CELEX: 32016M8130
Language: en
Date: 2016-10-28 00:00:00
Title: Commission Decision of 28/10/2016 declaring a concentration to be compatible with the common market (Case No COMP/M.8130 - IMERYS / ALTEO CERTAIN ASSETS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                              Brussels, 28.10.2016
                                                              C(2016) 7106 final
                                                                                PUBLIC VERSION
                                                                In the published version of this decision,
                                                                some information has been omitted
                                                                pursuant to Article 17(2) of Council
                                                                Regulation (EC) No 139/2004 concerning
                                                                non-disclosure of business secrets and other
                                                                confidential information. The omissions are
                                                                shown thus […]. Where possible the
                                                                information omitted has been replaced by
                                                                ranges of figures or a general description.
                                                              To the notifying party
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---                               TABLE OF CONTENT
I   THE PARTIES ............................................................................................................ 4
II  THE OPERATION...................................................................................................... 4
III UNION DIMENSION ................................................................................................. 5
IV RELEVANT MARKETS ............................................................................................ 5
    IV.1. Description of products ..................................................................................... 5
          IV.1.1. Bauxite and alumina ............................................................................ 5
          IV.1.2. Specialty aluminas ............................................................................... 6
          IV.1.3. Other products ..................................................................................... 6
    IV.2. Product market definitions ................................................................................ 7
          IV.2.1. The Notifying Party's proposed product market definitions................ 7
          IV.2.2. Previous Commission decisions .......................................................... 9
          IV.2.3. The Commission's assessment........................................................... 10
          IV.2.4. Conclusion on the relevant product markets ..................................... 16
    IV.3. Geographic market definition .......................................................................... 16
          IV.3.1. The Notifying Party's proposed geographic market definitions ........ 16
          IV.3.2. Previous Commission decisions ........................................................ 17
          IV.3.3. The Commission's assessment........................................................... 17
          IV.3.7. Conclusions on the relevant geographic markets .............................. 19
V   COMPETITIVE ASSESSMENT OF HORIZONTAL OVERLAPS ....................... 19
    V.1. White fused alumina for abrasive applications ............................................... 21
          V.1.1. The Notifying Party's arguments ....................................................... 21
          V.1.2. The Commission's assessment........................................................... 21
          V.1.3. Conclusion ......................................................................................... 25
    V.2. White fused alumina for refractory applications ............................................. 26
          V.2.1. The Notifying Party's arguments ....................................................... 26
          V.2.2. The Commission's assessment........................................................... 26
          V.2.3. Conclusion ......................................................................................... 29
    V.3. Bubble alumina ................................................................................................ 29
          V.3.1. The Notifying Party's arguments ....................................................... 29
          V.3.2. The Commission's assessment........................................................... 29
          V.3.3. Conclusion ......................................................................................... 32
    V.4. Brown fused alumina for abrasive applications .............................................. 33
          V.4.1. The Notifying Party's arguments ....................................................... 33
          V.4.2. The Commission's assessment........................................................... 33
          V.4.3. Conclusion ......................................................................................... 38
    V.5. Brown fused alumina for refractory applications ............................................ 39
          V.5.1. The Notifying Party's arguments ....................................................... 39
          V.5.2. The Commission's assessment........................................................... 39
          V.5.3. Conclusion ......................................................................................... 42
    V.6. Zirconia alumina for abrasive applications and sintered bauxite for
          abrasive applications ....................................................................................... 42
                                                             2
 ---pagebreak---      V.7. Other non-affected markets ............................................................................. 43
            V.7.1. Tabular alumina for refractory applications ...................................... 43
            V.7.2. Zirconia alumina for refractory applications ..................................... 43
VI COMPETITIVE ASSESSMENT OF RELATED VERTICAL MARKETS............ 43
     VI.1. The Notifying Party's arguments ..................................................................... 44
     VI.2. The Commissions' assessment......................................................................... 44
            VI.2.1. Framework for the assessment of non-horizontal effects .................. 44
            VI.2.2. Input foreclosure ................................................................................ 45
            VI.2.3. Customer foreclosure......................................................................... 46
     VI.3. Conclusion ....................................................................................................... 46
VII MODIFICATIONS OF THE TRANSACTION ....................................................... 47
     VII.1. Framework for the assessment of the commitments ....................................... 47
     VII.2. Commitments submitted by the Notifying Party ............................................. 48
     VII.3. Initial Commitments ........................................................................................ 48
            VII.3.1. Description of the Initial Commitments ............................................ 48
            VII.3.2. Assessment of the Initial Commitments ............................................ 49
            VII.3.3. Conclusion on the Initial Commitments ............................................ 52
     VII.4. Commitments of 14 October 2016 .................................................................. 52
            VII.4.1. Description of the Commitments of 14 October 2016 ...................... 52
            VII.4.2. Assessment of the Commitments of 14 October 2016 ..................... 52
            VII.4.3. Conclusion on the Commitments of 14 October 2016 ...................... 53
     VII.5. Final Commitments ......................................................................................... 53
            VII.5.1. Description of the Final Commitments ............................................. 53
            VII.5.2. Assessment of the Final Commitments ............................................. 53
            VII.5.3. Conclusion on the Final Commitments ............................................. 54
VIII CONDITIONS AND OBLIGATIONS ..................................................................... 54
IX CONCLUSION ......................................................................................................... 54
X    APPROVAL OF THE SPA AMENDMENT SUBMITTED ON 27 OCTOBER
     2016 PURSUANT TO PARAGRAPH 5 OF THE COMMITMENTS .................... 55
                                                                3
 ---pagebreak--- Subject:     Case M.8130 – Imerys / Alteo certain assets
             Commission decision pursuant to Article 6(1)(b) in conjunction with
             Article 6(2) of Council Regulation No 139/20041 and Article 57 of the
             Agreement on the European Economic Area2
(1)     On 9 September 2016, the Commission received notification of a proposed
        concentration pursuant to Article 4 and following a referral pursuant to Article 4(5)
        of the Merger Regulation by which the undertaking Imerys S.A. (‘Imerys’, France)
        acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of
        the whole of the undertakings Alteo ARC (France) and Alufin GmbH Tabularoxid
        (‘Alufin’, Germany) formerly owned by Alteo Holding SAS (‘Alteo’, France) by
        way of purchase of shares (the ‘Transaction’).3 Imerys is hereinafter designated as
        the ‘Notifying Party’. Alteo ARC and Alufin are collectively referred to as the
        ‘Target’, and together with Imerys as the ‘Parties’, whilst the undertaking resulting
        from the Transaction is referred to as ‘the new entity’ or ‘the merged entity’.
I       THE PARTIES
(2)     Imerys is a multinational mining company operating in four business groups:
        (i) energy solutions and specialties, (ii) filtration and performance additives,
        (iii) ceramic materials, and (iv) high resistance minerals.
(3)     Alteo is a fully integrated, global producer and supplier of non-metallurgical and
        specialty aluminas for a wide range of sectors. In particular Alteo operates in the
        refractories, abrasives, glass and flame retardants markets and the chemical
        industry. Alteo ARC operates two specialty alumina plants in France (La Bâthie, in
        the Alps, focused on white fused alumina, and Beyrède, in the Pyrenees, focused
        on brown fused alumina). Alufin operates one plant in Teutschenthal, Germany,
        focused on the production of tabular alumina. Alteo Gardanne, a wholly owned
        subsidiary of Alteo, constituting its headquarters and operating a plant in Gardanne
        producing non-metallurgical grade alumina, is not part of the Transaction.
(4)     The Target is active in the production of specialty aluminas for refractory and
        abrasive applications.
II      THE OPERATION
(5)     The operation will consist of the acquisition by Imerys of 100% of the shares and
        voting rights of the Target. After the completion of the Transaction, the Target will
        be solely controlled by Imerys. The operation therefore constitutes a concentration
        within the meaning of Article 3(1)(b) of the Merger Regulation.
1       OJ L 24, 29.1.2004, p. 1 (the ‘Merger Regulation’). With effect from 1 December 2009, the Treaty
        on the Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the
        replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The
        terminology of the TFEU will be used throughout this decision.
2       OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
3       Publication in the Official Journal of the European Union No C 342, 17.09.2016, p. 12.
                                                         4
 ---pagebreak--- III      UNION DIMENSION
(6)      The operation does not have a Union dimension within the meaning of Article 1 of
         the Merger Regulation as it does not meet the thresholds of Article 1(2) or
         Article 1(3).4
(7)      However, on 7 July 2016 the Parties informed the Commission by means of a
         reasoned submission that the concentration was capable of being reviewed under
         the national competition laws of three Member States5 and moreover, its
         competitive effects would likely go beyond the territory of one Member State. On
         that basis, and under Article 4(5) of the Merger Regulation, the Parties requested
         the Commission to examine the concentration. None of the Member States
         competent to examine the concentration under its national law expressed their
         disagreement within 15 working days of receiving the reasoned submission.
(8)      Therefore, the concentration is deemed to have a Union dimension pursuant to
         Article 4(5) of the Merger Regulation.
IV       RELEVANT MARKETS
IV.1.    Description of products
(9)      The operation concerns the markets for the production and supply of certain kinds
         of bauxites and aluminas. For the purposes of this decision, the following terms are
         used.
IV.1.1. Bauxite and alumina
(10)     Bauxite is an ore rich in aluminium minerals. It is obtained through mining at
         various sites across the world. The majority of bauxite is further processed into
         (calcinated) alumina, but a certain amount of mined bauxite is processed directly
         for use in non-metallurgical applications without first refining it into calcinated
         alumina.
(11)     Alumina is a common name for aluminium oxide (Al2O3). It is commonly produced
         by refining bauxite in the five-stage Bayer thermo-chemical process that includes
         grinding, digestion, clarification, precipitation and calcination. The final product of
         the Bayer process is also known as calcinated alumina, and it is a white sugar-like
         granular material.6
(12)     Calcinated alumina has two main uses: (i) metallurgical use for the smelting of
         aluminium, that is the extraction of aluminium metal, and (ii) non-metallurgical
         applications. Over 90% of calcinated alumina is used in the production of
         aluminium metal, in which case it is referred to as ‘smelter grade alumina’.
         However, only the non-metallurgical segment is relevant for the present case.
(13)     Within the non-metallurgical applications, calcinated alumina can be consumed in
         two main ways: (i) as such without further refining and (ii) after further refining
         through fusing or sintering. Only the processed products are relevant for the present
         case.
4      The thresholds in Article 1(2) of the Merger Regulation are not met since the combined worldwide
       turnover of the Parties in 2015 was EUR 4 181 million. The Parties also do not meet the turnover
       thresholds in at least three Member States required by Article 1(3)(c) of the Merger Regulation.
5      Germany, Spain and Austria.
6      See, for instance M.1003 – Alcoa / Inespal, paragraph 12, and M.1693 – Alcoa / Reynolds, recital 9.
                                                         5
 ---pagebreak--- IV.1.2. Specialty aluminas
(14)    Specialty aluminas is a term used by the Notifying Party to refer to high-purity
        aluminas that, having been produced from calcinated alumina or calcinated bauxite,
        are used for specific non-metallurgical applications, namely in abrasive or
        refractory materials.
                Abrasive materials are used to shape or finish a work piece through
                 rubbing, which leads to part of the work piece being worn away by
                 friction. While finishing a material often entails polishing it to gain a
                 smooth or reflective surface, the process can also involve roughening.
                 Abrasives are used very extensively in a wide variety of industrial,
                 domestic and technological applications.
                Refractory materials are inorganic non-metallic materials that can
                 withstand high temperatures without undergoing physical or chemical
                 changes, while remaining in contact with molten slag, metal or gases.
                 They are used, for instance, in linings for furnaces, kilns, incinerators and
                 reactors, as well as to make crucibles and moulds for casting glass and
                 metals, and for surfacing flame deflector systems for rocket launch
                 structures.
(15)    The Notifying Party has included fused aluminas, bubble alumina and tabular
        alumina but not zirconia alumina within the category of specialty aluminas.
(16)    Fused aluminas (or ‘artificial corundums’) are obtained by fusing calcinated
        alumina or bauxite in electric arc furnaces at high tempatures. Fused aluminas have
        high Al2O3 content or purity and are suitable, for instance, for refractory and
        abrasive applications. Fused alumina is produced in two types: white fused alumina
        and brown fused alumina.
                Brown fused alumina (‘BFA’) is produced by calcinating bauxite directly
                 (without refining it in the Bayer process) and then fusing it. Its Al2O3
                 content is high (around 95%) but slightly less than in white fused alumina.
                White fused alumina (‘WFA’) is produced through fusing calcinated
                 alumina (that is, following refining in the Bayer process). Its Al2O3 content
                 is typically slightly higher than in BFA, usually above 97%, and it is thus
                 purer than BFA.
(17)    Bubble alumina is a type of WFA. However, at the end of the production process,
        the hot material is poured out from the furnace through a high pressure air stream.
        The molted stream of material is transformed into a barrage of particles that are
        cooled rapidly. The spraying process typically causes the particles to form hollow
        spheres or ‘bubbles’.
(18)    Tabular alumina (also known as ‘sintered alumina’) is obtained by applying a
        sintering process to calcinated alumina rather than fusing it. It is characterised by
        high purity and high refractoriness, and it is highly resistant to thermal shocks,
        wear and chemical reactions. Tabular alumina is typically used for refractory
        purposes.
IV.1.3. Other products
(19)    Sintered bauxite is bauxite that has been directly calcinated (without being purified
        in the Bayer process) and then sintered. Sintered bauxite consists of grains that are
        very dense and tough.
(20)    Zirconia alumina is produced through the fusion of calcinated alumina and certain
        compounds containing zirconium. Zirconia alumina has a strong ability to fracture
                                                  6
 ---pagebreak---         when heat from the surface of work reaches critical levels. Zirconia alumina
        contains a relatively high Al2O3 content and is predominantly used in abrasive
        applications due to its superior hardness but can also be used in certain refractory
        applications.
(21)    An overview of the value chain and the products concerned is shown in Figure 1.
       Figure 1 - Overview of the value chains and products in question
Source: Form CO
IV.2.   Product market definitions
IV.2.1. The Notifying Party's proposed product market definitions
(22)    In the light of previous Commission decisions,7 the Notifying Party suggests
        segmenting the product markets by kind of mineral and by end-use application of
        such minerals.8 This is due to the fact that minerals either hardly ever provide
        properties which exactly match the features and properties of another mineral and
        there are other constraints which make substitution practically unfeasible (for
        instance price or scarcity of the resource). Following this approach, the Notifying
        Party submits that the Parties' activities overlap horizontally in the following
        segments:
                  specialty aluminas for abrasive applications (including WFA, BFA and
                   bubble alumina),
7      See the summary in section IV.2.2.
8      See Form CO, paragraph 98.
                                                     7
 ---pagebreak---                    specialty aluminas for refractory applications (including tabular alumina,
                    WFA, BFA and bubble alumina),
                   zirconia alumina for abrasive applications,
                   zirconia alumina for refractory applications,
                   sintered bauxite for abrasive applications.
(23)     The Notifying Party argues that a further sub-segmentation of the markets for
         specialty aluminas both for abrasive and refractory applications is not appropriate
         for the reasons set out in sections IV.2.1.1 to IV.2.1.3.9
(24)     As regards vertical relationships, the Notifying Party identifies a vertical link
         between the Parties' upstream activities in aluminas for refractory applications and
         Imerys' downstream activities in the market for refractories, see section IV.2.1.4.
IV.2.1.1.        Sub-segmentations in specialty aluminas for refractory applications
(25)     Concerning specialty aluminas for refractory applications, the Notifying Party
         submits that WFA and BFA might differ in respect to purity and therefore also in
         price. While BFA has an Al2O3 content around or above 95 % and is slightly less
         friable, WFA usually has an Al2O3 content above 97 % and thus is slightly purer.
         The Notifying Party emphasises, however, that WFA and BFA are interchangeable
         in view of their important similarities, in particular hardness (grade 9 on the Mohs
         scale of hardness), thermal stability and toughness. According to the Notifying
         Party, both WFA and BFA are used for the same functions (heat resistance) in the
         same refractory applications. The Notifying Party submits further that the higher
         the level of purity of the produced BFA, the higher the level of substitutability with
         WFA.
(26)     Regarding tabular alumina, used typically in refractory applications, the Notifying
         Party argues that (i) it has the same production process as WFA and only differs in
         terms of its finishing, (ii) has a very high purity (Al2O3 of around 99 %) and
         (iii) acts as a substitute for fused alumina in refractory applications. According to
         the Notifying Party, the substitutability is particularly clear when looking at the
         demand-side given that in refractory applications the most important quality of the
         alumina-product is its level of alumina content, this being very high in tabular
         alumina.
