi-finished products and finished products.

      (b)  Intangible assets

         (i)      the Trade Names: the Combined Entity will undertake to transfer to the Purchaser (i) any rights held by Korsnäs  in  the  Trade
             Names, and (ii) undertake towards the Purchaser to cease using the Trade Names. The Trade Names are

            White MF/UG:     ABC Bale Wrapping
                          ABC Bale Wrapping printed
                          ABC S
                          FB ES
                          FBCX
                          SF
                          SF WS
                          SF-N

            White Sack:      ABC
                          ABC Easy Repulpable
                          FB
                          FB Easy Repulpable
                          FB WS
                          FBC
                          FBC WS
                          ULTRA

             For the avoidance of doubt, use by the Purchaser of the above Trade Names shall always exclude the denotation "Korsnäs".

         (ii)     all Korsnäs' customer records and related documentation as reasonably necessary or relevant  (including  promotional  material,
             with the "Korsnäs" name covered up),  technical  specifications  and  product  certificates)  relating  to  the  Products  will  be
             transferred to the Purchaser. The Combined Entity undertakes to use all reasonable endeavours to obtain the consent of all  current
             customers purchasing the Products of PM2 (as set out in Annex 2) to the transfer from Korsnäs to the Purchaser of their  respective
             customer relationship. For this purpose, the customers shall be informed in writing of the coming into  force  of  the  Commitment.
             Customers who elect to switch shall have their existing agreements novated to the Purchaser and shall be released from any  further
             purchasing obligations from the Combined Entity. To the extent a customer relationship is  not  manifested  in  an  agreement,  the
             Combined Entity's responsibility under this provision shall be limited to contacting the customer in question with an aim to  cause
             such customer to source the Products from the Purchaser;

         (iii)    as regards supply agreements (including software license agreements to PM2's control systems), in the same way as for  customer
             agreements, all the agreements concerning supply only to PM2 will be transferred to the Purchaser. Agreements  for  the  supply  of
             products used at several paper machines at the mill site will remain with the Combined Entity. The Combined Entity will  offer  the
             Purchaser to source such supplies from the Combined Entity during a transitional period, at the end of which the Purchaser will  be
             responsible for securing its own supplies.

      (c)  licences, permits and authorisations:

   1. Environmental approvals and other permits relevant to the activity at PM2 are issued for the Gävle mill site as a whole, and hence do  not
      need to be modified to take into accountthe Purchaser.

      (d)  contracts, agreements, leases, commitments and understandings:

   2. There are none save for those referred to elsewhere in this Commitment.

      (e)  customer, credit and other records:

   3. All relevant customer, credit and other records relating to the Divestment Business will be transferred to the Purchaser.  In  the  manner
      described in point (b)(ii) above, the Combined Entity will seek to achieve that all existing trading  relationships  with  customers  will
      remain with the Divestment Business and will continue to be in effect.

      (f)  Personnel:

   4. The Divestment Business has in total […] full time employees, all of whom will be  transferred  with  the  Divestment  Business,  provided
      however that the employees themselves consent to the change of employer. Kinnevik undertakes to take all reasonable steps to encourage all
      Key Personnel to remain with the Divestment Business.

   5. Of these, […] employees of the Divestment Business are involved in the manufacture  of  the  Products,  while  there  are  […]  sales  and
      marketing personnel and […] technical customer support personnel.

      (g)  Key Personnel:

   6. The Key Personnel of the Divestment Business are the  following  current  Korsnäs  employees:  […]  (Head  PM2),  […]  (vice  Head/Process
      engineer), […] (technical customer support) and […] (Sales manager S&K).

      (h)  the arrangements for the supply with the following products or services by the  Combined  Entity  or  Affiliated  Undertakings  after
           Closing:

   7. Certain functions as may be required by the Divestment Business for its activities may, at the option and discretion of the Purchaser,  be
      the subject of agreements between the Combined Entity and the Purchaser. A Master Cooperation Agreement will be entered into  between  the
      Combined Entity and the Purchaser to serve as an umbrella for these various arrangements,  of  which  Kinnevik  undertakes  to  offer  the
      Purchaser the following.

         Transitional services

   8. At the option and discretion of the Purchaser, the Combined Entity will contract  with  the  Purchaser  for  certain  services  which  the
      Purchaser requires during a startup phase. These services vary depending on the nature of the Purchaser's position and at his option,  and
      may comprise:

        a) human resources: assistance with typical human resources tasks, such as payroll and other HR related services;

        b) planning sales, order management, production planning, order handling and finance: normal finance  tasks  such  as  billing,  accounts
           receivable etc.;

        c) central purchasing: central purchasing of certain products for the whole Gävle mill, which are also used on PM2,  including  chemicals
           for paper production: the Purchaser will be invited to participate;

        d) technical services for construction work;

        e) information services and software licences necessary for sales handling and running PM2;

        f) IT and telephony services; and

        g) logistics: assistance in organising logistics for supplies of goods produced to the Purchaser's  customers  (actual  deliveries  being
           made by third parties).

