CELEX: 32018M8492
Language: en
Date: 2018-12-11 00:00:00
Title: Commission Decision of 11/12/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8492 - Quaker / Houghton) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 11.12.2018
In the published version of this decision, some                 C(2018) 8753 final
information has been omitted pursuant to Article
17(2) of Council Regulation (EC) No 139/2004
concerning non-disclosure of business secrets and                       PUBLIC VERSION
other confidential information. The omissions are
shown thus […]. Where possible the information
omitted has been replaced by ranges of figures or a
general description.
                                                                To the notifying party:
  Subject:            Case M.8492 – Quaker / Global Houghton
                      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
  Dear Sir or Madam,
  (1)       On 19 October 2018, the European Commission received notification of a
            concentration pursuant to Article 4 of the Merger Regulation and following a
            referral pursuant to Article 4(5) of the Merger Regulation ("the notified
            concentration"), which would result from a proposed transaction by which Quaker
            Chemical Corporation ("Quaker") acquires sole control, within the meaning of
            Article 3(1)(b) of the Merger Regulation, of Global Houghton, Ltd. ("Houghton")
            by way of a purchase of shares ("the Transaction"). In this Decision, Quaker is
            also referred to as the "Notifying Party" and, together with Houghton, they are
            collectively referred to as "the Parties". The undertaking that would result from
            the Transaction is referred to as "the merged entity".
  1.        THE PARTIES
  (2)       Quaker, headquartered in Conshohocken, Pennsylvania (USA), is a global
            provider of process fluids, chemical specialty products and technical expertise to
  1    OJ L 24, 29.1.2004, p. 1. With effect from 1 December 2009, the Treaty on the Functioning of the
       European Union ('TFEU') introduced certain changes, such as the replacement of 'Community' by
       'Union' and 'common market' by 'internal market'. The terminology of the TFEU will be used
       throughout this Decision.
  2    OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
  Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
  Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
  Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---          a wide range of industries, including steel, aluminium, automotive mining,
         aerospace, tube and pipe, cans and others.
(3)      Houghton, headquartered in Valley Forge, Pennsylvania (USA) is a global
         provider of specialty chemicals, oils and lubricants. It serves a wide variety of
         sectors, including steel, aluminium, aerospace, automotive, food and beverage,
         machinery and equipment, and others.
2.       THE TRANSACTION
(4)      The notified concentration consists of the acquisition by Quaker of sole control
         over Houghton by way of a purchase of shares. In exchange for this, Houghton's
         shareholders will receive a cash consideration of USD 172.5 million, and 24.5%
         of Quaker's common shares. This minority shareholding will not confer joint
         control to Houghton's shareholders.3
(5)      It follows that the Transaction would result in a concentration within the meaning
         of Article 3(1)(b) of the Merger Regulation.
3.       UNION DIMENSION
(6)      The notified concentration does not meet the thresholds of Article 1(2) of the
         Merger Regulation. The combined aggregate worldwide turnover of the Parties is
         lower than EUR 5 000 million (Quaker: EUR 674.9 million; Houghton EUR
         692.9 million). Nor does the notified concentration meet the thresholds set out in
         Article 1(3) of the Merger Regulation, since the combined aggregate worldwide
         turnover of the Parties is lower than EUR 2 500 million. The notified
         concentration therefore does not have a Union dimension within the meaning of
         Article 1 of the Merger Regulation.
(7)      On 17 May 2017, the Notifying Party informed the Commission by way of a
         reasoned submission that the Transaction was capable of being reviewed under
3   Houghton is indirectly controlled by Gulf Oil International Ltd. ("Gulf", through Gulf Houghton),
    ultimately held by the holding vehicle AMAS Holding SPF ("Amas", Luxembourg). Amas is owned
    by numerous members of the Hinduja family (India) with no single individual having a share of […].