IV.2.1.2.        Sub-segmentations in specialty aluminas for abrasive applications
(27)     The Notifying Party argues that, like in refractory applications, WFA and BFA for
         abrasive applications are produced based on the same production process and
         therefore share for instance a particular hardness (grade 9 on the Mohs scale),
         strong thermal and chemical stability, and a high degree of thermal shock
         resistance. Therefore, according to the Notifying Party, WFA and BFA for abrasive
         applications are included in the same product market.
IV.2.1.3.        Bubble alumina as a separate product market
(28)     The Notifying Party argues further that bubble alumina – regardless of whether it is
         used in abrasive or refractory applications – is a mere variation of WFA and is only
         used in certain niche applications. The Notifying Party submits that bubble alumina
         consists of the exact same raw materials and follows the same production process,
         except that WFA is atomised or sprayed with compressed air at the very end of the
9         See Form CO, paragraphs 118, 124, 132, 135, 140, 141.
                                                       8
 ---pagebreak---          process. The Notifying Party submits further that the same furnace can be used for
         the production of WFA and bubble alumina and that only the pouring system needs
         to be adapted. According to the Notifying Party, all bubble alumina producers also
         manufacture and supply fused aluminas, and all suppliers of fused aluminas can
         easily manufacture and supply bubble alumina.
IV.2.1.4.        Downstream market for refractories
(29)     The Notifying Party submits that specialty aluminas for refractory applications are
         an important input for the downstream markets for refractories where Imerys is
         active through its subsidiary Calderys.
(30)     The Notifying Party defines refractories as non-metallic materials, produced by the
          mixing of aggregates (including inter alia specialty aluminas) with chemical or
          hydraulic binders. They are primarily employed as heat buffers or linings in
          industrial devices such as kilns, furnaces and ovens.10 The Notifying Party submits
          that the market for refractories can be segmented by:
                  Form-type, thereby distinguishing between:
                         shaped refractories and
                         unshaped refractories.
                  Raw-material and chemical composition, thereby distinguishing between:
                         basic refractories and
                         non-basic/acid refractories.
(31)     Concerning a form-based segmentation the Notifying Party explains that shaped
         refractories are supplied in a form that can be readily used by customers (for
         instance bricks). Unshaped refractories, namely monolithic (powder-based)
         products, are used for linings and are usually processed and applied in the
         equipment itself.11
(32)     Concerning a segmentation by raw-material and chemical composition, the
         Notifying Party concludes that basic refractories are made mainly of magnesium
         and calcium oxide and are not attacked or affected by alkaline materials. Non-
         basic/acid refractories are not attacked or affected by acidic materials and are based
         mainly on alumina and silica.12
IV.2.2. Previous Commission decisions
(33)     In Starck/Wienerberger the Commission concluded that there is a common market
         for natural and artificial corundum (alumina), as both are substitutable regarding
         many applications.13 The Commission further divided the market for aluminas in
         separate sub-segments by application: for abrasive applications, refractory
10        See Form CO, paragraph 180.
11        See Form CO, paragraph 181.
12        See Form CO, paragraph 181.
13        See M.702 – Starck/Wienerberger, paragraph 12.
                                                      9
 ---pagebreak---          applications and other applications.14 The Commission left open whether the
         market for aluminas used in refractory applications included tabular alumina.15
(34)     In Creditanstalt-Bankverein/Treibacher the Commission sub-segmented the overall
         market for artificial corundum (artificial alumina) in separate markets for abrasive
         applications, refractory applications and other applications.16 Whether there are
         separate markets for BFA and WFA due to the different qualities of the products
         was left open.17 The Commission has however decided that zirconia alumina has to
         be distinguished from the other types of alumina. It forms a separate market as it
         differs in its production process, price and product characteristics and is therefore
         only used in special grinding applications.18
(35)     In EN+/Glencore/Sual/UC Rusal the Commission again left open whether BFA
         and WFA constitute separate product markets.19
(36)     In Cookson/Foseco the Commission discussed the market for refractories, that is to
         say the market downstream of the production of specialty aluminas for refractory
         applications. The Commission segmented the markets for refractories by form and
         raw material / chemical composition. The Commission thus defined a separate
         segment for unshaped non-basic refractories.20
IV.2.3. The Commission's assessment
IV.2.3.1.        General observations
(37)     The results of the market investigation confirm the Notifying Party’s submissions
         and the findings in previous cases concerning the segmentation of aluminas
         according to their end use into abrasive and refractory applications.21
(38)     Nonetheless, what the Notifying Party calls ‘specialty alumina’ should be
         segmented into narrower markets. In particular, (i) tabular alumina should not be
         considered to belong to the same relevant market as fused alumina (see
         section IV.2.3.2) and (ii) fused alumina should be further segmented into BFA and
         WFA (see section IV.2.3.3).
(39)     Furthermore, bubble alumina could be considered to constitute a separate sub-
         market within WFA (see section IV.2.3.4) and further sub-segmentations within
         both WFA and BFA could be considered (see section IV.2.3.5).
(40)     As regards zirconia alumina (see section IV.2.3.6) and sintered bauxite (see
         section IV.2.3.7), both of those products constitute separate product markets while
         additional sub-segmentations can be left open for the purposes of this case.
14        See M.702 – Starck/Wienerberger, paragraph 13.
15        See M.702 – Starck/Wienerberger, paragraph 15.
16        See M.811 – Creditanstalt-Bankverein/Treibacher, paragraph 15.
17        See M.811 – Creditanstalt-Bankverein/Treibacher, paragraph 15.
18        See M.811 – Creditanstalt-Bankverein/Treibacher, paragraph 18.
19        See M.4441 – EN+/Glencore/Sual/UC Rusal, paragraph 21.
20        See M.4961 – Cookson/Foseco, paragraphs 9 – 12.
21        See, for instance replies to question 3 of Q1 – Questionnaire to Customers (refractory applications)
          and replies to question 3 of Q2 – Questionnaire to Customers (abrasive applications).
                                                          10
 ---pagebreak--- (41)     On the downstream market for refractories, the markets for unshaped non-
         basic/acid refractories can be considered separate from other types of refractories
         for the purposes of this case (see section IV.2.3.8).
IV.2.3.2.         Tabular alumina
(42)     The Notifying Party submits that tabular alumina22 belongs to the same market of
         specialty alumina (for refractory applications) together with fused alumina (for
         refractory applications).
(43)     However, the Commission considers that there is no or only limited substitutability
         between tabular alumina and fused alumina.
(44)     First, tabular alumina and fused alumina are produced in different production
         processes and require different machinery to produce. To this effect, the
         Commission notes that the Target produces fused alumina and tabular alumina at
         different sites: it produces fused alumina in Beyrède and La Bâthie while its tabular
         alumina production is located in Teutschenthal. Due to the different machinery
         needed for the production of tabular alumina and fused alumina, it also appears that
         a producer of one of them cannot switch to producing the other without acquiring
         the necessary machinery and incurring the associated substantial costs.
(45)     Second and following from the different production processes, not all suppliers
         supply both types of aluminas. That includes Imerys, which supplies fused alumina
         but not tabular alumina.
(46)     Third, a number of customers noted that tabular alumina and fused alumina differ
         in terms of technical characteristics and price. Although some respondents did
         consider tabular alumina and fused alumina to be substitutable from their
         perspective, substitutability appears to be limited to specific applications. A
         customer noted in this respect that ‘market is 1/3 tabular, 1/3 is WFA and 1/3 can
         be tabular or WFA’.23
(47)     Therefore, for the reasons set out in paragraphs (44) to (46) and in light of the
         outcome of the market investigation and the information available to it, the
         Commission considers that tabular alumina does not form part of the same relevant
         market as fused alumina.
IV.2.3.3.         White and brown fused alumina
(48)     The Notifying Party submits that no distinction between WFA and BFA is
         necessary. However, for the main reasons set out in paragraphs (49) to (53), the
         Commission considers that there is no or only limited substitutability between
         WFA and BFA.
(49)     First, suppliers responding in the Commission's market investigation reported that
         switching production between the two products on the same production line is not
         straightforward. This appears to apply, in particular, to switching from BFA to
         WFA, the latter of which is purer. A competitor writes: ‘It’s impossible to produce
         BFA together with WFA as BFA will soil the whole scheme’.24 Accordingly, both
         Parties appear to separate the production of WFA and BFA in most of their plants.
         The Target produces BFA in its plant in Beyrède while it produces WFA in its
22        Imerys does not produce tabular alumina while the Target does.
23        Replies to question 4 of Q1 – Questionnaire to Customers (refractory applications).
24        See, for instance replies to question 14 of Q3 – Questionnaire to Competitors (specialty alumina).
                                                          11
 ---pagebreak---          plant in La Bâthie. Similarly, Imerys produces BFA and WFA together in only two
         of its seven plants while five plants specialise either in the production of WFA or
         BFA.
(50)     Second, not all producers seem to supply both WFA and BFA but there are
         suppliers that specialise in one of them. For instance Motim, which is a European
         competitor of the Parties, supplies WFA but not BFA.25
(51)     Third, market participants’ relative market positions in WFA and BFA seem to
         differ from each other. For instance, the Notifying Party has indicated that its main
         competitors in BFA include Chinese producers while its most important
         competitors in WFA are companies such as Motim (Hungary) and Rusal (Russia).
(52)     Fourth, the Parties’ internal documents indicate that they follow BFA and WFA
         separately in their internal reporting and planning, and that they can earn
         significantly different margins on BFA and WFA.26 Also third parties separate
         BFA and WFA in their market analyses.27
(53)     Fifth, a clear majority of all customers that responded in the Commission's market
         investigation considered WFA and BFA not to be substitutable with each other in
         terms of technical characteristics and price.28 For instance, a refractory customer
         notes that ‘[w]hite and brown corundum cannot be exchanged in our applications
         because of the difference in quality (Al2O3 content). Brown corundum is more
         attractive in price but cannot be used in all applications’29 while an abrasive
         customer responds that ‘[t]he products is [sic] not equal in quality and have
         different characteristics. The types is [sic] used for different sanding operations.’30
(54)     Therefore, for the reasons set out in paragraphs (49) to (53) and in light of the
         outcome of the market investigation and the information available to it, the
         Commission considers that WFA and BFA constitute separate relevant product
         markets (both of which are to be further segmented according to the end use
         abrasive / refractory as set out in paragraph (37)).
IV.2.3.4.         Bubble alumina
(55)     In addition, and contrary to the Notifying Party’s submission, the results of the
         market investigation further indicate that bubble alumina should be considered a
         distinct market within WFA as there is no or only limited substitutability between
         bubble alumina and other WFA.
25        See the information published on Motim's website, www.motim.hu.
26        See, for instance Imerys internal document […], page 12.
27        See, for instance the document ‘Supply trends and prospects for fused alumina’ by Roskill
          Information Services, pages 8–10 and 17, and document ‘Non-Metallurgical Bauxite and Alumina –
          Global Industry, Markets and Outlook to 2021 – Ninth Edition, 2016’ by Roskill Information
          Services, pages 26–7 and 266–7.
28        See, for instance replies to question 5 of Q1 – Questionnaire to Customers (refractory applications)
          and replies to question 4 of Q2 – Questionnaire to Customers (abrasive applications).
29        Original in German reads: ‘Weißer und brauner Korund können in unseren Anwendungen nicht
          untereinander ausgetauscht werden, da der Qualitätsunterschied (Al2O3- Gehalt) unterschiedlich
          ist. Preislich is5t [sic] der braune Korund attraktiver, jedoch qualitativ nicht in allen Anwendungen
          einsetzbar.‘, reply to question 5 of Q1 – Questionnaire to Customers (refractory applications).
30        Reply to question 4 of Q2 – Questionnaire to Customers (abrasive applications).
                                                           12
 ---pagebreak--- (56)     First, the market investigation has not confirmed the Notifying Party’s submission
         that know-how on bubble alumina production is widely available. In contrast, one
         of the companies the Notifying Party had identified to be the Parties’ main
         competitors in WFA indicated that it does not even know the technology required
         to produce bubble alumina.31
(57)     Second, market participants’ relative market positions in bubble alumina and other
         WFA seem to differ significantly from each other. For instance, the Notifying Party
         has submitted that the Parties’ combined market shares in bubble alumina for
         refractories was [60-70]% while the combined market share for all WFA for
         refractories (including bubble alumina ) was [30-40]% in 2015. For abrasive
         applications the figures were [40-50]% and [20-30]%. Moreover, the Notifying
         Party has submitted that the Parties’ main competitors in the EEA for bubble
         alumina are different from those for other WFA.
(58)     Third, a clear majority of customers replying in the Commission's market
         investigation submitted that bubble alumina and other WFA are not substitutable in
         terms of technical characteristics and price.32 For instance, a refractory customer
         has explained that ‘[b]bubble alumina is a high purity, low density insulating
         product while white fused alumina is a dense material. The two are used to
         produce entirely different ranges of refractory products so are not
         interchangeable’33 and an abrasive customer noted that ‘[b]ubble alumina is a
         special higher priced product for certain abrasive applications’34.
(59)     Therefore, for the reasons set out in paragraphs (56) to (58) and in light of the
         outcome of the market investigation and the information available to it, the
         Commission considers that bubble alumina constitutes a distinct market separate
         from the remaining types of WFA (and further segmented according to the end use
         abrasive / refractory as set out in paragraph (37)).
IV.2.3.5.        Potential further sub-segmentations of WFA and BFA
(60)     During the market investigation, market participants indicated a number of
         additional potential sub-segmentations or differentiations within WFA and BFA.
(61)     Semi-friable vs. regular BFA: Semi-friable BFA is a type of BFA that typically has
         a lowered titanium oxide content and that is sometimes referred to have
         characteristics that are somewhere between BFA and WFA35.
(62)     Treated BFA vs. regular BFA: BFA can further be treated, such as heat-treated or
         ceramic-coated, to achieve specific characteristics for the product. Some market
         customers replying to the Commission's market investigation indicated that such
31        Reply to question 15 of Q3 – Questionnaire to Competitors (specialty alumina).
32        See, for instance replies to question 6 of Q1 – Questionnaire to Customers (refractory applications)
          and replies to question 5 of Q2 – Questionnaire to Customers (abrasive applications).
33        Reply to question 6 of Q1 – Questionnaire to Customers (refractory applications).
34        Reply to question 5 of Q2 – Questionnaire to Customers (abrasive applications).
35        See, for instance, https://www.alteo-alumina.com/en/business/product line/semi-friable-brown-
          fused-alumina, quoted on 13.10.2016. See also https://www.alteo-alumina.com/en/corundum,
          quoted on 13.10.2016. See also document ‘Non-Metallurgical Bauxite and Alumina – Global
          Industry, Markets and Outlook to 2021 – Ninth Edition, 2016’ by Roskill Information Services,
          page 50.
                                                          13
 ---pagebreak---          characteristics can be important for particular applications or climatic conditions of
         use.36
(63)     Grit size and shape: the size and shape of alumina particles appear to have an
         impact on their use in some abrasive applications. For instance, the Parties’ internal
         documents indicate that certain of their production facilities tend to produce a
         particular shape of product and that customers purchase different shapes of
         products from different suppliers. Market participants seem to distinguish 'blocky'
         grit shape from 'angular' grit shape. The Parties' internal documents also follow
         macro and micro grit sizes sometimes separately in their reporting and planning,
         also noting that micros are higher-value compared to macros.37 The Commission
         understands from the Parties' internal documents, as well as concurring evidence
         from market participants, that micro and macro grit size are frequently measured on
         the FEPA scale. On this scale, sizes F8 to F220 are commonly referred to as
         'macro-grit', while sizes F230 and above are referred to as 'micro-grit'. One
         customer explained: '[g]rit sizes are a particularly important product specification
         in the abrasive industry since they will achieve different end results. Macro-grit
         abrasives will be used to achieve a rough finish, while micro-grit will yield a
         polished, glass-like finish. The two are therefore not substitutable from a demand-
         side point of view'.38
(64)     Therefore, for the reasons set out in paragraphs (37), (61) to (63), and in light of the
         outcome of the market investigation and the information available to it, the
         Commission concludes that the markets for WFA and BFA are differentiated at
         least according to the various additional criteria discussed in this Section:
         application (abrasive or refractory applications), purity, grit size, and grit shape. On
         the other hand, for the purposes of the present decision, the exact product market
         definition as regards other possible segmentations of BFA and WFA discussed in
         paragraphs (37), (61) to (63) can be left open as the outcome of the competitive
         assessment remains the same under those alternative delineations.