      The Combined Entity will cooperate with the Purchaser to provide a solution tailored to the Purchaser's requirements. The duration of such
      a contract will be determined in order to give the Purchaser time to secure the necessary production input and site services  for  PM2  to
      become self-sufficient in the areas where this is suitable, but will not be longer than  […].  The  Purchaser  shall  have  the  right  to
      terminate agreements entered into pursuant to this paragraph with six months' notice.

         Pulp

   9. At the option and discretion of the Purchaser, the Combined Entity will contract with  the  Purchaser  for  the  supply  of  pulp  to  the
      Purchaser, on the following terms. For a duration of […] from Closing ("the First Pulp Supply Period"), the Combined Entity will  contract
      with the Purchaser for the supply to it of a volume […] up to the current annual requirement of PM2, […]. At the end  of  the  First  Pulp
      Supply Period, the Combined Entity shall for a period of a further  […]  contract  with  the  Purchaser  for  the  supply  to  it  of  the
      aforementioned volume […]. The Purchaser shall have the right to terminate agreements entered into pursuant to  this  paragraph  with  […]
      notice.

  10. The Combined Entity will also contract with the Purchaser, at the latter's option and discretion, for  access  to  BT2  (a  storage  tower
      outside the PM2 building which is the entry point for incoming pulp to PM2), with pumps and pipes, for a duration of […] from Closing. The
      Purchaser shall have the right to terminate agreements entered into pursuant to this paragraph with […] notice.

         Steam

  11. At the option and discretion of the Purchaser, the Combined Entity will contract with the Purchaser for steam to be supplied to PM2 by the
      Combined Entity. […] for a duration of […] from Closing. The Purchaser shall have the right to terminate agreements entered into  pursuant
      to this paragraph with […] notice.

         Water and pressurised air

  12. At the option and discretion of the Purchaser, the Combined Entity will contract with  the  Purchaser  for  the  supply  and  disposal  of
      mechanically purified water, chemically purified water, sealing water and sanitary water, dry pressurised air and chemicals  to  PM2.  […]
      for a duration of […] from Closing. The Purchaser shall have the right to terminate agreements entered into  pursuant  to  this  paragraph
      with […] notice.

         Electricity

  13. The supply of electricity to PM2 will, at the option and discretion of the Purchaser, be provided by The  Combined  Entity  in  accordance
      with applicable legislation and regulation. There will also be a mechanism for balance management, so that  the  Purchaser  will  only  be
      charged for the electricity it actually uses, for a duration of […] from  Closing.  The  Purchaser  shall  have  the  right  to  terminate
      agreements entered into pursuant to this paragraph with […] notice.

         Building

  14. The Combined Entity will enter into a long term lease for […] from Closing with the Purchaser for the building in which  PM2  is  located.
      […].

      The Purchaser shall have the right to terminate agreements entered into pursuant to this paragraph with […] notice.

         Maintenance services

  15. The maintenance personnel and resources in the Gävle mill are common for the whole facility and there is no dedicated maintenance resource
      for PM2. The Purchaser will be responsible for all maintenance within the walls of the building housing PM2.  The  Combined  Entity  will,
      should the Purchaser so wish, contract with the Purchaser for such maintenance services for a duration  of  […]  from  Closing.  […].  The
      Purchaser shall have the right to terminate agreements entered into pursuant to this paragraph with […] notice.

         Site services

  16. At the option and discretion of the Purchaser, the Combined Entity will contract with the Purchaser for certain site services  which  will
      be provided by the Combined Entity for a duration of […] from Closing.  Such  services  will  include  things  such  as  fire  protection;
      security; railway maintenance; construction; transport and logistics within the Gävle site, including access to the Gävle mill's  planning
      system, mill information system, roll administration system, use of other mill warehouses, roll transport and handling  services;  postal;
      canteen and warehouse services. They will also cover "access control services" and will  require  that  the  Purchaser  ensures  that  all
      members of its staff, its subcontractors etc. comply with the Combined Entity' rules, principles  and  procedures  for  access.  […].  The
      agreement(s) concluded for site services shall be drawn up in  consultation  with  the  Monitoring  Trustee  to  ensure  that  appropriate
      safeguards to maintain confidentiality are included. The Purchaser shall have the right to terminate agreements entered into  pursuant  to
      this paragraph with […] notice.

         Environmental

  17. In addition to the supply agreements, the parties  will  also  need  to  enter  into  an  agreement  governing  the  allocation  of  their
      environmental rights and obligations. This Ancillary Agreement will also set out the terms on which  the  Purchaser  would  operate  under
      existing environmental permits for the Gävle mill site.