    No family member(s) either solely or jointly exercise(s) control over Amas. Post-Transaction,
    Quaker's Board of Directors will be composed of twelve members and Gulf Houghton will have the
    right to appoint three Directors. Strategic decisions at the level of the Board will be taken by simple
    majority. Most decisions at the Shareholder Meeting will be taken by simple majority with a minimum
    quorum of […]. The only decisions which will require a supra-majority of […]% of the shareholders'
    votes relate to standard minority shareholders protection rights, with the exception of the removal of
    directors. While Gulf Houghton will be able to veto such decision in light of their […]% share, this is
    not, on its own, sufficient to confer them negative control over Quaker post-Transaction. As regards
    points pertinent to the competitive assessment regarding this non-controlling minority stake, it is noted
    that the information submitted by the Notifying Party indicates that: (i) there are only very small
    overlaps between the activities of Gulf and those of the Parties in the EEA: first, while Gulf supplies
    mineral-based hydraulic fluids (a market where the Parties have minor activities), the supplied
    volumes are very limited; second, Gulf licenses its brand to companies selling products in markets
    where the Parties are active. However, the quantities sold under the Gulf brand are also very limited;
    and (ii) no other meaningful relationship would arise between the Parties' activities and Gulf's
    activities. Accordingly, the non-controlling minority shareholding is not discussed further in this
    Decision.
                                                         2
 ---pagebreak---      the national competition laws of Germany, Portugal and Spain, and requested that
     the Transaction be reviewed by the Commission. The Member States competent
     to examine the Transaction did not express disagreement to the referral request
     within the period laid down by the Merger Regulation.
(8)  Accordingly, the notified concentration is deemed to have a Union dimension
     pursuant to Article 4(5) of the Merger Regulation.
4.   THE PROCEDURE
(9)  The Transaction was initially notified to the Commission on 2 February 2018.
     Following the results of an initial market investigation, the Parties formally
     submitted to the Commission a first set of commitments on 2 March 2018.
(10) The first set of commitments consisted of the divestment of EEA product
     formulations in relation to Quaker's aluminium hot rolling oil business and
     Houghton's steel rolling oil business, with a non-exclusive royalty-free licence-
     back to the merged entity outside the EEA, to the extent permitted by the US
     Federal Trade Commission in its proceedings. The market test concerning the first
     set of commitments yielded negative results. The remedy package was deemed
     inadequate to allow a potential purchaser to run the divestment business viably
     and competitively. Notably, the mix-and-match of carved out assets from both
     Quaker and Houghton presented serious implementation risks, particularly in
     relation to the transfer of sufficient personnel. In light the results of the market
     test, the Parties withdrew their initial notification on 16 March 2018.
(11) The Parties re-notified the concentration on 19 October 2018 ("the second
     notification"). Shortly after, on 25 October 2018, the Parties submitted an
     improved set of commitments, as described in Section 6.2.1 of this Decision.
(12) In the context of the second notification, the Commission has carried out a market
     investigation and a market test (the latter is hereinafter referred to as "the market
     test") in parallel.
(13) Virtually all respondents confirmed that their views on the markets concerned by
     the Transaction had not changed with respect to those provided in the context of
     the initial market investigation. Therefore, for the purpose of the competitive
     assessment in this Decision, the Commission relies on the information that the
     market participants already provided in response to the initial market
     investigation, which is hereinafter referred to as "the market investigation".
5.   COMPETITIVE ASSESSMENT
5.1. Product market definition
(14) Quaker and Houghton are both active in the development, production and
     marketing of specialty chemical products globally. The Parties' activities overlap
     in the production and sale of industrial lubricants and industrial surface treatment
     products.
                                                3
 ---pagebreak--- (15)   As regards lubricants, in its decision in the Exxon/Mobil4 case, the Commission
       identified four general types of lubricants applications, namely industrial,
       automotive, marine and aviation. The main function of lubricants used for
       industrial applications is to reduce friction and wear between moving parts within
       a system. Also, the Commission underlined in Exxon/Mobil that industrial
       lubricants include metalworking fluids ("MWFs"), hydraulic fluids ("HFs"),
       industrial gear oils, turbine oils, transformer oils, compressor oils and process
       oils/aromatic extracts. The Parties are only active in two of these categories,
       namely MWFs and HFs.
             5.1.1.    Metal working fluids
                       5.1.1.1.    Introduction
(16)   MWFs comprise a range of oils and liquids used in metal production processes to
       lubricate and/or cool metal workpieces whilst being processed. Contrary to other
       types of industrial lubricants such as HFs5, MWFs come into direct contact with
       the workpiece.
(17)   The Notifying Party submits that the relevant product market encompasses the
       manufacture and sale of all industrial lubricants, without any further
       segmentation.