IV.2.3.6.         Zirconia alumina
(65)     As set out in paragraph (22), the Notifying Party submits that zirconia alumina
         could constitute a distinct market, separate from fused alumina (or other ‘specialty
         alumina’). According to the Notifying Party, the market could further be segmented
         according to the end use of the product (abrasive / refractory).
(66)     The results of the market investigation support the view that zirconia alumina
         constitutes a market separate from fused alumina.
(67)     From the supply side-perspective, the production process and technologies appear
         to differ. A major fused alumina producer indicated that it does not even know the
         technology required for zirconia alumina production.39
(68)     Moreover, a clear majority of customers responding in the Commission's market
         investigation noted that zirconia alumina and fused aluminas are not comparable in
36        See, for instance replies to question 10 of Q2 – Questionnaire to Customers (abrasive applications).
37        See, for instance Imerys internal document […], page 2, Imerys internal document […], pages 11–3,
          and Imerys internal document […], page 7, and […], page 4, […], page 8, […], tab […].
38        Confirmed minutes of a call with an abrasive customer on 23.9.2016.
39        Reply to question 16 of Q3 – Questionnaire to Competitors (specialty alumina).
                                                           14
 ---pagebreak---          terms of technical characteristics or price.40 A refractory customer explained that
         ‘zirconia is 4X the price of fused alumina. It would not be considered for standard
         refractory applications. It would only be used in areas of high corrosion, or in
         small quantities to help control thermal expansion. It is rather cost prohibitive’.41
         An abrasive customer notes that ‘zirconia alumina is considerably more tough as
         fused alumina. Substitution of zirconia alumina by fused alumina would result in a
         significant performance drop, whereas a substitution of fused alumina by zirconia
         alumina (possible in only a limited number of applications) would result in a
         significant cost increase’.42
(69)     Therefore, for the reasons set out in paragraphs (66) to (68) and in light of the
         outcome of the market investigation and the information available to it, the
         Commission considers that zirconia alumina may constitute a distinct product
         market which does not fall in the same product market as fused alumina.
(70)     On the other hand, it is not necessary for the purposes of the present decision to
         conclude whether the market for zirconia alumina should be further segmented
         according to the end use of the product as the outcome of the competitive
         assessment remains the same under the alternative market delineations.
IV.2.3.7.        Sintered bauxite
(71)     As set out in paragraph (22), the Notifying Party submits that sintered bauxite
         could constitute a distinct product market which is separate from specialty alumina
         or zirconia alumina. According to the Notifying Party, sintered bauxite is only used
         for abrasive applications.
(72)     The results of the market investigation support the view that sintered bauxite
         constitutes a distinct market.
(73)     In particular, some suppliers of fused and/or tabular alumina indicated in the
         market investigation that they do not have the ability to produce sintered bauxite.43
         Moreover, the Commission notes that, according to the Notifying Party, the market
         structure in sintered bauxite in the EEA is unlike that for other products concerned
         by the case, with Showa Denko holding over 60% of the market for sintered
         bauxite but not being a notable competitor in any other product discussed.
(74)     Further, customers have submitted in the market investigation that sintered bauxite
         is not comparable to other products such as fused alumina in terms of technical
         characteristics or price.44 For instance, an abrasive customer explained that sintered
         bauxite and fused alumina have ‘[d]ifferent mechanical and abrasive
         characteristics. Sintered bauxite is much more expensive’.45
40        See, for instance replies to questions 7 and 8 of Q1 – Questionnaire to Customers (refractory
          applications) and replies to question 6 and 9 of Q2 – Questionnaire to Customers (abrasive
          applications).
41        Reply to question 7 of Q1 – Questionnaire to Customers (refractory applications).
42        Reply to question 6 of Q2 – Questionnaire to Customers (abrasive applications).
43        Replies to question 17 of Q3 – Questionnaire to Competitors (specialty alumina).
44        See, for instance replies to questions 8 and 9 of Q2 – Questionnaire to Customers (abrasive
          applications).
45        Reply to question 8 of Q2 – Questionnaire to Customers (abrasive applications).
                                                         15
 ---pagebreak--- (75)     Therefore, for the reasons set out in paragraphs (72) to (74) and in the light of the
         outcome of the market investigation and the information available to it, the
         Commission considers that sintered bauxite may constitute a distinct product
         market and concludes that sintered bauxite does not fall in the same product market
         as fused alumina.
IV.2.3.8.        Downstream market for refractories
(76)     In accordance with its past practice,46 and seeing that this practice is not contested
         by the Notifying Party in this case, the Commission considers unshaped non-
         basic/acid refractories to constitute a distinct product market. In any case, the
         product market definition in this case can be left open since no competition issue
         would arise even in the narrowest possible segment where the vertical link between
         the Parties would lead to the highest concentration levels.
IV.2.4. Conclusion on the relevant product markets
(77)     Therefore, in light of the above and for the purposes of this decision, the
          Commission concludes that it is appropriate to carry out its assessment of the effect
          of the Transaction with reference to the following markets:
                  WFA for abrasive applications,
                  WFA for refractory applications,
                  bubble alumina for abrasive applications,
                  bubble alumina for refractory applications,
                  BFA for abrasive applications,
                  BFA for refractory applications,
                  tabular alumina,
                  zirconia alumina,
                  sintered bauxite and
                  unshaped non-basic/acid refractories.
IV.3.     Geographic market definition
IV.3.1. The Notifying Party's proposed geographic market definitions
(78)     The Notifying Party submits that the geographic scope of the relevant alumina
         markets is global (for fused alumina [WFA, bubble alumina and BFA], tabular
         alumina and zirconia alumina).47 The Notifying Party refers to low relative
         transport costs and emphasises significant imports coming from outside the
         European Economic Area (‘EEA’) and in particular from Brazil, the United States,
         Ukraine, Russia, and most importantly China. According to the Notifying Party, the
         imports have increased notably following the expiry of certain anti-dumping
         measures by the European Union in 2002. According to the Notifying Party,
         increasing presence of Chinese suppliers in the EEA as well as continuing
         commoditization of even the most niche segments of specialty alumina are among
         the main drivers for the Transaction.
46        See M.4961 – Cookson/Foseco, paragraphs 17.
47        See Form CO, paragraph 155.
                                                      16
 ---pagebreak--- (79)    Similarly, the Notifying Party submits that the geographic market for sintered
        bauxite is global in scope.
(80)    As regards the downstream markets for refractories, the Parties consider the
        markets, including the segment for unshaped non-basic/acid monolithic (powder-
        based) refractories, to be EEA-wide in scope.48
IV.3.2. Previous Commission decisions
(81)    In previous decisions concerning fused alumina for abrasive and refractory
        applications the Commission left open whether the relevant markets were global or
        EEA-wide in scope.49
(82)    For alumina in general, the Commission concluded in Alcoa/Inespal50 that the
        market possessed all the features of a global market. In contrast, in
        Starck/Wienerberger and Creditanstalt-Bankverein/Treibacher, the Commission
        considered the geographic market for artificial corundum (fused alumina) for
        abrasive and refractory applications to be at least EEA-wide, but left the precise
        market definition ultimately open.51 The same applies for zirconia alumina.52 In
        EN+/Glencore/Sual/UC Rusal the market investigation indicated that WFA was
        traded at a global level. The Commission however left the precise market definition
        open.53
(83)    As regards the downstream market for refractories, in past decisions the
        Commission considered the relevant geographic markets for refractories, including
        unshaped non-basic/acid monolithic (powder-based) refractories, to be EEA-wide
        in scope.54
IV.3.3. The Commission's assessment
(84)    The Commission acknowledges that there are notable imports into the EEA of at
        least some of the alumina products concerned by the Transaction. Nonetheless, the
        Commission recalls that a relevant geographic market is an area in which the
        conditions of competition are sufficiently homogenous and which can be
        distinguished from neighbouring areas because the conditions of competition are
        appreciably different in those areas. In this context, actual trade flows may give
        useful information for the assessment but are alone not decisive.55
(85)    In the present case, the Commission notes that there are indications that suggest
        that the market is rather EEA than worldwide. For instance, the relative market
        positions of different market participants vary between the EEA and the rest of the
48      See Form CO, paragraph 182.
49      See M.702 – Starck / Wienerberger, paragraphs 16–18; and M.811 – Creditanstalt-Bankverein /
        Treibacher, paragraph 19.
50      See M.1003 – Alcoa/Inespal, paragraph 23.
51      See M.702 – Starck / Wienerberger, paragraph 16–18; and M.811 – Creditanstalt-Bankverein /
        Treibacher, paragraph 19.
52      See M.811 – Creditanstalt-Bankverein / Treibacher, paragraph 19.
53      See M.4441 – EN+/Glencore/Sual/UC Rusal, paragraph 22.
54      See M.4961 – Cookson/Foseco,            paragraphs   27 – 30,   M.472   –    Vesuvius/Wuelfrath,
        paragraphs 22 - 24.
55      See, for instance the Commission Notice on the definition of relevant market for the purposes of
        Community competition law, OJ C 372, 9.12.1997, p. 5, paragraphs 8 and 49.
                                                     17
 ---pagebreak---         world and market participants have reported significant issues related to sourcing
        from outside of the EEA.
(86)    As to the relative market positions, the Commission notes that the Notifying Party
        submits that the relative market position of Imerys and the Target is significantly
        different within the EEA than globally. This applies particularly to the various
        segments of fused alumina where Imerys and the Target achieve significantly
        higher market shares in the EEA than globally. For instance, the Notifying Party
        submits that the combined market share of Imerys and the Target was
        approximately [30-40]% in WFA for refractory applications in volume in 2015
        while the share globally was only circa [10-20]%. In bubble alumina for refractory
        applications, the figures were [60-70]% EEA and [30-40]% globally, and in BFA
        (all types) [20-30]% EEA and [5-10]% globally.
(87)    The results of the market investigation indicate that the customers face significant
        issues related to sourcing from outside the EEA. This applies in particular to WFA
        and bubble alumina.
IV.3.4. Markets for WFA alumina, bubble alumina and tabular alumina
(88)    Many customers of WFA reported issues related to sourcing from outside the EEA.
        In particular, the majority of customers for abrasive WFA considered that they can
        only with difficulty or with great difficulty source the product from outside the
        EEA, and nearly half of them also considered that there are specific reasons
        limiting their ability source to from outside the EEA.56 In case of WFA for
        refractory applications, more customers considered that sourcing is at least fairly
        easy; however, some of them still saw even great difficulty in sourcing from
        outside the EEA, and the majority of them considered there to be specific reasons
        that limit their ability to source from outside the EEA.57
(89)    Many customers for bubble alumina also reported issues related to sourcing from
        outside the EEA. In particular, the majority of customers of bubble alumina
        reported that they can only with difficulty or with great difficulty source the
        product from outside the EEA. This applies to both bubble alumina for abrasive
        and to bubble alumina for refractory applications. A number of particularly
        refractory customers of bubble alumina also indicated that there are specific
        reasons that limit their ability to source from outside the EEA.58
(90)    The reasons cited by customers for the difficulty of sourcing from outside the EEA
        included, for instance, lead times, import duties (currently at 5.2% for WFA and
        bubble alumina) and transport costs as well as issues with quality and reliability.
        For instance, a customer for refractory WFA explains that ‘[f]or products that are
        not from Europe, we often have quality problems in our products for special
        applications. Should we need material for a quick delivery, the sources outside of
        Europe are not always able to deliver accordingly’59 while a customer for abrasive
56      Replies to questions 14 and 16 of Q2 – Questionnaire to Customers (abrasive applications).
57      Replies to questions 18 and 20 of Q1 – Questionnaire to Customers (refractory applications).
58      Replies to questions 26 and 28 of Q1 – Questionnaire to Customers (refractory applications), and
        replies to questions 22 and 24 Q2 – Questionnaire to Customers (abrasive applications).
59      The original in German reads:’Bei Produkten, die nicht aus Europa stammen haben wir oftmals
        Qualitätsprobleme in unseren Produkten für Spezialanwendungen. Sollten wir schnell Material für
        unsere Produktion benötigen, sind die außereuropäischen Quellen manchmal nicht entsprechend
        lieferfähig.‘ Reply to question 20 of Q1 – Questionnaire to Customers (refractory applications).
                                                      18
 ---pagebreak---         WFA notes that ‘WFA have a lot of different size and different grades - - for our
        job (distributor of raw material) to organize the stock with a lead time of 3 month
        can be impossible’60. Some customers of bubble alumina also referred to issues
        related to sourcing volumes, noting that bubble alumina is often used in small
        volumes and that sourcing from outside the EEA involves large batches.61
(91)    The same would hold true for tabular alumina. From a supply-side perspective both
        WFA and tabular alumina stem from the same raw material and differentiate only
        in the processing method. Regarding that tabular alumina constitutes a high purity
        product, quality issues, as well as the other issues mentioned for WFA and bubble
        alumina are likely to occur in the sourcing of tabular alumina as well. But for the
        purposes of this decision it is unnecessary to conclude on the issue.
IV.3.5. Markets for BFA, zirconia alumina and sintered bauxite
(92)    With respect to BFA, zirconia alumina and sintered bauxite, the customers were
        generally more split on the question of the relevant geographic market definition.
        Nonetheless, the replies suggest that issues related to sourcing from outside the
        EEA are likely, or at least cannot be excluded, also with respect to these products.62
IV.3.6. Markets for refractories
(93)    In accordance with its past practice63, and given that this is not disputed by the
        Parties, the Commission considers the market for unshaped non-basic/acid
        refractories to be EEA-wide in scope.
IV.3.7. Conclusions on the relevant geographic markets
(94)    Therefore, for the reasons set out in paragraphs (84) to (91) and in light of the
        outcome of the market investigation and the evidence available to it, the
        Commission considers that the relevant market for WFA, and bubble alumina,
        including their sub-segments, is EEA-wide.
(95)    With respect to tabular alumina, BFA, zirconia alumina and sintered bauxite, it
        cannot be excluded that the market is wider than the EEA. It can, however, be left
        open for the purposes of this decision whether the market is wider than the EEA as
        the outcome of the competitive assessment remains the same under those
        alternative market delineations.
(96)    Finally, the Commission considers the market for unshaped non-basic/acid
        refractories to be EEA-wide in scope.
V       COMPETITIVE ASSESSMENT OF HORIZONTAL OVERLAPS
(97)    Under Article 2 (2) and (3) of the Merger Regulation, the Commission must assess
        whether a proposed concentration would significantly impede effective competition
        in the internal market or in a substantial part of it, in particular through the creation
        or strengthening of a dominant position.
60      Reply to question 16 of Q2 – Questionnaire to Customers (abrasive applications).
61      Replies to questions 22 of Q2 – Questionnaire to Customers (abrasive applications).
62      Replies to questions 22, 24, 30 and 32 of Q1 – Questionnaire to Customers (refractory applications),
        and questions 18, 20, 26, 28, 30 and 32 of Q2 – Questionnaire to Customers (abrasive applications).
63      See M.4961 – Cookson/Foseco, paragraph 30, M.472 – Vesuvius/Wuelfrath, paragraphs 22–24.
                                                       19
 ---pagebreak--- (98)  In this respect, a merger may entail horizontal and/or vertical effects. Horizontal
      effects are those deriving from a concentration where the undertakings concerned
      are actual or potential competitors of each other in one or more of the relevant
      markets concerned. The Commission appraises horizontal effects in accordance
      with the guidance set out in the relevant notice, that is to say the Horizontal Merger
      Guidelines.64
(99)  With particular regard to non-coordinated effects, the Horizontal Merger
      Guidelines list a number of factors which may influence whether or not significant
      horizontal non-coordinated effects are likely to result from a merger, such as the
      large market shares of the merging firms, the fact that the merging firms are close
      competitors, the limited possibilities for customers to switch suppliers, or the fact
      that the merger would eliminate an important competitive force. That list of factors
      applies equally regardless of whether a merger would create or strengthen a
      dominant position, or would otherwise significantly impede effective competition
      due to non-coordinated effects. Furthermore, not all of these factors need to be
      present to make significant non-coordinated effects likely and it is not an
      exhaustive list.65
(100) In addition, the Horizontal Merger Guidelines describe a number of factors, which
      could counteract the harmful effects of the merger on competition, including the
      likelihood of buyer power, entry and efficiencies.
(101) Finally, the Horizontal Merger Guidelines mention factors specifically relevant for
      assessing mergers creating or strengthening buyer power in upstream markets.