         Other

  18. Two so-called "re-winders" (omrullningsmaskin) are located within the PM2  building  (cf.  list  above).  […]  The  Combined  Entity  will
      therefore contract with the Purchaser for access to one of the re-winders […], and such access will be a condition of the sale.

  19. The Combined Entity will agree with the Purchaser on a minimum level coordination of production at PM2 with the rest of the mill, e.g.  in
      terms of maintenance shutdown, in order to ensure operational and technical efficiency.

  20. […].

  35. The Divestment Business shall not include:

   1. For the sake of clarity, shall not form part of the Divestment Business:

         (i)      the "Korsnäs" name and any rights thereto; and

         (ii)     any resources, contracts or know-how specifically relating to the […] that has been produced on PM2.

                                                                     ANNEX 1

                                                                     ANNEX 2

CustNoCustomerCountryCustNoCustomerCountryCustNoCustomerCountryCustNoCustomerCountry[…][…][…][…][…][…][…][…][…][…][…][…]
-----------------------
[1]  OJ L 24, 29.1.2004, p. 1 ("the EU 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]  Publication in the Official Journal of the European Union No C 312 of 16.10.2012, p. 23.
[3]  Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C95, 16.04.2008, p1). 
[4]  Form CO relating to the notification of a concentration pursuant to Regulation (EC) No 139/2004, consolidated with amendments introduced by Commission Regulation (EC) No 1033/2008, Annex I of Commission Regulation (EC) No 802/2004 of 7 April 2004 implementing Council Regulation (EC) No 139/2004 (published in OJ L 133, 20.04.2004, p.1) amended by Commission Regulation (EC) No 1033/2008 of 20 October 2008 (published in OJ L 279, 22.10.2008, p. 3).
[5]  Coated paper has a thin layer of mineral slurry on one of the sides. This is done when appearance of the paper is important and in order to achieve better printability.
[6]  To a varying extent plastic is also used for these purposes.
[7]  Plastic can also be used in many of these applications. 
[8]  M.210 – Mondi/Frantschach, M.499 – Jefferson Smurfitt/Saint Gobain, M.646 – Repola/Kymmene, M.960 – Frantschach/MMP/Celulozy Swiecie, M.1884 – Mondi/Frantschach/Assidomän. While in Mondi/Frantschach and Mondi/Frantschach/Assidomän the Commission assessed the effects of the transaction in the white sack kraft paper segment, in Jefferson Smurfit/St Gobain and Repola/Kymmene the Commission specifically referred to sack kraft paper as brown paper. 
[9]  M.2243 – Stora Enso/AssiDomän/JV and M.5155 – Mondi/Loparex Assets. In Stora Enso/AssiDomän/JV, the Commission referred to the market as the "sack and kraft paper" market, while in Mondi/Loparex Assets the Commission referred to it as "kraft paper" market.
[10]  M.2243 – Stora Enso/Assidomän/JV and M.5155 – Mondi/Loparex Assets.
[11]  M.646 – Repola/Kymmene, recital 29.
[12]  As regards […], the Notifying Party points out that Eurokraft data indicates that […].
[13]  Forum Packaging's reply to question 16 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[14]  See Jonsac's reply to question 16 of the Commission's request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[15]  See Sacchettificio Nationale G Corazza's reply to question 15 of the Commission's request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[16]  See Mondi's reply to question 16 of the Commission's request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[17]  Bovo's reply to question 18.2 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[18]  Cartiera Lucchese's reply to question 22.1 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Competitors – (Q. 1), dated 11 October 2012.
[19]  Alier's reply to question 25 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Competitors – (Q. 1), dated 11 October 2012.
[20]  Fiorini's reply to question 20.2 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[21]  Metsä Board's reply to question 20.2 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[22]  Forum Packaging's reply to question 21 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[23]  Oyka Kagit Ambalaj's reply to question 30 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Competitors – (Q. 1), dated 11 October 2012.
[24]  M.2243 – Stora Enso/Assidomän/JV, recital 21, and M.5155 – Mondi/Loparex Assets, recital 32.
[25]  Replies to question 24 the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[26]  Valvosacco's reply to question 24 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[27]  Forum Packaging's reply to question 26 of the Commission's request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers – (Q. 2), dated 8 October 2012.
[28]  Segezha's reply to question 24 of the Commission’s request for information pursuant to Article 11 of Council Regulation (EC) No 139/2004 addressed to Customers
-----------------------
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-disclo[pic][29]$./07<=>?@AVXYZ\òçÜÑÊçÃ¼± Ã¼–Ã?zeTG<Êçh*4Òhqv€B*phÿÿÿh*4Òhqv€B*CJphÿÿÿ h*4Òh­6?B*CJ aJ phÿÿÿ)jh*4ÒhogÈB*U[pic]mHnHphÿÿÿu[pic]h*4Òh”"q(jh*4Òh”"qU[pic]mHnHsH tH usure 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 VERSION

MERGER PROCEDURE