(18)   In this regard, the Notifying Party refers to a decision dating back to 1996,
       IV/M.727 - BP/Mobil, where the Commission noted the limited extent of
       demand-side substitutability regarding industrial lubricants but also recognised
       considerable supply-side substitutability in the lubricants manufacture process.
       Notably, the Commission considered that in blending plants, base oils can be
       blended with different additives to manufacture different types of lubricants and
       that switching between different types of industrial lubricants is relatively simple.
       In that decision, the Commission noted that some customers demand the full
       range of lubricants for their operations from their lubricants supplier, rather than
       sourcing individual lubricants from different suppliers and that this portfolio
       effect, combined with the very strong supply-side substitutability in terms of
       manufacturing process would seem to indicate a single market for industrial
       lubricants despite the specific products which are produced for different end uses.
       The Notifying Party submits that the production process relating to industrial
       lubricants simply involves blending tanks with agitators, and customized
       ingredients. On that basis, the Notifying Party argues that the existence of
       significant supply-side substitutability warrants the findings of a single market
       comprising all industrial lubricants.
(19)   Notwithstanding the above, the Notifying Party also submits that the market for
       the manufacture and sale of MWFs, might be subdivided into four main
       categories: (a) Removal fluids, (b) Forming fluids, (c) Protecting fluids; and (d)
4  Commission decision in case IV/M.1383 - Exxon/Mobil dated 29 September 1999. It is pertinent to
   note that the competitive assessment in that case focused mainly on a component of lubricants, namely
   base oils. The present Decision focuses on overlaps of downstream products thereof, i.e. lubricants.
5  Under certain circumstances, HFs may enter in contact with the workpiece in case of leakages and
   potentially with the MWFs. Depending on the end product, compatibility between HFs and MWFs
   may therefore need to be ensured.
                                                        4
 ---pagebreak---        Treating fluids. The Notifying Party further acknowledges that each of these
       MWF segments comprises a number of different products:
       (a)      Removal fluids are used in metalworking operations in which chips are
                removed from the metal (e.g. cutting fluids, grinding fluids, coolants, etc.).
                Within the removal fluids category, the following main product groups
                may be identified, according to the information provided by the Notifying
                Party: (i) emulsifiables, and (ii) neat oils.
       (b)      Forming fluids are used in chipless metalworking operations that involve
                changing the shape or contour of metals by bending, stretching, pounding
                or squeezing the metal. The diversity of forming applications results in a
                wide range of fluid types, serving various industries. Within the forming
                fluids category, the following main product groups may be identified,
                according to the information provided by the Notifying Party: (i) rolling
                oils, which are used in the steel and non-ferrous (i.e. aluminium, copper,
                and zinc) industries, for hot and cold rolling oil operations, (ii) wet temper
                fluids, (iii) drawing and forming fluids, (iv) forging fluids, and (v) cans
                fluids. Within some of these product groups, different products can be
                identified depending on their intended use (e.g. within rolling oils,
                distinction between i.a. steel hot rolling oils and steel cold rolling oils, as
                well as aluminium hot rolling oils and aluminium cold rolling oils).
       (c)      Protecting fluids are used to temporarily shield metal surfaces, protecting
                them from air, water or other corrosive substances (e.g. rust preservatives).
                Within the protecting fluids category, the Notifying Party explains that a
                specific product category could be distinguished in view of the peculiar
                characteristics of its oils, i.e. prelubes, and that no further meaningful
                subdivision would be adequate.
       (d)      Treating fluids are used in thermal processes in which the physical
                properties of metal are changed to meet application requirements (e.g. to
                render the metal hard, soft, elastic or brittle). The Notifying Party submits
                that it is not aware of possible sub-divisions of this category and does not
                discuss it further as the Parties' activities do not overlap in this respect.6
(20)   While the Notifying Party acknowledges that, internally, it segments the market
       for industrial lubricants in multiple ways (for example by […] or by […]), it
       submits that such internal segmentations cannot serve as a basis to define product
       markets for the purpose of merger control review.
(21)   The market investigation has shown that demand-side substitutability between
       different categories or products of industrial lubricants is very limited. The vast
       majority of respondents indicated that it is technically impossible to use a
       particular lubricant for a different purpose than what it was designed for. The
       results of the market investigation indicated that the very limited demand-side
       substitutability does not only apply to the possibility to substitute products within
6  Quaker does not produce or sell any treating fluids to any of its customers, with the exception of a
   single customer for which Quaker performs broader fluid management services, […].