      According to the guidelines, harm to competition would in particular incur if the
      merged firm may be in a position to obtain lower prices by reducing its purchase of
      inputs which could, in turn, lead to lower levels of output in the final product
      market, thereby harming consumer welfare.66 However, the Horizontal Merger
      Guidelines also state that increased buyer power may be beneficial for competition
      if it lowers input costs without restricting downstream competition or total output
      as in such case a proportion of these cost reductions are likely to be passed onto
      consumers in the form of lower prices.67
(102) In this case, the Transaction gives rise to horizontal overlaps in the following
      markets where both Imerys and the Target are active:
               WFA for abrasive applications in the EEA,
               WFA for refractory applications in the EEA,
               bubble alumina for abrasive applications in the EEA,
               bubble alumina for refractory applications in the EEA,
               BFA for abrasive applications in the EEA and worldwide,
               BFA for refractory applications in the EEA and worldwide,
               Zirconia alumina in the EEA and worldwide,
64    Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
      concentrations between undertakings (‘Horizontal Merger Guidelines’), OJ C 31, 05.02.2004.
65    Horizontal Merger Guidelines, paragraph 26.
66    Horizontal Merger Guidelines, paragraph 61.
67    Horizontal Merger Guidelines, paragraph 62.
                                                   20
 ---pagebreak---                  sintered bauxite in the EEA and worldwide.
(103)    In contrast, the Transaction does not give rise to horizontal overlaps in tabular
         alumina as only the Target but not Imerys is active in tabular alumina in the EEA.
V.1.     White fused alumina for abrasive applications
V.1.1.   The Notifying Party's arguments
(104)    The Notifying Party emphasises that the Target holds a small market share in WFA
         for abrasive applications at the worldwide level, resulting in a limited horizontal
         overlap between the Parties. The Notifying Party also submits that the market is
         very competitive and characterised by the presence of many suppliers.68
(105)    Although at EEA level the market is more concentrated, the Notifying Party
         emphasises that the EEA market remains competitive due to the presence of a
         number of important alternative European suppliers (Motim and Rusal) as well as
         due to imports from Chinese suppliers.69
(106)    Thus, the Notifying Party concludes that the Transaction does not raise competition
         concerns in the market for WFA for abrasive applications.
V.1.2.   The Commission's assessment
V.1.2.1. Concentration levels
(107)    Imerys is the main supplier in the EEA of WFA for abrasive applications. The
         Target is also a significant supplier to EEA customers with its La Bâthie plant in
         the French Alps. The combined market shares of the Parties in the market for WFA
         for abrasive applications in the EEA are high in a market that is already
         concentrated.
(108)    The Parties' methodology for the calculation of market shares and market sizes is
         not laid out in detail in the Form CO. The Parties submit that they were computed
         based on the Parties’ industry intelligence, Eurostat data as well as on an industry
         report by the consultancy company Roskill (the Roskill 2016 Report).
(109)    Based on information gathered during its market investigation, the Commission has
         doubts about the accuracy of certain market estimates submitted by the Parties, in
         particular for WFA. For example, based on the Roskill 2016 Report, the Parties
         have estimated that the total market size in terms of volume of WFA (abrasive and
         refractory applications combined) worldwide would be approximately
         [700-800] kT ([300-350] kT for WFA refractory, and [400-450] kT for WFA
         abrasive). The Parties' main source of market data, Roskill, explained during the
         market investigation that its report is mostly based on capacity figures reported by
         competitors as opposed to actual production figures,70 which indicates that the
         output figures of the Roskill 2016 Report overestimate the actual size of the
         worldwide merchant market for WFA.
(110)    Similar uncertainties exist with regards to the quantities of WFA imported into the
         EEA as reported by the Parties in market share tables. The quantities of WFA (for
         both abrasive and refractory applications) imported into the EEA in 2015 provided
         by the Parties in the market share tables of the Form CO is 85–120 kT, among
68       See Form CO, paragraphs 220, 223.
69       See Form CO, paragraph 224.
70       Confirmed minutes of a call with Roskill on 4.10.2016.
                                                        21
 ---pagebreak---  ---pagebreak--- (114)    As explained, because customers for abrasive applications have specific
         requirements in terms of grit size, it is also informative to assess competition in the
         sub-segments of WFA for abrasive applications for macro and micro grit WFA.
         The Parties have provided market share estimates for the micro and macro grit
         WFA for abrasive applications segments and report a combined market share close
         to [30-40]% in both of these. As explained above, this likely overstates the market
         sizes, the presence of several competitors in these high end segments and
         underestimates the market shares of the Parties.
(115)    Therefore, in the light of the market investigation and based on market shares
         alone, it cannot be excluded that non-coordinated anticompetitive effects would
         arise from the Transaction with respect to WFA for abrasive applications. This risk
         is further increased by the elements described below.
V.1.2.2. Closeness of competition between the Parties
(116)    The Parties' activities overlap in almost all possible segments of WFA for abrasive
         applications (apart from some niche applications only supplied by Imerys such as
         pink and ruby WFA), making them particularly close competitors in terms of
         portfolio. This is evidenced by the fact that [30-40]% of the Target's top 10
         customers are common to Imerys.
(117)    The close competition between the Parties is widely acknowledged by the
         respondents to the Commission's abrasive customers questionnaire: 80% of
         respondents view the Parties as particularly close competitors for WFA for abrasive
         applications, mostly due to similar portfolio, and similar lead times.73
(118)    Several customers noted that Imerys and the Target are particularly close
         competitors in the EEA, especially when looking at some sub-segments, for
         instance high purity WFA or micro-grit WFA.
(119)    One customer noted that 'Due to the specificity of those sub-segments, in Europe
         there are only two companies that have the capabilities, plants and facilities to
         produce micro grits, namely Imerys and Alteo. A third entity situated in China
         potentially producing a suitable micro grit – Mount Tai – exists; but uses an
         outdated facility and therefore potentially cannot achieve the requested quality.'74
(120)    Another customer explained that only two or three producers are capable of
         consistently supplying high purity WFA: Imerys and the Target, and to some extent
         Rusal. This customer also considered that Washington Mills was capable of
         supplying high purity WFA but that their focus is not the EEA.75
(121)    Imerys' internal documents show that, to resist competitive pressure, it has focused
         its commercial strategy on […]. For example, Imerys notes that […].76 In a similar
         strategy document, Imerys notes that […].77
73       Replies to question 52 of Q2 – Questionnaire to Customers (abrasive applications).
74       Confirmed minutes of a call with an abrasive customer on 23.9.2016.
75       Confirmed minutes of a call with an abrasive customer on 29.9.2016, in the original French: 'Seuls
         deux ou trois producteurs sont capables de fournir de manière régulière du corindon blanc d'une
         pureté élevée: Imerys et Alteo, plus accessoirement Rusal. Washington Mills, aux Etats Unis ne les
         diffuse pas de manière régulière en Europe.'
76       Annex 7 Imerys […].
77       Imerys […].
                                                        23
 ---pagebreak--- (122)    The Commission understands that the Target has made a structured effort in the
         recent years to compete in these same high-end segments and has invested to
         establish itself as a reliable supplier of quality products. In a recent interview to the
         specialised press, the commercial director of the Target's BFA and WFA division
         explained that strategy. Concerning opportunities in the market, he indicated that
         'although there is oversupply of FA [Fused Alumina] in general, some qualities and
         grades are in tight supply. This might be because there is difficulty in sourcing a
         particular quality or consistency of product.' When asked how the Target is
         managing to claim market shares from competitors, he explained that 'We are
         focusing on quality, consistency and reliability in our products and services.
         Reliability used to be one of our weaknesses as a business and we lost customers as
         a result. We have invested heavily in improving this over the last two years and
         Alteo is now a trusted supplier of all the products we manufacture. We achieved
         this by working closely with our customers – both by inviting customers to our
         plants and by sending our people to customer sites to help understand each other’s
         needs. Based on what we have learned, we have worked to ensure that the quality
         of our products remains consistent while also expanding our range in accordance
         with what our buyers want. In 2014, we launched seven new products and have
         another eight in the pipeline for 2015. Our number one sales application is bonded
         abrasives (grinding wheels), but we are looking to increase our sales in ceramics,
         blasting and coated abrasives applications. Last year we invested a few million
         euros in R&D and in hiring new people and buying new laboratory equipment. We
         are also launching several partnerships with our customers. All of our innovation
         comes from working with our customers and developing products and solutions
         based on their needs. These tend to be higher in quality and more cost efficient.'78
(123)    Evidence gathered by the Commission therefore suggests that the Parties compete
         closely by focusing on higher value products and applications within WFA for
         abrasives.
V.1.2.3. Remaining competitors
(124)    As explained in paragraphs (109) to (112), several elements lead the Commission
         to doubt the accuracy of the market shares attributed to various competitors by the
         Parties as set out in the above market share table in paragraph (113).
(125)    In that table, important market shares are attributed to Chinese competitors
         importing WFA for abrasive applications in the EEA. Aside from the fact that the
         volume of such imports is questionable, several customers have raised quality
         issues when ordering WFA for abrasive applications from Chinese suppliers. One
         respondent explained that 'Chinese suppliers in general has [sic] big problems to
         deliver a stable and good quality that can satisfy our requirements. We have not
         found any supplier in China that can supply us with material that can be used in
         our production.'79
(126)    Customers seem to note the presence of Chinese suppliers of WFA in standard
         quality for abrasive applications, but do not perceive them as competitors to the
         Parties for high-end, specific applications (for instance high purity or micro grit).80
78       Interview of Mr. Audemard by the industry publication ‘Industrial Minerals’ in June 2015
         (https://www.alteo-alumina.com/sites/default/files/Ressources/im_june_2015_alteoarc.pdf).
79       Reply to question 97.1 of Q2 – Questionnaire to Customers (abrasive applications).
80       Confirmed minutes of a call with an abrasive customer on 23.9.2016.
                                                        24
 ---pagebreak---          One customer explained (in the original French) that 'Alteo et Imerys sont les seuls
         à maîtriser la "haute pureté" avec un lavage à l'acide chlorhydrique. Cette maîtrise
         peut faire la différence: un corindon blanc chinois peut atteindre au mieux 99,4%
         de pureté quand Alteo atteint 99,8% de pureté ou plus. Une pureté de 99,4% n'est
         pas acceptable pour une prothèse médicale. Motim ne sait pas faire de macro
         grain en haute pureté.'81
(127)    The only competitor of the Parties which is also based in the EEA, Motim, is not
         regarded as on par with the Parties by several customers for the high-end segments,
         in particular in micro-grit WFA.82
(128)    Rusal, while regarded by some customers as a source of quality WFA, is not
         always considered a reasonable alternative. This is probably best explained by
         Rusal in its own words: 'Import duty 5.2% and logistics costs limit competiveness
         of our goods in Western and Southern Europe.'83
(129)    All customers who responded to the market investigation indicated that they were
         not aware of any spare capacity for WFA for abrasive applications currently.84
(130)    In addition, contrary to what is explained below at paragraphs (185) to (187) in the
         BFA section, the Parties' internal documents show little evidence of intense
         competition in WFA for abrasive applications.
V.1.2.4. Effects of the Transaction
(131)    A majority of customers of specialty alumina for abrasive applications anticipate
         that the Transaction would have a negative effect on competition and prices.85 This
         is because the two major EEA competitors are merging. The Target is seen as the
         most reliable alternative to Imerys, since Motim is not considered as a good
         alternative by all.
V.1.3.   Conclusion
(132)    In view of the foregoing and in the light of the results of the market investigation
         and the information available to it, the Commission considers that the Transaction
         raises serious doubts as to its compatibility with the internal market concerning
         unilateral effects from the horizontal overlaps between the Parties' activities in
         WFA for abrasive applications (and possible sub segmentations). This conclusion
         is based, in particular, on the following elements: (i) the Parties' combined shares
         post-Transaction will be high in a highly concentrated market; (ii) the Parties were,
         prior to the Transaction, particularly close competitors; and (iii) after the
         Transaction, there will be limited competitive constraints from competitors, and
         customers will face limited alternatives (if any in certain sub-segments). More
         particularly, within the EEA, Motim is not considered on par with the Parties in
         certain sub-segments (micro-grit). As regards competition from outside the EEA
81       Confirmed minutes of a call with an abrasive customer on 29.9.2016.
82       Confirmed minutes of a call with an abrasive customer on 23.9.2016. Confirmed minutes of a call
         with an abrasive customer on 29.9.2016, in the original French: ' Motim (Hongrie) n'est pas
         comparable en termes de qualité. [customer] estime que cela ne changera pas à court terme. En
         effet, etant donnée que le corindon blanc de qualité est le segment qui génère le plus de marges, si
         Motim avait pu transférer sa production vers ces segment, cela aurait déjà été fait.'
83       Reply to question 19.1 of Q3 – Questionnaire to Competitors (specialty alumina).
84       Replies to question 53 of Q2 – Questionnaire Customers (abrasive applications).
85       Replies to question 106 of Q2 – Questionnaire to Customers (abrasive applications).
                                                        25
 ---pagebreak---          faces several disadvantages compared to the Parties (import duties and logistic
         issues). Chinese importers in particular are not seen as able to deliver the desired
         quality in certain sub-segments. In any case there would be little spare capacity by
         suitable alternative suppliers to compensate a hypothetical increase in price of
         WFA for abrasive applications by the Parties after the Transaction.
V.2.     White fused alumina for refractory applications
V.2.1.   The Notifying Party's arguments
(133)    The Notifying Party submits that the overlap in the worldwide market for WFA for
         refractory applications is very small and their sales are trivial.86
(134)    The Notifying Party emphasises that although at EEA level the market is slightly
         more concentrated, it is still very competitive due to the presence of a number of
         important suppliers (in particular Rusal and Motim) including Chinese importers.87
(135)    Thus, the Notifying Party concludes that the Transaction does not raise competition
         concerns in the market for WFA for refractory applications.
V.2.2.   The Commission's assessment
(136)    There are some slight but notable differences between the EEA markets for WFA
         for abrasive and refractory applications. Grit size and shape for example are much
         less important for refractory customers who tend to value more purity, as
         acknowledged by the Parties, see paragraph (26). However, the competitive
         dynamics in these two markets in terms of identify and strength of the suppliers are
         broadly similar. In particular, the remarks made above in section V.1.2.3
         concerning the limited competitive constraints from Russian and Chinese
         competitors apply mutatis mutandis.
V.2.2.1. Concentration levels
(137)    Imerys is the main supplier in the EEA for WFA for refractory applications. The
         Target is also a significant supplier to EEA customers with its La Bâthie plant in
         the French Alps. The combined market shares of the Parties in the market for WFA
         for refractory applications in the EEA are high in a market that is already
         concentrated.
(138)    Similarly as already set out for WFA for abrasive applications in section V.1.2.1,
         the Parties' methodology for market shares and market sizes is not laid out in detail
         in the Form CO. The Parties state that they were computed based on the Parties’
         industry intelligence, Eurostat data, as well as the Roskill 2016 Report.
(139)    The doubts raised at paragraphs (108) to (111) on the reliability of market sizes and
         volumes of imports into the EEA, based on the Roskill 2016 Report, apply across
         the board for WFA for both abrasive and refractory applications. Likewise,
         individual competitors have reported imports into the EEA that are significantly
         lower than the volumes estimated by the Parties and presented below.
(140)    In view of the results of the market investigation, the Commission considers that
         the sales of WFA for refractory applications by non-EEA competitors are much
         more limited than originally estimated by the Parties, based on the Roskill 2016
         Report.
86       See Form CO, paragraph 208.
87       See Form CO, paragraph 209.
                                                  26
 ---pagebreak---  ---pagebreak--- V.2.2.2. Closeness of competition between the Parties
(144)    Almost two-third of the respondents to the market investigation view Imerys and
         the Target as each other’s closest competitors in WFA for refractory applications.88
         Customers explain that ‘[t]hey are located in the same region and have the same
         product portfolio in fused alumina.’ Another customer added that '[t]hese two
         suppliers are the main and market leading suppliers of White Fused Alumina in
         Europe. Currently both are supplying our company with no quality alternatives.'89
(145)    This is especially true in high purity WFA for refractory applications where the
         Parties are the only two suppliers in the EEA. One customer explained that it ‘has
         very strict quality requirements and needs WFA with a 99.9% degree of purity,
         which is considered very high end material. […] For this quality, in Europe,
         Imerys and Alteo are the only two possible suppliers.’90
V.2.2.3. Remaining competitors
(146)    The remaining competitors will not exert sufficient competitive pressure on the
         Parties after the Transaction.