                                                     5
 ---pagebreak---        a given MWF category (e.g. a forming fluid with a removal fluid), but also in
       relation to the different products within the various MWF product categories.7
(22)   Moreover, in the present case, results of the market investigation do not generally
       confirm the Notifying Party's submission about supply-side substitutability.
       Supply-side substitutability may be taken into account when defining markets in
       those situations in which its effects are equivalent to those of demand-side
       substitution in terms of effectiveness and immediacy. This means that suppliers
       are able to switch production to the relevant products and market them in the
       short term without incurring significant costs or risks in response to a small and
       permanent change in relative prices. When companies market a wide range of
       qualities or grades for one product and even if, for a given final customer or group
       of consumers, the different qualities are not substitutable, the different qualities
       will be grouped into one product market, provided that most suppliers are able to
       offer and sell the various qualities immediately and without incurring significant
       increases in costs.8
(23)   The market investigation has also shown that manufacturing equipment does not
       appear to represent a significant barrier to switching production from one
       particular individual product to another. Indeed, if a supplier possessed the
       chemical formulation and production know-how to produce a particular lubricant,
       switching production to that lubricant would not appear to be characterised by
       high costs and delays.9 In this respect, the Notifying Party submits, for example,
       that switching production between different types of industrial lubricants would
       involve only the step of cleaning the blending tank, which can be performed
       within a couple of hours. The Notifying Party further submits that the costs
       resulting from switching the production between different types of industrial
       lubricants are generally not high.
(24)   However, what does appear, in light of the results of the market investigation, to
       constitute a significant barrier to switching for certain industrial lubricants is the
       chemical formulation of the product and production know-how, which appear to
       be essential in the production process in relation to certain MWF lubricants (for
       example, in relation to some rolling oils).
(25)   The results of the market investigation have indicated that developing the
       formulation and know-how for certain MWF involves significant costs. Because
       of this, most suppliers active in the industrial lubricants space acknowledge that if
       a supplier did not already possess the formulation and know-how to produce
       certain products, that supplier would not be able to offer and sell those products
       immediately and without incurring significant costs.10 Accordingly, supply-side
       substitutability cannot be considered equivalent in terms of effectiveness and
       immediacy as demand-side substitution. More details about this lack of supply-
       side substitutability in relation to particular products pertinent to the assessment
       of the Transaction are presented in the following paragraphs, where applicable.
7  Replies to Q2 – questionnaire to customers, question 7.
8  Commission's notice on the definition of relevant market for the purposes of Community competition
   law, paragraphs 20-21.
9  Replies to Q1 – questionnaire to competitors, question 12.
10 Replies to Q1 – questionnaire to competitors, questions 12 and 13.
                                                       6
 ---pagebreak---                       5.1.1.2.    Removal fluids
(26)   Removal fluids are used in metalworking operations in which chips are removed
       from the workpiece. They are designed to cool machined parts and metalworking
       tools. Additionally, Removal fluids act to wash away bits of metal or chips from
       the workpiece, protect the workpiece from corrosion and reduce friction. The
       ultimate objective of the use of Removal fluids is to increase the productivity and
       the product quality.
(27)   According to the results of the market investigation, the vast majority of metal
       working fluid producers considers Removal fluids as a separate product market
       within MWF11. This conclusion is shared by the vast majority of customers of
       MWF12. The majority of the respondents to the market investigation with
       producers of MWF also indicated that starting the supply of Removal fluids in the
       short term is not realistic due to the high costs (gathering know-how, R&D
       processes, set-up costs) and time needed (products need to be developed, but also
       tested by the customers).13
(28)   Furthermore, according to the information provided by the Notifying Party, the
       following sub-segments may be identified within the Removal fluids category: (i)
       Emulsifiables; and (ii) Neat oils.
       (a)      Emulsifiables are water soluble Removal fluids. These fluids are mixed
                with water in order to produce an emulsion, which is then applied to the
                operation for which the Removal fluid is required.
       (b)      Neat oils are oil-based Removal fluids without water content. They are
                typically used for low-speed operations and large cutting depths, where
                there is no specific need for cooling and thus no demand for water content.
(29)   The vast majority of the producers of MWF participating in the market
       investigation confirm the Notifying Party’s view that Emulsifiables and Neat oils
       are the two main types of Removal fluids14. According to the results of the market
       investigation, the majority of the producers of MWF consider the barriers to entry
       the sub-segments of Emulsifiables or Neat oils as difficult and costly if the
       company is not already present in that sub-segment. The estimated time needed to
       enter either segment without pre-existing knowledge and activity can be up to 2
       years and cost estimates range between low and EUR 10 million.15 Other hurdles
       mentioned by producers of MWF are IP rights, regulatory hurdles, customer and
       machine tool manufacturer approvals, etc.16
(30)   However, the market investigation with the customers has not provided a clear
       result to the customer’s perception of the demand-side-substitutability of
       Emulsifiables and Neat oils. Approximately 1/3 of the respondents considered
       Neat oils and Emulsifiables can be substitutes to each other, but another third of
11 Replies to Q1 – questionnaire to competitors, question 5.
12 Replies to Q2 – questionnaire to customers, question 5.
13 Replies to Q1 – questionnaire to competitors, question 13.
14 Replies to Q1 – questionnaire to competitors, question 60.
15 Replies to Q1 – questionnaire to competitors, question 62.
16 Replies to Q1 – questionnaire to competitors, question 62.1.1.
                                                       7
 ---pagebreak---        the customers indicated that this was not the case (the remainder had no
       opinion).17 However, all respondents indicated that a substitution would not be
       straightforward and required new trials to be ran with the new fluid, potential
       needs to modify the production equipment and the overall risk of quality loss in
       the final product. The majority of customers also indicated that, even if one of the
       two types of removal fluids would undergo a permanent price increase of 5 to
       10%, they would not switch away from the more expensive product.18
(31)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, (i) Removal fluids constitute a relevant product market; and (ii) the
       question of whether the market for Removal fluids should be segmented between
       Emulsifiables and Neat oils can be left open, since the notified concentration does
       not raise serious doubts as to its compatibility with the internal market, regardless
       of the exact product market definition.
                      5.1.1.3.    Forming fluids
(32)   Forming fluids are used in chipless metalworking operations that involve
       changing the shape or contour of metals by bending, stretching, pounding or
       squeezing the metal. The diversity of forming applications has resulted in a wide
       range of fluid types, services various industries.
               i.   Rolling oils
       Non-ferrous rolling oils, including aluminium rolling oils
(33)   The category of non-ferrous rolling oils includes MWF used in the rolling of
       metals that do not contain iron in appreciable amounts, i.e. typically aluminium,
       copper, and zinc. Depending on the temperature that characterises the rolling
       stage, each of these metals may undergo two different main rolling processes,
       namely hot rolling and cold rolling. Different types of rolling oils are used by
       manufacturers, depending on the type of rolling process and metal considered.
(34)   In the EEA, the Parties’ activities mainly overlap in relation to the supply of
       aluminium hot rolling oils (AHRO). Additional overlaps arise in relation to the
       supply of aluminium cold rolling oils (ACRO) and copper cold rolling oils
       (CCRO), but Quaker's sales of each of these two products are de minimis.
(35)   AHRO is a forming MWF used by aluminium manufacturers in forming or
       shaping aluminium to reduce forces on the roll, to prevent roll wear and to cool
       the roll. More specifically, AHRO is used to reduce the thickness of the
       aluminium ingot or slab in order to form different aluminium shapes. AHRO
       provides cooling, metal wetting, a high friction coefficient and film strength and
       also prevents metal pickup by the rolls.19
(36)   The Commission has never considered in the past potential markets for rolling
       oils used in the production of non-ferrous metals, including aluminium.
17 Replies to Q2 – questionnaire to customers, question 40 and sub-questions.
18 Replies to Q2 – questionnaire to customers, question 40.2 and 40.3.
19 Form CO, paragraph 196.
                                                       8
 ---pagebreak--- (37)   The information provided by the Notifying Party indicates that a given non-
       ferrous rolling oil (e.g. AHRO) is generally designed to be applied during the
       production process of a specific type of non-ferrous metal. Due to varied
       metallurgical properties of each of the different non-ferrous metals, lubricants
       dedicated to specific metals have to be used for each of these metals and cannot
       therefore be fully substituted from the demand side. According to the Notifying
       Party, the same reasoning applies to rolling oils used in hot and cold production
       processes as they are designed specifically for each application type.20
(38)   Similarly to its assertion about significant degree of supply-side substitutability in
       the industrial lubricants space, the Notifying Party submits that there is a
       significant degree of supply-side substitutability in the manufacture of various
       types of non-ferrous rolling oils.21
(39)   However, the Notifying Party's views appear to be contradicted both by the
       Parties’ internal documents and by the results of the market investigation, which
       suggest the existence of a separate product market for the manufacture and supply
       of AHRO for the following reasons.