(147)    Competitors in the EEA and the neighbouring area (Russia, Ukraine) are not
         always considered on par with the Parties. One customer found that ‘Motim,
         produces a quality that does not fully comply with the needed standards, mainly
         due to a deviating particle distribution in the smaller grain sizes’ and has ‘tried
         sourcing from Rusal but the material is also not compliant with its standards.’91
         The same customer noted that ‘Traders can also secure supplies from these
         countries but only to a limited extent, as their storage capacity is usually limited’
         and that ‘Imports for China are usually compliant when a test batch is sent, but not
         when a large quantity, e.g 500 mT is required. In addition the long lead times (up
         to 60 days) makes it inflexible and not practical.’
(148)    Another customer noted that ‘[i]f we buy from China we have here same general
         difficulties as mentioned on the other raw materials before concerning quality
         control and logistics.’92
(149)    In addition, contrary to what is explained below at paragraphs (185) to (187) in the
         BFA section, the Parties' internal documents show little evidence of intense
         competition in WFA for refractory applications.
V.2.2.4. Effects of the Transaction
(150)    A clear majority of respondents to the market investigation thought that the
         Transaction would have a negative impact on competition and prices in WFA for
         refractory applications.93
88       Replies to question 61 of Q1 – Questionnaire to Customers (refractory applications).
89       Replies to question 61 of Q1 – Questionnaire to Customers (refractory applications).
90       Confirmed minutes of a call with a customer on 27.9.2016.
91       Confirmed minutes of a call with a customer on 27.9.2016.
92       Replies to question 18.1 of Q1 – Questionnaire to Customers (refractory applications).
93       Replies to question 108 of Q1 – Questionnaire to Customers (refractory applications)
                                                        28
 ---pagebreak--- (151)    One customer explained that it ‘would probably not look for alternatives in the
         event of a 5 to 10% price increase by Imerys, since alternative suppliers from
         outside the EEA, note earlier remarked quality issues, are currently offering at
         higher price levels than Imerys' and Alteo's.’94
V.2.3.   Conclusion
(152)    In view of the foregoing and in the light of the results of the market investigation
         and the information available to it, the Commission considers that Transaction
         raises serious doubts as to its compatibility with the internal market concerning
         unilateral effects from the horizontal overlaps between the Parties' activities in
         WFA for refractory applications. This conclusion is based, in particular, on the
         following elements: (i) the Parties' combined shares post-Transaction will be high
         in a concentrated market; (ii) the Parties were, prior to the Transaction, particularly
         close competitors., and (iii) after the Transaction, there will be limited competitive
         constraints from competitors, and customers will face limited alternatives (if any in
         certain sub-segments). In particular, within the EEA, Motim is not considered on
         par with the Parties. As regards competition from outside the EEA faces several
         disadvantages compared to the Parties (import duties and logistic issues). Chinese
         importers in particular are not seen as able to deliver the desired quality in certain
         sub-segments.
V.3.     Bubble alumina
V.3.1.   The Notifying Party's arguments
(153)    The Notifying Party submits that with respect to the small volume of bubble
         alumina it is very difficult for them to submit estimates of hypothetical market
         shares.95 Furthermore, the Notifying Party emphasises that their submitted,
         relatively high market shares can be explained by the fact that bubble alumina does
         not constitute a market on its own. The hypothetical market would be generally
         rather unattractive for other producers to supply due to its trivial size and low
         customer demand, though competitors could easily do so.96
V.3.2.   The Commission's assessment
(154)    Given that bubble alumina can only be produced by a sub-set of producers of
         WFA, the concerns raised by the Transaction in the markets for WFA for abrasive
         applications and refractory applications are also applicable to the market for bubble
         alumina.
(155)    Given the similarities in the suppliers and the limited amount of information
         available, the two markets for bubble alumina for abrasive and refractory
         applications will be assessed within the same section below.
V.3.2.1. Concentration levels
(156)    If anything, concerns are even greater in the market for bubble alumina given the
         high market share of the Parties in the EEA and the very limited number of
         competitors.
94       Confirmed minutes of a call with a customer on 27.9.2016.
95       See Form CO, paragraphs 210, 211.
96       See Form CO, paragraph 212.
                                                       29
 ---pagebreak---  ---pagebreak---  ---pagebreak--- V.3.2.3. Remaining competitors
(163)    The competitors reported by the Parties are all based outside the EEA and, as such,
         they face several disadvantages compared to the Parties. These disadvantages have
         been discussed above in the WFA for abrasive and refractory applications sections,
         at paragraphs (124) to (130) and (146) to (149): import duties, fluctuating exchange
         rates and costs of shipping, and longer lead times that are incompatible with
         smooth production management for customers.
(164)    One customer noted that, although Washington Mills is an alternative to the Parties
         in terms of quality, its products are more expensive than the Parties in the EEA.97
(165)    Not all WFA competitors are capable of producing bubble alumina. One competitor
         explained that it is because they 'don't know technology of bubble alumina
         production.'98
V.3.2.4. Effects of the Transaction
(166)    The market investigation only included very few actual bubble alumina customers.
         It is therefore difficult to draw aggregate conclusions without reaching a critical
         mass. Some respondents did raise concerns. Three refractory customers anticipated
         prices to go up.99 One abrasive customer estimated that, with the merger of the only
         two bubble alumina competitors in the EEA, customers would have to turn to
         Chinese producers who face a number of disadvantages which make them
         uncompetitive on price.100
V.3.3.   Conclusion
(167)    In view of the foregoing and in the light of the results of the market investigation
         and the information available to it, the Commission considers that the Transaction
         raises serious doubts as to its compatibility with the internal market concerning
         unilateral effects from the horizontal overlaps between the Parties' activities in
         bubble alumina in the EEA. This conclusion is based, in particular, on the
         following elements: (i) the Parties' combined shares post-Transaction will be very
         high in a highly concentrated market; (ii) the Parties were, prior to the Transaction,
         particularly close competitors; and (iii) after the Transaction, there will be limited
         competitive constraints from competitors, and customers will face limited
         alternatives. In particular, within the EEA, the Parties face no competition from
         domestic suppliers. As regards competition from outside the EEA, it faces several
         disadvantages compared to the Parties (in particular in terms of import duties and
         logistic issues).
97       Confirmed minutes of a call with a customer on 27.9.2016.
98       Reply to question 15.1 of Q3 – Questionnaire to Competitors (specialty alumina).
99       Replies to question 110.1 of Q1 – Questionnaire to Customers (abrasive applications).
100      Replies to question 108.1 of Q2 – Questionnaire to Customers (refractory applications).
                                                       32
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---          volumes to US, Brazilian, Chinese or Ukrainian competitors, including in the
         higher end BFA segments, such as semi-friable or treated BFA.
(184)    In the United States, anti-dumping duties against the import of Chinese BFA are in
         place since March 2009, which may evidence the competitive constraints exerted
         by Chinese BFA competitors on the worldwide markets.
(185)    In an internal budget forecast presentation, Imerys mentions Chinese competition
         (particularly from Art Abrasives and Runbao) in segments like semi-friable BFA,
         heat-treated (i.e. blue fired) BFA and ceramic-coated BFA.104
(186)    In its internal customer visit reports, Imerys' sales personnel often notes
         competition with (and sometimes loss of accounts to) Chinese competitors, Elfusa,
         Washington Mills or a Ukrainian competitor, for example:
                   Report […], 21 January 2014: Elfusa is named as Imerys’ direct
                    competitor in blue-fired and ceramic coated BFA, traded through […];
                   Report […], 3 May 2016: in the segment for semi-friable BFA (FRSK)
                    Elfusa is the main supplier;
                   Report […], 18 July 2012: Imexco (Elfusa products) supplies BFA, Art
                    Abrasives (from China) provides blue-fired BFA and ceramic-coated
                    BFA, and Elfusa directly supplies semi-friable BFA;
                   Report […]: where sales personnel reports volumes lost to […], in
                    Ukraine;
                   Report […], 14 January 2016: where the sales personnel reports […];
                   Report […], 25 November 2015: where the sales personnel reports […].
(187)    By contrast, the Target is almost never mentioned as a competitor in these
         customer reports, indicating little intensity in competition between the Parties.
V.4.2.4. Effects of the Transaction
(188)    A majority of respondents to the market investigation did not expect the
         Transaction to have any impact on the market for BFA for abrasive applications in
         the EEA.105
V.4.3.   Conclusion
(189)    In view of the foregoing and in the light of the results of the market investigation
         and the information available to it, the Commission considers that the Transaction
         does not raise serious doubts as to its compatibility with the internal market
         concerning unilateral effects from the horizontal overlaps between the Parties'
         activities in BFA for abrasive applications. This conclusion is based, in particular,
         on the following elements: (i) the Parties' combined shares post-Transaction will be
         moderate, apart from certain potential sub-segments; (ii)The market is quite
         fragmented, with several competitors from outside the EEA (China, Brazil,
         Ukraine, and the United States), (iii) the Parties were, prior to the Transaction, not
         particularly close competitors, apart from the potential sub-segment of semi-friable
         BFA; and (iv) Imerys' internal documents show that it faces significant competitive
         constraints in BFA for abrasive applications and its potential sub-segments. This
104      Imerys’ […], slide 14.
105      Replies to question 106 of Q2 – Questionnaire to Customers (abrasive applications).
                                                       38
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---         its market share post-Transaction in the upstream markets for specialty alumina for
        refractory applications.108
VI.1.   The Notifying Party's arguments
(206)   Concerning a potential input foreclosure, the Notifying Party submit that post-
        Transaction the Parties’ market shares on a global market for specialty alumina
        would be below 10 % and they would therefore hold no market power in the
        upstream market. The Notifying Party argues that customers acting on the
        downstream market for refractories would be able to source from any other
        specialty alumina supplier around the world. The Notifying Party further argues
        that the same argument holds true, should the market be considered EEA-wide in
        scope.
(207)   The Notifying Party also submits that Imerys (through its subsidiary Calderys)
        holds market shares not exceeding 20% under any possible market definition for
        the downstream market for unshaped acid refractories.109 Imerys would therefore
        have no market power in the relevant downstream market. According to the
        Notifying Party, the market for unshaped acid refractories is very competitive.
(208)   The Notifying Party further argues that the downstream market for refractories is
        small in revenue and provides low margins. The Notifying Party concludes that the
        merged entity would therefore have no economic incentive to foreclose the
        upstream market for specialty alumina, as the losses caused by such strategy would
        not be compensated by any gains resulting from an increase of sales in the
        downstream market which will remain competitive.110
(209)   Concerning a potential customer foreclosure, the Notifying Party submits that
        Calderys does not hold a dominant position in the downstream markets for
        refractory products and already procures its specialty alumina requirements
        captively. The Notifying Party argues that the Transaction has no impact in this
        respect and that specialty alumina suppliers would have the possibility to keep
        supplying their products to plenty of customers.111
VI.2.   The Commissions' assessment
VI.2.1. Framework for the assessment of non-horizontal effects
(210)   Foreclosure concerns a situation where actual or potential rivals' access to supplies
        or markets is hampered or eliminated as a result of the merger, thereby reducing
        these companies' ability and/or incentive to compete. Two forms of foreclosure can
        be distinguished. The first is where the merger is likely to raise the costs of
        downstream rivals by restricting their access to an important input (input
        foreclosure). The second is where the merger is likely to foreclose upstream rivals
        by restricting their access to a sufficient customer base (customer foreclosure).112
108     See Form CO, paragraph 179.
109     See Form CO, paragraph 184.
110     See Form CO, paragraphs 186–188.
111     See Form CO, paragraph 189.
112     Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the
        control of concentrations between undertakings (2008/C 265/07), paragraphs 29–30.
                                                      44
 ---pagebreak--- (211)   Input foreclosure arises where, post-merger, the new entity would be likely to
        restrict access to the products or services that it would have otherwise supplied
        absent the merger, thereby raising its downstream rivals' costs by making it harder
        for them to obtain supplies of the input under similar prices and conditions as
        absent the merger.113
(212)   Customer foreclosure may occur when a supplier integrates with an important
        customer in the downstream market. Because of this downstream presence, the
        merged entity may foreclose access to a sufficient customer base to its actual or
        potential rivals in the upstream market (the input market) and reduce their ability or
        incentive to compete. In turn, this may raise downstream rivals' costs by making it
        harder for them to obtain supplies of the input under similar prices and conditions
        as absent the merger.114
(213)   For an input or customer foreclosure scenario to raise competition issues, three
        factors need to be taken into account: 1) the ability of the merged entity to engage
        in foreclosure; 2) the incentives of the merged entity to do so: and 3) whether a
        foreclosure strategy would have a significant detrimental effect on competition on
        the downstream market.
VI.2.2. Input foreclosure
(214)   Contrary to what the Notifying Party submits, the relevant upstream product
        market for specialty alumina for refractory applications is further sub-segmented
        into separate markets: WFA for refractory applications, bubble alumina for
        refractory applications, BFA for refractory applications and tabular alumina. The
        Parties' combined market shares on the upstream markets are substantially higher
        than the market shares submitted by the Notifying Party for the vertical assessment.
(215)   In particular, the Parties’ combined market shares are high with respect to WFA
        and bubble alumina for refractory applications. In the market for WFA for
        refractory applications in the EEA, the Parties have a combined market share of
        around [30-40]% according to the Notifying Party – and close to [50-60]%
        according to the Commission’s investigation. Concerning the market for bubble
        alumina for refractory applications, the Parties have a post-combined market share
        of around [60-70]% in the EEA.
(216)   However, as described in Sections VII.3 to VII.5, the Notifying Party has entered
        into commitments that include the divestment of the whole of Alteo’s WFA and
        bubble alumina businesses. Therefore, the Transaction will not affect Imery’s
        vertical integration in this respect.
(217)   With respect to tabular alumina and BFA for refractory applications, the Notifying
        Party has submitted that the merged entity’s market shares would remain
        below 20% regardless of whether the market is considered to be EEA- or
        worldwide and even in monolithics on which Imerys' downstream activities
        concentrate. As discussed in Section V.5.2.1, the Commission has some doubts
        about the reliability of the market shares for BFA and cannot exclude that they
        might be higher.
(218)   As discussed in Section V.5.2.2, the Commission nonetheless notes that the Parties
        are not particularly close competitors to each other and supply different types of
113     Guidelines on the assessment of non-horizontal mergers, paragraph 31.
114     Guidelines on the assessment of non-horizontal mergers, paragraph 58.
                                                      45
 ---pagebreak---         BFA for refractory applications. Therefore, even if some customers were concerned
        about not having an adequate number of alternative suppliers for certain sub-
        segments of specialty alumina for refractory applications115, the situation is
        unlikely to be significantly worsened by the Transaction.
(219)   In general, a number of competing suppliers appear to be present in the refractory
        BFA markets, including those located in China and Ukraine. Customers of
        refractory BFA could therefore likely turn to other suppliers if the merged entity
        attempted a foreclosure strategy. This view is supported by customers of refractory
        BFA, the clear majority of whom were not concerned of the Transaction with
        respect to the supply of BFA.116
(220)   Therefore, and in light of the information available to it, the Commission concludes
        that the merged entity will likely not have the ability to engage into input
        foreclosure with respect to BFA and tabular alumina.
(221)   In addition, the Commission considers that the market investigation did not reveal
        any significant incentive for the merged entity to engage into input foreclosure
        even if it had the ability to do so. The Commission notes in this respect that
        Imerys’ (Caldery’s) market share in the downstream markets for refractories are
        below 20%.
VI.2.3. Customer foreclosure
(222)   With respect to customer foreclosure, Imerys’ market share in the downstream
        markets remain low at below 20% according to the Parties. Given the low market
        share and its internal production of the upstream inputs, it is unlikely that Imerys
        would even at present be a significant purchaser of specialty aluminas for
        refractory purposes. This view is supported by the majority of upstream rivals that
        indicated Imerys to have sourced no or only limited volumes from them.117
(223)   It is therefore unlikely that the merged entity would have the ability to engage into
        customer foreclosure. This finding is supported by the results of the market
        investigation where a clear majority of market participants indicated that there
        would be adequate remaining customers even if the merged entity stopped
        purchasing specialty alumina for refractory purposes. This included respondents
        that are currently supplying Imerys.118
VI.3.   Conclusion
(224)   In view of the foregoing and in light of the outcome of the market investigation and
        the information available to it, the Commission considers that the Transaction does
        not raise serious doubts as to its compatibility with the internal market with respect
        to its effects on vertically linked markets.
115     Replies to question 105 of Q1 – Questionnaire to Customers (refractory applications).
116     Replies to question 109 of Q1 – Questionnaire to Customers (refractory applications).
117     See, for instance replies to question 111 of Q3 – Questionnaire to Competitors (specialty alumina).
        See also replies to question 104 of Q1 – Questionnaire to Customers (refractory applications).
118     See, for instance replies to question 105 of Q3 – Questionnaire to Competitors (specialty alumina),
        and replies to question 112 of Q3 – Questionnaire to Customers (refractory applications).