(40)   First, in their internal documents, the Parties analyse their sales and discuss the
       position of their competitors on the basis on narrow product segments, including
       at the level of "aluminium hot rolling" products.22
(41)   Second, the results of the market investigation indicated that there is a lack of
       demand-side and supply-side substitutability between AHRO and other
       lubricants, including other non-ferrous rolling oils.
(42)   On the demand side, customers explained that AHRO cannot be substituted with
       any other product which is not specifically designed for that application
       purpose.23 One AHRO customer explained for instance that "No other forming
       fluids can be substitute[s] for AHROs due to their unique chemistries."24
(43)   On the supply side, competitors explained that switching production to AHRO
       constitutes a costly and lengthy process. While manufacturing equipment does not
       appear to represent a significant barrier to switching production, the majority of
       competitors explained that without specific know-how on the chemical
       composition of AHRO and the blending process of its different ingredients, it
       would be extremely difficult to start producing a rolling oil which is not already
       in their product portfolio.25 In particular, results of the market investigation
       indicated that switching production to AHRO would require suppliers to run a
       long R&D process and, potentially, to face significant set-up costs, regardless of
       whether they are already active in the production of other rolling oils.26
20 Form CO, paragraph 213.
21 Form CO, paragraph 213.
22 See for example Annex 5.4(ii)(a)(25) to the Form CO, [Reference to internal documents].
23 Replies to Q2 – questionnaire to customers, questions 7 and 9.
24 One customer's reply to Q2 – questionnaire to customers, question 9.
25 Replies to Q1 – questionnaire to competitors, question 39.
26 Replies to Q1 – questionnaire to competitors, question 21.
                                                       9
 ---pagebreak--- (44)    For the reasons set out above, the Commission considers that, for the assessment
        of the Transaction, the market for AHRO constitutes a distinct product market. In
        relation to other non-ferrous rolling oils, given that the notified concentration is
        unlikely to lead to competition concerns regardless of the exact product market
        definition, the Commission considers that the question as to whether non-
        aluminium non-ferrous rolling oils individually constitute separate product
        markets or are part of a broader market for non-aluminium non-ferrous rolling
        oils can be left open for the purpose of the present case.
        Steel rolling oils
(45)    Similarly to the aluminium sector, steel can be processed under hot and cold
        rolling. Different types of rolling oils are used by steel manufacturers depending
        on the type of process considered.
(46)    In particular, Steel Hot Rolling Oils (“SHRO”) are a type of MWF used in the hot
        rolling of steel with the aim to increase productivity (higher speeds and less wear
        of the rolls) and quality of the metal being worked (reduced oxide formation). The
        use of SHRO also facilitates the production of increasingly thinner sheets in the
        hot rolling process.27
(47)    Steel Cold Rolling Oils (“SCRO”) are a type of MWF used in the cold rolling of
        steel with the aim to lubricate and protect the metal against corrosion, abrasion
        and other damages.28 Besides SCRO, tinplate rolling oils (TRO) are used for the
        cold rolling of very thin steel, which is predominantly used as packaging steel, for
        example thin cans. The function of TRO is the same as for SCRO, that is to say to
        lubricate and protect steel against corrosion and other damages.29
(48)    Furthermore, pickle oil is a lubricant which is typically applied to the steel surface
        after pickling, before the cold rolling mills. Pickle oil is only used if the pickling
        line and the rolling mill are not couples to avoid scratching and corrosion, and to
        provide the lubrication in the first stand of the rolling mill.30
(49)    The Commission has never considered in the past potential markets for rolling
        oils used in the production of steel.
(50)    As explained in Section 5.1.1.1, the Notifying Party takes the view that one single
        product market for industrial lubricants, including the various types of MWFs
        such as SHRO and SCRO, exists, in view of strong supply-side substitutability.
(51)    As regards TRO, the Notifying Party considers that the function of TRO and
        SCRO is essentially the same. TRO formulations are similar to SCRO
        formulations, but generally contain fewer additives and are therefore considered
27 Form CO, paragraphs 173-174. Not all steel producers use SHRO, which explains why the market size
   of SHRO is much smaller than the market size of other rolling oils used in the steel sector, notably
   SCRO (Form CO, paragraph 369). As explained, customers make use of SHRO as soon as the steel
   needs to undergo hot rolling operations and, for example, the quality of the metal produced needs to be
   particularly high.
28 Form CO, paragraph 175.
29 Form CO, paragraph 189.
30 Form CO, paragraph 176.
                                                       10
 ---pagebreak---         relatively less complex.31 Therefore, the Notifying Party considers TRO to be part
        of the same product market as SCRO.
(52)    As regards pickle oils, the Notifying Party explains that all large steel cold rolling
        mills in Europe are coupled with the pickling line, and that the demand for pickle
        oil is therefore limited. In addition, the Notifying Party argues that most of the
        times the same formulation is used for pickle oil and for SCRO. Therefore, in the
        Notifying Party's view, SCRO and pickle oil are substitutable both from the
        demand side and the supply side.32
(53)    The Notifying Party's views appear to be contradicted both by the Parties’ internal
        documents and by the results of the market investigation, which suggest that
        separate markets exist for the manufacture and supply of SHRO and SCRO.
(54)    First, in their internal documents, the Parties analyse their sales and discuss the
        position of their competitors on the basis on narrow product segments, including
        at the level of "steel hot rolling" products33 and "steel cold rolling" products.34
(55)    Second, the results of the market investigation indicated that there is a lack of
        demand-side and supply-side substitutability between SHRO and other lubricants,
        including SCRO, and vice versa.
(56)    On the demand side, customers explained that SHRO and SCRO are specifically
        used in the hot rolling and cold rolling of steel, respectively, and cannot be
        substituted with other products in view of their very specific characteristics.35 For
        instance, one customer operating in the steel sector explained that "Rolling oils
        are developed for the specific use in hot or cold rolling process of steel sheet and
        are designed to each application specifically. Therefore, it is not substitutable
        within the same category."36
(57)    On the supply side, competitors responding to the market investigation explained
        that switching production to each of SHRO and SCRO constitutes a costly and
        lengthy process. While manufacturing equipment does not appear to represent a
        significant barrier to switching production, the majority of competitors mentioned
        that having the relevant, specific know-how is necessary to be able to produce
        those products and that, in order to develop this, substantial investments, notably
        in R&D, would be required.
(58)    Overall, competitors explained that starting to produce SHRO would take up to
        two years for a company already producing other types of rolling oils, and up to
        five years for a company not active in the rolling oils business. Beyond the lack of
        necessary know-how, a company not active in rolling oils would likely face
31 Form CO, paragraph 190.
32 Form CO, paragraph 177-178.
33 See for example Annex 5.4(ii)(a)(25) to the Form CO, [Reference to internal documents]; Annex
   5.4(ii)(d)(1) to the Form CO, [Reference to internal documents].
34   See for example Annex 5.4(ii)(a)(25) to the Form CO, [Reference to internal documents]; Annex
   5.4(ii)(d)(1) to the Form CO, [Reference to internal documents].
35 Replies to Q2 – questionnaire to customers, question.
36 One customer's reply to Q2 – questionnaire to customers, question 9.
                                                       11
 ---pagebreak---        higher commercial barriers as it would not possess relevant customer references.37
       Empirical evidence shows that switching production may be even more difficult
       than what emerged overall from the market investigation since, for example, one
       competitor active on the market for SCRO reported that while they have been
       trying to start producing SHRO, they have not managed to effectively enter this
       space yet.38
(59)   Similarly, possessing the specific know-how in relation to SCRO is essential to be
       able to compete on the market, which entails costly R&D investments and time
       efforts (up to several years). Having knowledge of other rolling oils used in steel,
       such as SHRO, is not fungible since, as one competitor explained: "With regards
       to cold rolling oils and hot rolling oils, they require different formulation
       technologies and know how."39
(60)   As regards pickle oil, the market investigation confirmed that only a few steel
       mills purchase these oils in Europe, since demand for this product arises only
       where the cold mill is not paired with the pickling line. In addition, some
       customers and competitors explained that SCRO may be used in the picking
       process, and thus may be used as a substitute product for pickle oil.40 For
       example, a competitor active in SCRO market explained that "In many cases the
       pickle oil is the same oil as is used later for cold rolling operations".41
(61)   As regards TRO, the market investigation showed rather limited demand-side
       substitutability with standard SCRO, since TRO are specifically designed for the
       treatment of thinner metal and are thus not substitutable with other lubricants in
       terms of product characteristics.42 As regards the supply side, the results of the
       market investigation are mixed. While some competitors explained that SCRO
       and TRO are relatively similar products, others point out to the existence of
       relevant differences in the product formulations.43
(62)   For the reasons set out above, the Commission considers that, for the assessment
       of the Transaction, the markets for SHRO and SCRO constitute distinct product
       markets. As regards, pickle oils and TRO, given that the assessment of the
       Transaction would not change regardless of whether they are considered part of
       the SCRO market or distinct product markets, the Commission considers that this
       question can be left open.