                                                       46
 ---pagebreak--- VII MODIFICATIONS OF THE TRANSACTION
(225)  In order to render the Transaction compatible with the internal market, the
       Notifying Party has modified the Transaction by entering into commitments.
VII.1. Framework for the assessment of the commitments
(226)  The Commission recalls that the following principles, as referred to in the
       Commission Regulation (EC) No 802/2004 and in the Commission Notice on
       remedies acceptable under the Merger Regulation (the ‘Remedies Notice’),119 apply
       where parties to a merger choose to offer commitments in order to restore effective
       competition following serious doubts identified by the Commission.
(227)  Where a concentration raises serious doubts as regards its compatibility with the
       internal market, the parties may undertake to modify the concentration so as to
       remove the grounds for the serious doubts identified by the Commission with a
       view to having the transaction approved in phase I of the merger review procedure.
       In this respect, the Commission has the power to accept commitments provided that
       they will remove the grounds for serious doubts as to the compatibility of the
       transaction with the internal market
(228)  As set out in the Remedies Notice, the commitments have to eliminate the
       competition concerns entirely, and have to be comprehensive and effective from all
       points of view. The Commission only has power to accept commitments that are
       capable of rendering the concentration compatible with the internal market in that
       they will prevent the significant impediment to effective competition in all relevant
       markets where competition concerns were identified.120
(229)  In assessing whether commitments will maintain effective competition, the
       Commission considers all relevant factors, including the type, scale and scope of
       the proposed commitments, with reference to the structure and particular
       characteristics of the market in which the transaction is likely to significantly
       impede effective competition, including the position of the parties and other
       participants on the market.121
(230)  In order for the commitments to comply with those principles, they must be
       capable of being implemented effectively within a short period of time.122 Where,
       however, the parties submit commitments proposals that are so extensive and
       complex that it is not possible for the Commission to determine with the requisite
       degree of certainty, at the time of its decision, that they will be fully implemented
       and that they are likely to maintain effective competition in the market, an
       authorisation decision cannot be granted.123
(231)  Concerning the form of acceptable commitments, the Merger Regulation gives
       discretion to the Commission as long as the commitments meet the requisite
       standard.124
119    Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under
       Commission Regulation (EC) No 802/2004, OJ C 267, 22.10.2008, p. 1.
120    Remedies Notice, paragraph 9.
121    Remedies Notice, paragraph 12.
122    Remedies Notice, Paragraph 9.
123    Remedies Notice, paragraphs 13,14 and 61 et seq.
124    Case T-177/04, EasyJet v Commission [2006] ECR II-1913, paragraph 197.
                                                    47
 ---pagebreak--- (232)    Divestiture commitments are often the most effective way to eliminate competition
         concerns resulting from horizontal overlaps. The intended effects of a divestiture
         will only be achieved if and once the business to divest is transferred to a suitable
         purchaser in whose hands it will become an active competitive force in the market.
         In order to ensure that the business is divested to a suitable purchaser, the
         commitments have to include criteria to define its suitability which will allow the
         Commission to conclude that the divestiture of the business to such a purchaser
         will likely remove the competition concerns identified.125
VII.2.   Commitments submitted by the Notifying Party
(233)    The Notifying Party submitted initial commitments on 7 October 2016 (the ‘Initial
         Commitments’). After the Commission had raised certain doubts as to whether the
         Initial Commitments would be sufficient to entirely remove the serious doubts
         resulting from the Transaction, the Notifying Party submitted a refinement and
         improvement of the Initial Commitments on 14 October 2016 (the ‘Commitments
         of 14 October 2016’). The Commission launched a market test on those
         commitments on the same day.
(234)    Following the Commission’s feedback on the market test and assessment of the
         Commitments of 14 October 2016, the Notifying Party submitted further improved
         commitments on 27 October 2016 (‘Final Commitments’).
(235)    The Commission has analysed the proposed commitments and considers the Final
         Commitments to be sufficient and appropriate to ensure that the Transaction no
         longer raises serious doubts as to its compatibility with the internal market and that
         effective competition is maintained following the Transaction..
VII.3.   Initial Commitments
VII.3.1. Description of the Initial Commitments
(236)    In order to address the preliminary competition concerns, the Parties committed in
         the Initial Commitments to divest the Target's entire WFA and bubble alumina
         business (‘the WFA Business’) concentrated in the Target's production site in La
         Bâthie (France), currently owned by Alteo ARC.
(237)    The assets of the WFA Business include in particular Alteo's WFA (including
         bubble alumina) manufacturing operations in La Bâthie. The Notifying Party
         submitted that the Target produces WFA (including bubble alumina) in two sites of
         La Bâthie, while Alteo produces Abral® and silicon nitride in a third site of that
         plant.
(238)    The Initial Commitments included all tangible and intangible assets pertaining to
         the WFA Business. In this context, the Initial Commitments provided for a transfer
         of know-how used for the production of WFA and all intellectual property rights
         used. Moreover, the Initial Commitments included the entirety of Alteo's WFA
         business' customer portfolio, orders and records. Further, the Notifying Party
         committed to divest all of Alteo's contracts, licenses, permits and authorisations
         related to the WFA business.
(239)    The Initial Commitments did not include the divestment of Alteo's further activities
         located in La Bâthie, namely its Abral® and silicon nitride businesses. They also
         did not contain any specific safeguards as regards the WFA Business' access to raw
         material and in particular to calcinated alumina, including from its former parent
125      Remedies Notice, paragraph 47.
                                                  48
 ---pagebreak---          company Alteo. Moreover, the Initial Commitments did not specify the exact
         means of offering sales and marketing, R&D, IT, accounting and administration
         services provided by Alteo's staff to the WFA Business as well as related
         transitional agreements. Also, the exact scope of the divested IP, licences, permits
         etc. and the specific key personnel to be transferred were not defined in the Initial
         Commitments.
VII.3.2. Assessment of the Initial Commitments
(240)    As set out in sections V.1 to V.3., the Commission concluded that the Transaction
         raises serious doubts as to its compatibility with the internal market regarding
         (i) WFA for abrasive applications, (ii) WFA for refractory applications and
         (iii) bubble alumina in the EEA.
(241)    On the basis of the information provided by the Notifying Party and for the reasons
         set out below, the Commission did not consider that the Initial Commitments could
         fully remove such serious doubts due to, first, remaining concerns regarding the
         viability of the WFA Business and in particular in the light of the exclusion of
         Alteo's Abral® and silicon nitride businesses from the WFA Business, second, the
         uncertainty to what extent sales personnel would be made available to the WFA
         Business and, third, the requirement of further appropriate means to safeguard
         access to raw materials for the WFA Business.
VII.3.2.1.       Suitability to remove identified competition concerns
(242)    As regards the overlaps of the Parties' activities in WFA for refractory and abrasive
         applications as well as in bubble alumina, the Initial Commitments included the
         divestment of the entirety of Alteo's WFA and bubble alumina operations
         worldwide.
(243)    This divestment would thus eliminate any horizontal overlap of the activities of the
         Parties in the WFA and bubble alumina markets.
(244)    On that basis, the Commission considers that the divestment of Alteo's entire WFA
         and bubble alumina business as proposed in the Initial Commitments could be
         sufficient to remove the overlaps between the Parties' activities in the markets for
         WFA and bubble alumina for refractory and abrasive applications.
VII.3.2.2.       Divestiture of a viable and competitive business
(245)    The Commission considers that there are a number factors which indicate that the
         WFA Business may be a viable and competitive business in certain respects:
              (i) The WFA Business is a profitable business with sales of EUR […], growing
                   by […]% per annum in the past […] years. Although negative growth of
                   […]% is expected in […], a recovery of the lost sales is expected until […]
                   with further growth expectations of additional […]% in the next […] years.
                   The contribution of the WFA Business without variable costs was EUR […]
                   in 2015 and the cash gross margin was EUR […] or […]% of sales in 2015.
              (ii) The WFA Business has a production capacity of […] ktpa, which is
                   comparable to other WFA competitors such as Motim, whose capacity is
                   estimated by the Parties to be approximately […] ktpa126.
126      Similarly, the Roskill 2016 Report, page 49.
                                                      49
 ---pagebreak---              (iii)The WFA Business comprises all customer relationships, existing permits,
                  licences and authorisations of Alteo that are necessary to operate the
                  business within a short time.
(246)   However, the Commission had doubts as to the viability of the WFA Business,
        with regard to certain elements. The Commission considered in particular that the
        WFA Business' direct access to sales and marketing personnel responsible for the
        WFA Business which is currently employed by Alteo Gardanne and the inclusion
        of Alteo's Abral® and silicon nitride businesses located in the same La Bâthie plant
        are necessary for the viability of the WFA Business. Further, the safeguards that a
        potential purchaser of the WFA Business has sufficient access to raw materials if
        need be, for instance through the optional succession into a raw material contract
        concluded between Alteo and Imerys inter alia regarding calcinated alumina, was
        considered to be crucial to ensure sufficient flexibility of the purchaser to develop
        the WFA Business as a viable and competitive business. Lastly, further safeguards
        regarding transitional services such as HR, R&D, accounting and administration
        appeared to be necessary.
Sales and Marketing Personnel
(247)   The WFA Business does not currently employ any own sales and marketing
        personnel. Such services are rather provided by […] sales forces, […]. These sales
        forces dedicate currently approximately […]% of their time to the sale and
        marketing of WFA (the remaining time being primarily devoted to selling and
        marketing of BFA).
(248)   The Commission's assessment is that for a business to function on a stand-alone
        basis and to develop as a viable and competitive force on the market, it is essential
        to employ sales forces that are dedicated to the business they work for, who have
        sufficient expertise of the relevant markets and preferably maintain ongoing
        customer relations.
(249)   Therefore, the Commission considers that it is necessary that the WFA Business
        would include sufficient sales and marketing personnel that is currently employed
        by Alteo Gardanne. In particular, in case the purchaser would not own an existing
        own sales and distribution network and would not be active in the market for WFA,
        it is questionable whether within a short period of time suitable personnel could be
        hired and sufficient customer relations could be established to compete effectively
        for sales on the market.
(250)   A mere prolongation of the provision of sales and marketing services by Alteo
        Gardanne for a transitional period would create less certainty than the transfer of a
        sales team to the WFA Business, especially in the medium- and long-term, and is
        thus the less preferable option.
(251)   However, the personnel which is currently in charge of Alteo's WFA sales is
        employed by Alteo Gardanne, and that personnel was not to be transferred to
        Imerys in the course of the Transaction. Therefore, Imerys can neither commit to
        transfer such third party personnel to the WFA Business nor do these employees in
        any way automatically follow the WFA Business. Whether they can be transferred
        or not, as was submitted by the Parties, depends on the approval of Alteo Gardanne
        as well as on the salespeople themselves. In any event, the Initial Commitments did
        not stipulate the specific means of how and under which terms sales and marketing
        personnel currently dedicated inter alia to Alteo's WFA business would have to be
        made available to the WFA Business.
                                                 50
 ---pagebreak--- (252)    Therefore, the Commission was not able to conclude with sufficient certainty that
         the Initial Commitments were appropriate to ensure the medium to long-term
         competitiveness and viability of the WFA Business in terms of access to sales and
         marketing personnel.
Inclusion of Abral® and silicon nitride business
(253)    In the Initial Commitments, the Notifying Party excluded Alteo's Abral® and
         silicon nitride businesses which are currently located also in Alteo's production site
         in La Bâthie. The Notifying Party submitted that the Abral® and the silicon nitride
         business could be easily carved out since manufacturing takes place at different
         facilities within the La Bâthie site.
(254)    However, the profit and loss data provided by the Notifying Party of the La Bâthie
         site suggests that Abral® and silicon nitrides contribute substantially to La Bâthie's
         gross margin and EBTIDA. For instance, sales of Abral® and silicon nitride
         accounted for EUR […] of the cash gross margin of overall EUR […].
(255)    Thus, it could not be excluded that the exclusion of the Abral® and silicon nitrides
         activities from the existing La Bâthie business risks to weaken the financial
         strength and profitability of La Bâthie as it is structured today. Therefore, the
         Commission considered that the Abral® and silicon nitrides business should be
         included in the WFA Business to ensure its continuous viability and
         competitiveness.
Optionality of succession in raw material contract
(256)    In the context of the Transaction, Imerys entered into a long-term raw material
         supply contract with Alteo with fixed terms ([…] years) and prices. This supply
         contract concerns also raw materials (calcinated alumina), which were meant to be
         used by Imerys post-Transaction for the WFA Business.
(257)    The Initial Commitments stipulated that all of Alteo's contracts related to its WFA
         (including bubble alumina) Business should be divested. However, it remained
         unclear (i) whether the supply agreement regarding raw material to be supplied by
         Alteo to Imerys post-Transaction would fall under this obligation and (ii) under
         which conditions a potential purchaser should succeed into the supply agreement,
         considering that Alteo Gardanne would have to agree to such transfer.
(258)    Sufficient access to raw materials is a crucial pre-condition for a business to be and
         develop as a viable and competitive business on the market. The viability of the
         WFA Business depends thus on whether sufficient calcinated alumina supplies at
         competitive conditions are available to a potential purchaser or could easily be
         found. Should this not be the case or only at worse conditions than those negotiated
         by Imerys with Alteo in the context of the Transaction, a partial succession in the
         existing raw material supply contract between Imerys and Alteo regarding
         calcinated alumina could ensure the WFA Business' access to calcinated alumina.
         On the other hand, should the purchaser already have supply contracts in place or
         should the purchaser be able to source calcinated alumina at more beneficial terms
         than those agreed upon between Imerys and Alteo, succeeding into the raw material
         contract would be detrimental to the WFA Business' potential to develop as a
         viable and competitive force on the market.
(259)    In the light of the above, the Commission indicated to the Notifying Party that
         under the Initial Commitments the WFA Business' access to calcinated alumina
         was not sufficiently ensured and that to appropriately safeguard sufficient access
         without creating a financial burden for the WFA Business, it should be at the
                                                  51
 ---pagebreak---          option of the purchaser to partially succeed in the raw material supply contract
         between Alteo and Imerys.
VII.3.3. Conclusion on the Initial Commitments
(260)    Therefore, in view of the above considerations and the information available to it,
         the Commission was not able to conclude with sufficient certainty that the Initial
         Commitments were appropriate to ensure the competitiveness and viability of the
         WFA Business.
VII.4.   Commitments of 14 October 2016
(261)    On 14 October 2016, the Notifying Party submitted a refined set of commitments
         (‘Commitments of 14 October 2016’), replacing the Initial Commitments, aimed at
         addressing the shortcomings identified with regards to the Initial Commitments.
         The Commitments of 14 October 2016 replaced the Initial Commitments.
VII.4.1. Description of the Commitments of 14 October 2016
(262)    The Commitments of 14 October 2016 include everything that was included in the
         Initial Commitments described in Section VII.3.1. In addition, the Commitments of
         14 October 2016 contain certain additions and clarifications. The main
         amendments are listed in paragraphs (263) to (265).
(263)    First, the Commitments of 14 October 2016 include the divestment of the Abral®
         and silicon nitride business and related assets that were outside the scope of the
         Initial Commitments.
(264)    Second, at the option of the purchaser, the purchaser shall be able to partially
         succeed into the raw material supply contract between Alteo and Imerys regarding
         calcinated alumina for the production of WFA.
(265)    Third, the Commitments of 14 October 2016 include an explicit description of key
         personnel. In addition, appropriate financial incentives will be offered by the
         Notifying Party to at least […] among the […] sales forces currently dedicated to
         Alteo's La Bâthie products. Such incentives shall be offered with priority to the
         […] and […] of the […] sales managers currently in charge of the sales of the
         products concerned. In addition, the criteria for suitable purchasers include a
         clarification that only those purchasers can be approved by the Commission who
         have the ability to secure sufficient international coverage in terms of sales
         network.
VII.4.2. Assessment of the Commitments of 14 October 2016
(266)    Following the modification of the Commitments explained above the Commission
         launched a market test on the Commitments of 14 October 2016.
(267)    The results of the market test were generally positive. In particular, the majority of
         market participants that took a position considered that the Commitments of
         14 October 2016 were sufficient to eliminate the competition concerns raised by
         the Transaction and that the divested assets would be viable and constitute a
         competitive force on the market if purchased by a suitable purchaser.127 The
         majority of respondents who were customers also considered that they could
         purchase WFA and bubble alumina from the divested business.128 The market test
127      See, for instance replies to questions 1–3 and 5– 7 of R1 – Market Test.
128      Replies to question 4 of R1 – Market Test.
                                                         52
 ---pagebreak---          also confirmed that there was interest from some purchasers from the alumina
         industry in acquiring the divested business.129
(268)    Nonetheless, a significant number of market participants clarified that, in order for
         the divested business to be viable and to constitute an effective competitive force,
         the purchaser would need to have prior experience in the specialty alumina
         industry. Reasons for this were explained to be, for instance access to customers
         and industry knowledge.130
VII.4.3. Conclusion on the Commitments of 14 October 2016
(269)    Therefore, in view of the replies to the market test and the information available to
         it, the Commission was not able to conclude with sufficient certainty that the
         Commitments of 14 October 2016 were appropriate to ensure the viability and
         competitiveness of the businesses to be divested. This was because the
         Commission could not ascertain that the viability and competitiveness of the
         businesses to be divested would not significantly depend on the purchaser having
         the prior experience identified by market participants in the market test.
VII.5.   Final Commitments
(270)    On 27 October 2016, and following the Commission’s feedback on the results of
         the market test on the Commitments of 14 October 2016, the Notifying Party
         submitted a refined set of commitments (‘Final Commitments’). The Final
         Commitments replaced the Commitments of 14 October 2016.
VII.5.1. Description of the Final Commitments
(271)    The Final Commitments include everything that was included in the Commitments
         of 14 October 2016 described in Section VII.4.1 (and everything that was included
         in the Initial Commitments described in Section VII.3.1).
(272)    In addition, the Final Commitments include a requirement that the purchaser shall
         have prior experience in the specialty alumina industry, namely ‘proven expertise
         in the industry of fused alumina for non metallurgical applications (i.e. refractory
         and abrasive applications) or in market segments closely related to fused alumina
         for non metallurgical applications (e.g. a presence in the upstream market for
         calcined alumina or in the neighbouring market of fused alumina for metallurgical
         applications)’131.
VII.5.2. Assessment of the Final Commitments
(273)    As described in Section VII.4, market participants had indicated in the market test
         on the Commitments of 14 October 2016 that the purchaser would need to have
         prior industry experience for the divestment to be viable and constitute an effective
         competitive force. In other respects, the market test was positive and did not raise
         issues that would have called the suitability of the Commitments of
         14 October 2016 into question.
(274)    The Commission considers that the Final Commitments adequately address the
         question raised in the earlier market test, in particular in relation to the purchaser's
         profile. Given that the Final Commitments have in no other material way been
         altered from the Commitments of 14 October 2016, the Commission concludes that
129      Replies to question 11 of R1 – Market Test.
130      See, for instance replies to question 13 of R1 – Market Test.
131      Paragraph 15 of the Final Commitments.
                                                          53
 ---pagebreak---          the overall positive results of the market test can be considered valid for the Final
         Commitments as well.
VII.5.3. Conclusion on the Final Commitments
(275)    Therefore, and in view of the considerations in this Section and the information
         available to it, the Commission considers that the Final Commitments entered into
         by the Notifying Party are sufficient and appropriate to eliminate the serious doubts
         as to the compatibility of the Transaction with the internal market with respect to
         (i) WFA for abrasive applications, (ii) WFA for refractory applications and
         (iii) bubble alumina.
VIII     CONDITIONS AND OBLIGATIONS
(276)    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 internal market.
(277)    The fulfilment of the measures that give 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 is no longer applicable. Where the undertakings concerned commit a breach
         of an obligation, the Commission may revoke the clearance decision in accordance
         with Article 6(3) 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.
(278)    In accordance with the basic distinction between conditions and obligations, the
         commitments in section B (and the Schedule) of the Final Commitments constitute
         conditions attached to this decision, as only through full compliance therewith can
         the structural changes in the relevant markets be achieved. The other commitments
         set out in the Final Commitments constitute obligations, as they concern the
         implementing steps which are necessary to achieve the modifications sought in a
         manner compatible with the internal market. Accordingly, the Decision not to raise
         objections is made conditional on full compliance by the Notifying Party with
         Section B of the Final Commitments and the remaining sections of the Final
         commitments constitute obligations on the Notifying Party within the meaning of
         Article 6(2) of the Merger Regulation.
(279)    The full text of the Final Commitments is attached as an Annex to this decision and
         forms an integral part of it.
IX    CONCLUSION
(280)    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 Sections B and in the Schedule of the
         commitments annexed to the present decision and with the obligations contained in
         the remaining 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 and Article 57 of the EEA Agreement.
                                                  54
 ---pagebreak--- X     APPROVAL OF THE SPA AMENDMENT SUBMITTED ON 27 OCTOBER
        2016 PURSUANT TO PARAGRAPH 5 OF THE COMMITMENTS
(281)   Paragraph 5 of the Final Commitments provides that the Transaction shall not be
        closed until Imerys and Alteo have entered into an agreement, and that the
        Commission has approved the agreement, on (i) the provision of transitional
        services by Alteo Gardanne to the purchaser of the divested business and (ii) an
        option for the purchaser of the divested business to partially enter into the supply
        agreement between Alteo Gardanne and Alteo ARC with a view of ensuring
        adequate raw material supplies to the divested business (split of the supply
        agreement between Alteo Gardanne and the divested business).
(282)   On 27 October 2016, Imerys and Alteo entered into an agreement on the
        amendment of the agreements bringing about the Transaction concerning, among
        other elements, the provision of transitional services and raw materials by Alteo
        Gardanne to the purchaser of the divested business ('Amendment to the SPA').
(283)   With respect to transitional services concerning, among others, back-office
        functions, Section (iii)(c) of the Amendment to the SPA provides that Alteo
        Gardanne shall provide the divested business transitional services 'similar to those
        already appended to the Alteo ARC SPA, relating to the Divestment Business,
        under the terms and conditions set forth therein applicable mutatis mutandis,
        subject to the following:
            (i) such transitional services shall continue to be provisionally provided for
                 the entire Divestiture Period plus, upon the closing of the transfer of the
                 Divestment Business, an additional period of […], which can be renewed
                 once at the option of the Third Party Purchaser, starting from the closing of
                 the transfer of the Divestment Business, unless the Third Party Purchaser
                 elects to terminate those services before that date;
            (ii) such transitional services shall be terminated by anticipation if the relevant
                 services have been internalized by the Divestment Business before the
                 expiration of any of the periods referred to above'
(284)   With respect to transitional sales agent services in particular, Section (iii)(d) of the
        Amendment to the SPA stipulates that Alteo Gardanne shall continue to act as a
        sales agent to the divested business 'up to a period of maximum […] thereafter,
        should no member of the old sales team accept to follow the Divestment Business
        (as per the Commitments). Should the members of the old sales team (at least […]
        in numbers) accept to follow the Divestment Business, the transitional service
        agreement in respect of the sales forces will terminate within maximum […] from
        the transfer of the members of the old sales team to the Divestment Business'.
(285)   With respect to R&D, Section (iii)(d) of the Amendment to the SPA stipulates that
        'upon reasonable request of the Third Party Purchaser, Alteo Gardanne’s R&D
        department shall provide support services to the Third Party Purchaser for a
        period of up to […] (renewable once) after the closing of the transfer of the
        Divestment Business.'
(286)   Concerning the supply of raw materials by Alteo Gardanne to the divested
        business, Section (iii)(b) of the Amendment to SPA provides that '[t]he supply
        agreement for raw materials between Alteo Gardanne and Alteo ARC, covering
        both the La Bâthie plant and the Beyrède plant, as appended in agreed form to the
        Alteo ARC SPA, shall be split accordingly to ensure the supply of the relevant raw
        materials by Alteo Gardanne to the Divestment Business under the terms and
        conditions set forth therein applicable mutatis mutandis - - the Beneficiary [Alteo
                                                  55
 ---pagebreak---       Holding] agrees that the Offeror [Imerys] is entitled to assign to the Third Party
      Purchaser the supply of raw materials to the Divestment Business - -'
(287) The Commission considers that the text of the Amendment to the SPA is in line
      with paragraph 5 of the Final Commitments. The Amendment to the SPA – which
      has been signed by a duly appointed representative of Alteo – provides Alteo's
      agreement to provide to the purchaser transitional services and raw materials as
      required in paragraph 5 of the Commitments.
(288) Therefore, and in light of the information made available to it, the Commission
      confirms that the Amendment to the SPA fulfils the requirements set out in
      paragraph 5 of the Final Commitments.
                                                  For the Commission
                                                  (Signed)
                                                  Phil HOGAN
                                                  Member of the Commission
                                             56
 ---pagebreak---                             Case M.8130 – Imerys / Alteo certain assets
                    COMMITMENTS TO THE EUROPEAN COMMISSION
                                             27 October 2016
   Pursuant to Articles 6(2) of Council Regulation (EC) No 139/2004 (the “Merger
   Regulation”), Imerys S.A., incorporated under the laws of France, (“Imerys” or the
   “Notifying Party”), hereby enters into the following Commitments (the “Commitments”)
   vis-à-vis the European Commission (the “Commission”) with a view to rendering the
   acquisition of the Target as described in the Form CO (Alteo ARC and Alufin) (the
   “Transaction”) compatible with the internal market and the functioning of the EEA
   Agreement.
   This text shall be interpreted in light of the Commission’s decision pursuant to Article 6(1)(b)
   of the Merger Regulation to declare the Transaction compatible with the internal market and
   the functioning of the EEA Agreement (the “Decision”), in the general framework of
   European Union law, in particular in 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 (the “Remedies Notice”).
   SECTION A. DEFINITIONS
1. For the purpose of the Commitments, the following terms shall have the following meaning:
   […]
   Affiliated Undertakings: undertakings controlled by Imerys and/or by the ultimate parents of
   Imerys, whereby the notion of control shall be interpreted pursuant to Article 3 of the Merger
   Regulation and in light of the Commission Consolidated Jurisdictional Notice under Council
   Regulation (EC) No 139/2004 on the control of concentrations between undertakings (the
   “Consolidated Jurisdictional Notice”)
   […];
   Alteo Gardanne: A subsidiary of Alteo Holding (the Seller in the Transaction), constituting
   its headquarters.
   […]
   […]
   Assets: the assets that contribute to the current operation or are necessary to ensure the
   viability and competitiveness of the Divestment Business as indicated in Section B,
   paragraph 6(a) and 6(b), and described more in detail in the Schedule.
   Closing: the transfer of the legal title to the Divestment Business to the Purchaser.
   Closing Period: the period of 3 months from the approval of the Purchaser and the terms of
   sale by the Commission.
                                                        1
 ---pagebreak--- Confidential Information: any business secrets, know-how, commercial information, or any
other information of a proprietary nature that is not in the public domain.
Conflict of Interest: any conflict of interest that impairs the Trustee’s objectivity and
independence in discharging its duties under the Commitments.
Divestment Business: the business as defined in Section B and in the Schedule which Imerys
commits to divest.
Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by Imerys and who has/have received from Imerys 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 […] months from the Effective Date.
Hold Separate Manager: the person appointed by Imerys for the Divestment Business to
manage the day-to-day business under the supervision of the Monitoring Trustee.
Imerys: Imerys S.A., incorporated under the laws of France, with its registered office at
154, rue de l’Université, 75007 Paris, and registered with the RCS at Paris under number
562 008 151.
Key Personnel: all personnel necessary to maintain the viability and competitiveness of the
Divestment Business, as listed in the Schedule, including the Hold Separate Manager.
La Bathie: Alteo’s manufacturing sites producing WFA, bubble alumina, […].
Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by Imerys, and who has/have the duty to monitor Imerys’
compliance with the conditions and obligations attached to the Decision.
Personnel: all staff currently employed by the Divestment Business as listed in the Schedule.
Purchaser: the entity approved by the Commission as acquirer of the Divestment Business in
accordance with the criteria set out in Section D.
Purchaser Criteria: the criteria laid down in paragraph 15 of these Commitments that the
Purchaser must fulfil in order to be approved by the Commission.
Sale and Purchase Agreement: a final binding sale and purchase agreement for the sale of
the Divestment Business […].
Schedule: the schedule to these Commitments describing more in detail the Divestment
Business.
Transaction: the Notified Transaction under case M.8130 Imerys/Alteo certain assets.
Trustee(s): the Monitoring Trustee and/or the Divestiture Trustee as the case may be.
Trustee Divestiture Period: the period of […] months from the end of the First Divestiture
Period.
WFA Business: Alteo’s business in WFA and Bubble alumina, subject to divestiture.
                                                   2
 ---pagebreak---    SECTION B. THE COMMITMENT                     TO    DIVEST     AND      THE    DIVESTMENT
                   BUSINESS
   Commitment to divest
2. In order to maintain effective competition, Imerys 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 16 of these Commitments. To carry out the divestiture,
   Imerys commits to find a purchaser and to enter into a Sale and Purchase Agreement for the
   sale of the Divestment Business within the First Divestiture Period. If, at the end of the First
   Divestiture Period, Imerys has not entered into such an agreement, Imerys shall grant the
   Divestiture Trustee an exclusive mandate to sell the Divestment Business in accordance with
   the procedure described in paragraph 28 in the Trustee Divestiture Period.
3. Imerys shall be deemed to have complied with this commitment if:
   (a)   by the end of the Trustee Divestiture Period, Imerys or the Divestiture Trustee have
         entered into a Sale and Purchase Agreement and the Commission approves the proposed
         purchaser and the terms of sale as being consistent with the Commitments in accordance
         with the procedure described in paragraph 16 and
   (b)   the Closing of the sale of the Divestment Business to the Purchaser takes place within
         the Closing Period.
4. In order to maintain the structural effect of the Commitments, Imerys shall, for a period of 10
   years after Closing, not acquire, whether directly or indirectly, the possibility of exercising
   influence (as defined in paragraph 43 of the Remedies Notice, footnote 3) over the whole or
   part of the Divestment Business, unless, following the submission of a reasoned request from
   Imerys showing good cause and accompanied by a report from the Monitoring Trustee (as
   provided in paragraph 42 of these Commitments), the Commission finds 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 Transaction compatible with the internal market.
5. Imerys commits not to close the Transaction until:
   (a)   Imerys has submitted a copy of the executed agreement between Imerys and Alteo
         Gardanne - which inter alia stipulates the provision of transitional services by Alteo
         Gardanne to the Divestment Business […]
   (b)   the Commission has approved such agreement.
   Structure and definition of the Divestment Business
6. The Divestment Business consists of Alteo’s WFA Business […]. The legal and functional
   structure of the Divestment Business as operated to date is described in the Schedule. The
   Divestment Business includes all assets and staff that contribute to the current operation or are
   necessary to ensure the viability and competitiveness of the Divestment Business, in
   particular:
   (a)   all tangible and intangible assets (including intellectual property rights) pertaining to
         Alteo’s WFA (including bubble alumina) business […];
                                                      3
 ---pagebreak---    (b)   all licences, permits and authorisations issued by any governmental organisation for the
         benefit of the Divestment Business;
   (c)   all contracts, leases, commitments and customer orders of the Divestment Business;
   (d)   all customer, credit and other records of the Divestment Business; and
   (e)   the Personnel.
   SECTION C. RELATED COMMITMENTS
   Preservation of viability, marketability and competitiveness
7. From the Effective Date until Closing, Imerys shall preserve or procure the preservation of 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, Imerys undertakes:
   (a)   not to carry out any action 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, or procure 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, or procure that all reasonable steps are being taken,
         including appropriate incentive schemes (based on industry practice), to encourage all
         Key Personnel to remain with the Divestment Business, and not to solicit or move any
         Personnel to Imerys’ remaining business. Where, nevertheless, individual members of
         the Key Personnel exceptionally leave the Divestment Business, Imerys shall provide a
         reasoned proposal to replace the person or persons concerned to the Commission and
         the Monitoring Trustee. Imerys must be able to demonstrate to the Commission that the
         replacement is well suited to carry out the functions exercised by those individual
         members of the Key Personnel. The replacement shall take place under the supervision
         of the Monitoring Trustee, who shall report to the Commission.
   Hold-separate obligations
8. Imerys commits, from the Effective Date until Closing, to keep the Divestment Business
   separate from the businesses that it is retaining, and to ensure that unless explicitly permitted
   under these Commitments: (a) management and staff of the businesses retained by Imerys
   have no involvement in the Divestment Business; (b) the Key Personnel and Personnel of the
   Divestment Business have no involvement in any business retained by Imerys and do not
   report to any individual outside the Divestment Business.
9. Until Closing, Imerys shall assist the Monitoring Trustee in ensuring that the Divestment
   Business is managed as a distinct and saleable entity separate from the businesses which
   Imerys is retaining. Immediately after the adoption of the Decision, Imerys shall appoint a
   Hold Separate Manager. The Hold Separate Manager, who shall be part of the Key Personnel,
   shall manage the Divestment Business independently and in the best interest of the business
                                                       4
 ---pagebreak---     with a view to ensuring its continued economic viability, marketability and competitiveness
    and its independence from the businesses retained by Imerys. The Hold Separate Manager
    shall closely cooperate with and report to the Monitoring Trustee and, if applicable, the
    Divestiture Trustee. Any replacement of the Hold Separate Manager shall be subject to the
    procedure laid down in paragraph 6(c) of these Commitments. The Commission may, after
    having heard Imerys, require Imerys to replace the Hold Separate Manager.
    Ring-fencing
10. Imerys shall implement, or procure to implement, all necessary measures to ensure that it does
    not, after the Effective Date, obtain any Confidential Information relating to the Divestment
    Business and that any such Confidential Information obtained by Imerys before the Effective
    Date will be eliminated and not be used by Imerys. This includes measures vis-à-vis Imerys’
    appointees on the supervisory board and/or board of directors of the Divestment Business. In
    particular, the participation of the Divestment Business in any central information technology
    network shall be severed to the extent possible, without compromising the viability of the
    Divestment Business. Imerys may obtain or keep information relating to the Divestment
    Business which is reasonably necessary for the divestiture of the Divestment Business, the
    disclosure of which to Imerys is required by law.
    Non-solicitation clause
11. Imerys undertakes, subject to customary limitations, not to solicit, and to procure that
    Affiliated Undertakings do not solicit, the Key Personnel transferred with the Divestment
    Business for a period of […] after Closing.
    Due diligence
12. In order to enable potential purchasers to carry out a reasonable due diligence of the
    Divestment Business, Imerys 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;
    (b)   provide to potential purchasers sufficient information relating to the Personnel and
          allow them reasonable access to the Personnel.
    Reporting
13. Imerys 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). Imerys shall submit
    a list of all potential purchasers having expressed interest in acquiring the Divestment
    Business to the Commission at each and every stage of the divestiture process, as well as a
    copy of all the offers made by potential purchasers within five days of their receipt.
14. Imerys 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 any
    information memorandum to the Commission and the Monitoring Trustee before sending the
    memorandum out to potential purchasers.
                                                       5
 ---pagebreak---     SECTION D. THE PURCHASER
15. In order to be approved by the Commission, the Purchaser must fulfil the following criteria:
    (a)   The Purchaser shall be independent of and unconnected to Imerys and its Affiliated
          Undertakings (this being assessed having regard to the situation following the
          divestiture).
    (b)   The Purchaser shall have the financial resources, ability to secure sufficient
          international coverage in terms of sales network, proven expertise in the industry of
          fused alumina for non metallurgical applications (i.e. refractory and abrasive
          applications) or in market segments closely related to fused alumina for non
          metallurgical applications (e.g. a presence in the upstream market for calcined alumina
          or in the neighbouring market of fused alumina for metallurgical applications), and
          incentive to maintain and develop the Divestment Business as a viable and active
          competitive force in competition with Imerys and other competitors;
    (c)   The acquisition of the Divestment Business by the Purchaser must neither be likely to
          create, in 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. In particular, the Purchaser must reasonably be expected to obtain all necessary
          approvals from the relevant regulatory authorities for the acquisition of the Divestment
          Business.
16. The Sale and Purchase Agreement (as well as ancillary agreements) relating to the divestment
    of the Divestment Business shall be conditional on the Commission’s approval. When Imerys
    has reached an agreement with a purchaser, it shall submit a fully documented and reasoned
    proposal, including a copy of the final agreement(s), within one week to the Commission and
    the Monitoring Trustee. Imerys must be able to demonstrate to the Commission that the
    purchaser fulfils the Purchaser Criteria and that the Divestment Business is being sold in a
    manner consistent with the Commission’s Decision and the Commitments. For the approval,
    the Commission shall verify that the purchaser fulfils the Purchaser Criteria and that the
    Divestment Business is being sold in a manner consistent with the Commitments including
    their objective to bring about a lasting structural change in the market. The Commission may
    approve the sale of the Divestment Business without one or more Assets or parts of the
    Personnel, or by substituting one or more Assets or parts of the Personnel with one or more
    different assets or different 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
17. Imerys shall appoint a Monitoring Trustee to carry out the functions specified in these
    Commitments for a Monitoring Trustee. Imerys commits not to close the Transaction before
    the appointment of a Monitoring Trustee.
18. If Imerys has not entered into a Sale and Purchase agreement regarding the Divestment
    Business one month before the end of the First Divestiture Period or if the Commission has
    rejected a purchaser proposed by Imerys at that time or thereafter, Imerys shall appoint a
    Divestiture Trustee. The appointment of the Divestiture Trustee shall take effect upon the
    commencement of the Trustee Divestiture Period.
                                                         6
 ---pagebreak--- 19. The Trustee shall:
    (a)    at the time of appointment, be independent of Imerys and its Affiliated Undertakings;
    (b)    possess the necessary qualifications to carry out its mandate, for example have
           sufficient relevant experience as an investment banker or consultant or auditor; and
    (c)    neither have nor become exposed to a Conflict of Interest.
20. The Trustee shall be remunerated by Imerys 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, such success premium may only be earned if the divestiture takes place
    within the Trustee Divestiture Period.
           Proposal by Imerys
21. No later than two weeks after the Effective Date, Imerys shall submit the names of one or
    more natural or legal persons whom Imerys 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 or on request by the Commission, Imerys shall submit a list of one or more persons
    whom Imerys propose to appoint as Divestiture Trustee to the Commission for approval. The
    proposal shall contain sufficient information for the Commission to verify that the person or
    persons proposed as Trustee fulfil the requirements set out in paragraph 19 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
22. 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 name is approved, Imerys shall appoint or cause to be
    appointed the person or persons concerned as Trustee, in accordance with the mandate
    approved by the Commission. If more than one name is approved, Imerys shall be free to
    choose the Trustee to be appointed from among the names 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 Imerys
23. If all the proposed Trustees are rejected, Imerys shall submit the names of at least two more
    natural or legal persons within one week of being informed of the rejection, in accordance
    with paragraphs 17 and 22 of these Commitments.
                                                          7
 ---pagebreak---               Trustee nominated by the Commission
24.  If all further proposed Trustees are rejected by the Commission, the Commission shall
     nominate a Trustee, whom Imerys shall appoint, or cause to be appointed, in accordance with
     a trustee mandate approved by the Commission.
    II.    Functions of the Trustee
25.  The Trustee shall assume its specified duties and obligations in order to ensure compliance
     with the Commitments. The Commission may, on its own initiative or at the request of the
     Trustee or Imerys, 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
26.  The Monitoring Trustee shall:
     (a)    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.
     (b)    oversee, in close co-operation with the Hold Separate Manager, the on-going
            management of the Divestment Business with a view to ensuring its continued
            economic viability, marketability and competitiveness and monitor compliance by
            Imerys with the conditions and obligations attached to the Decision. To that end the
            Monitoring Trustee shall:
            (i)   monitor the preservation of the economic viability, marketability and
                  competitiveness of the Divestment Business, and the keeping separate of the
                  Divestment Business from the businesses retained by Imerys, in accordance with
                  paragraphs 7 and 8 of these Commitments;
            (ii)  supervise the management of the Divestment Business as a distinct and saleable
                  entity, in accordance with paragraph 9 of these Commitments;
            (iii) with respect to Confidential Information:
                  -     determine all necessary measures to ensure that Imerys does not after the
                        Effective Date obtain any Confidential Information 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;
                  -     make sure that any Confidential Information relating to the Divestment
                        Business obtained by Imerys before the Effective Date is eliminated and
                        will not be used by Imerys;
                  -     decide whether such information may be disclosed to or kept by Imerys as
                        the disclosure is reasonably necessary to allow Imerys to carry out the
                        divestiture or as the disclosure is required by law; and
                                                          8
 ---pagebreak---                  -     monitor the splitting of assets and the allocation of Personnel between the
                       Divestment Business and Imerys or its Affiliated Undertakings;
    (c)   propose to Imerys such measures as the Monitoring Trustee considers necessary to
          ensure Imerys’ 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;
    (d)   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:
          (i)    potential purchasers receive sufficient and correct 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
          (ii)   potential purchasers are granted reasonable access to the Personnel;
    (e)   act as a contact point for any requests by third parties, in particular potential purchasers,
          in relation to the Commitments;
    (f)   provide to the Commission, sending Imerys a non-confidential copy at the same time, a
          written report within 15 days after the end of every month that shall cover the operation
          and management of the Divestment Business as well as the splitting of assets and the
          allocation of Personnel 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;
    (g)   promptly report in writing to the Commission, sending Imerys a non-confidential copy
          at the same time, if it concludes on reasonable grounds that Imerys is failing to comply
          with these Commitments;
    (h)   within one week after receipt of the documented proposal referred to in paragraph 16 of
          these Commitments, submit to the Commission, sending Imerys a non-confidential copy
          at the same time, 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;
    (i)   assume the other functions assigned to the Monitoring Trustee under the conditions and
          obligations attached to the Decision.
27. If the Monitoring and Divestiture Trustee are not the same legal or natural persons, the
    Monitoring Trustee and the Divestiture Trustee shall cooperate closely with each other during
    and for the purpose of the preparation of the Trustee Divestiture Period in order to facilitate
    each other’s tasks.
                                                       9
 ---pagebreak---               Duties and obligations of the Divestiture Trustee
28.   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
      (i) the purchaser and (ii) the Sale and Purchase Agreement (and ancillary agreements) as in
      line with the Commission’s Decision and the Commitments in accordance with paragraphs 15
      and 16 of these Commitments. The Divestiture Trustee shall include in the Sale and Purchase
      Agreement (as well as in any ancillary agreements), 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 Imerys, subject to
      Imerys’ unconditional obligation to divest at no minimum price in the Trustee Divestiture
      Period.
29.   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 Imerys.
    III.    Duties and obligations of Imerys
30.   Imerys shall provide and shall cause their 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 Imerys’ 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 Imerys
      and the Divestment Business shall provide the Trustee upon request with copies of any
      document. Imerys 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.
31.   Imerys 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 headquarters level. Imerys shall provide and shall cause their
      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. Imerys shall inform the Monitoring Trustee on possible purchasers, submit lists of
      potential purchasers at each stage of the selection process, including the offers made by
      potential purchasers at those stages, and keep the Monitoring Trustee informed of all
      developments in the divestiture process.
32.   Imerys shall grant or procure Affiliated Undertakings to grant comprehensive powers of
      attorney, duly executed, to the Divestiture Trustee to effect the sale (including ancillary
      agreements), 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
                                                        10
 ---pagebreak---       Trustee, Imerys shall cause the documents required for effecting the sale and the Closing to be
      duly executed.
33.   Imerys 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 Imerys 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.
34.   At the expense of Imerys, the Trustee may appoint advisors (in particular for corporate
      finance or legal advice), subject to Imerys’ 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 Imerys refuse to
      approve the advisors proposed by the Trustee the Commission may approve the appointment
      of such advisors instead, after having heard Imerys. Only the Trustee shall be entitled to issue
      instructions to the advisors. Paragraph 33 of these Commitments shall apply mutatis
      mutandis. In the Trustee Divestiture Period, the Divestiture Trustee may use advisors who
      served Imerys during the Divestiture Period if the Divestiture Trustee considers this in the
      best interest of an expedient sale.
35.   Imerys agrees that the Commission may share Confidential Information proprietary to Imerys
      and the Divestment Business with the Trustee. The Trustee shall not disclose such
      information and the principles contained in Article 17(1) and (2) of the Merger Regulation
      apply mutatis mutandis.
36.   Imerys agrees that the contact details of the Monitoring Trustee are published on the website
      of the Commission’s Directorate-General for Competition and they shall inform interested
      third parties, in particular any potential purchasers, of the identity and the tasks of the
      Monitoring Trustee.
37.   For a period of ten years from the Effective Date the Commission may request all information
      from Imerys that is reasonably necessary to monitor the effective implementation of these
      Commitments.
    IV.     Replacement, discharge and reappointment of the Trustee
38.   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 and Imerys, require Imerys to replace
             the Trustee; or
      (b)    Imerys may, with the prior approval of the Commission, replace the Trustee.
39.   If the Trustee is removed according to paragraph 38 of these Commitments, 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 17 to 24 of these Commitments.
40.   Unless removed according to paragraph 38 of these Commitments, 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,
                                                         11
 ---pagebreak---     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
41. The Commission may extend the time periods foreseen in the Commitments in response to a
    request from Imerys or, in appropriate cases, on its own initiative. Where Imerys requests an
    extension of a time period, it shall submit a reasoned request to the Commission no later than
    one month before the expiry of that period, showing good cause. This request shall be
    accompanied by a report from the Monitoring Trustee, who shall, at the same time send a
    non-confidential copy of the report to Imerys. Only in exceptional circumstances shall Imerys
    be entitled to request an extension within the last month of any period.
42. The Commission may further, in response to a reasoned request from Imerys showing good
    cause waive, modify or substitute, in exceptional circumstances, one or more of the
    undertakings in these Commitments. This request shall be accompanied by a report from the
    Monitoring Trustee, who shall, at the same time send a non-confidential copy of the report to
    Imerys. The request shall not have the effect of suspending the application of the undertaking
    and, in particular, of suspending the expiry of any time period in which the undertaking has to
    be complied with.
    SECTION G. ENTRY INTO FORCE
43. The Commitments shall take effect upon the date of adoption of the Decision.
    _______________________________________
    duly authorised for and on behalf of Imerys S.A.
                                                        12
 ---pagebreak---       SCHEDULE
1.  The Divestment Business as operated to date has the following legal and functional
    structure: it consists of Alteo’s white fused alumina business (including its bubble
    alumina business) (the “WFA Business”) […], located at La Bâthie, (together, the
    “Divestment Business”.1
2.  […]
3.  The manufacturing of Alteo’s WFA Business […] is located in the plant La Bâthie, a
    production site which currently operates Alteo’s entire production of those products. La
    Bâthie forms part of Alteo ARC, […]. Alteo ARC is incorporated under the laws of
    France, registered with the RCS of Aix-en-Provence under number 382 844 470 with its
    legal place of registration at Route de Biver, F-13120 Gardanne. […].
4.  La Bâthie is specialized in the production of white fused alumina and sub-segments
    thereof, including bubble alumina, […].
5.  La Bâthie is located at Usine de La Bâthie, F-73540 La Bâthie. […].
6.  There are […] employees working in the La Bathie plant, […].
7.  […]:
    […]
8.  […]
9.  In accordance with paragraph 6 of these Commitments, the Divestment Business
    includes, but is not limited to:
(a) All tangible assets associated to the Divestment Business, namely:
          All tangible assets of Alteo’s WFA Business, among which:
                o […];
                o [...];
                o […];
1     The corporate structure under which the Divestiture of the Divestment Business will take place has not
      been decided yet. The divestiture may also occur via the Divestment of Alteo ARC and reverse carve-
      out of the BFA Business. The retained option will be submitted to the Commission approval.
                                                        13
 ---pagebreak---               o […];
              o […].
         […]:
              o […];
              o […];
              o […].
(b) all intangible assets associated to the Divestment Business, namely:
         All intangible assets of Alteo’s WFA Business, among which:
             Alteo’s know-how […];
             All Intellectual Property Rights used in conducting the WFA Business;
              o The brands associated to Alteo’s WFA Business, namely: […], […], […]
                  and […];
              o The patents associated to […], namely:
                         […]:
                             […]
                             […]
                             […]
                             […]
                             […]
                             […]
                             […]
                             […]
                             […]
                             […]
                             […]
                         […]
                             […]
                             […]
                                                 14
 ---pagebreak---                             […]
                            […]
                            […]
               o The goodwill attached to Alteo’s WFA Business.
         […]
               o […];
               o […]
                         […]
                            […]
                            […]
                            […]
                            […]
                            […]
                     […]
                            […]
                            […]
                            […]
                            […]
                            […]
               o […]
         Should additional IP exist which is currently used by other businesses included in
          the scope of the Transaction but outside the Divestment Business, and necessary
          for the functioning of the Divestment Business, such IP shall likewise be included
          by way of a free irrevocable license, granted to the Divestment Business for an
          indefinite period.
(c) all licences, permits and authorisations currently used by Alteo’s WFA Business,
    […]
         [..]
(d) all of Alteo’s contracts related to its WFA business […]
         […]
                                                15
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- 10. Imerys commits not to close the Transaction until:
    (i)  Imerys has submitted a copy of the executed agreement between Imerys and Alteo
         Gardanne […] and
    (ii) the Commission has approved such agreement.
11. […]
                                              19