              ii.    Wet Temper fluids
(63)   Wet Temper fluids are used by steel mill operators on their temper mills. A
       temper mill has the primary purpose to improve the surface finish on steel
37 Replies to Q1 – questionnaire to competitors, question 21. As one competitor explained, a new entrant
   would face: "Long or costly R&D processes, lack of access to essential inputs, extensive know-how
   needed, prohibitive set-up costs, commercial barriers and high approval costs from third parties."
38 Replies to Q1 – questionnaire to competitors, question 20.
39 Replies to Q1 – questionnaire to competitors, question 23.
40 Replies to Q2 – questionnaire to customers, question 9 and replies to Q1 – questionnaire to
   competitors, question 18.
41 Replies to Q1 – questionnaire to competitors, question 18.
42 Replies to Q2 – questionnaire to customers, question 10.
43 Replies to Q1 – questionnaire to competitors, question 18.
                                                       12
 ---pagebreak---        products which have already been cold rolled and annealed. Wet Temper fluids
       help to remove iron, carbon and other contaminants from the steel strip.
(64)   According to the market investigation, the majority of competitors active in MWF
       agree that Wet Temper fluids form a separate product category within Forming
       fluids44. The respondents indicated that entering the supply of Wet Temper fluids
       can take anywhere between 6 months to 24 months, depending on whether or not
       the company has some pre-existing knowledge and manufacturing equipment45.
       According to the Notifying Party, the manufacturing equipment for Wet Temper
       fluids is the same as for any other Forming fluids or even MWF.
(65)   The vast majority of customers of MWF having replied to the market
       investigation consider that different types of Forming fluids (e.g. Wet Temper
       fluids), cannot be substituted with other Forming fluids46.
(66)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, Wet Temper fluids can be considered as a separate product market.
             iii.   Drawing and Forming fluids
(67)   Drawing and Forming fluids are used in metalworking operations that change the
       shape and contour of the metal by bending, stretching, pounding and squeezing.
       Typical customers are the automotive industry, the tube industry and the wire
       industry.
(68)   According to the market investigation, the majority of competitors active in MWF
       agree that Drawing and Forming fluids form a separate product category within
       Forming fluids47. The respondents indicated that entering the sub-segment of
       Drawing and Forming fluids can take anywhere up to 24 months, depending on
       whether or not the company has some pre-existing knowledge and manufacturing
       equipment48. According to the Notifying Party, the manufacturing equipment for
       Drawing and Forming fluids is the same as for any other forming or even MWF.
(69)   The vast majority of customers of MWF having responded to the market
       investigation consider that different types of Forming fluids (e.g. Drawing and
       Forming Fluids), cannot be substituted with other Forming fluids49.
(70)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, Drawing and Forming fluids can be considered as a separate product
       market
44 Replies to Q1 – questionnaire to competitors, question 16
45 Replies to Q1 – questionnaire to competitors, questions 21.7 and sub-questions and 22.
46 Replies to Q2 – questionnaire to customers, question 9.
47 Replies to Q1 – questionnaire to competitors, question 16
48 Replies to Q1 – questionnaire to competitors, questions 21.7 and sub-questions and 22.
49 Replies to Q2 – questionnaire to customers, question 9.
                                                       13
 ---pagebreak---               iv.   Forging fluids
(71)   Forging fluids are used to prevent damage to the metal as it is forced into a die
       during the forging process whereby the density, toughness and strength of metal
       is increased by forcing metal into different shapes by repeated hammer-like
       blows. Forging fluids cool and lubricate the die to reduce friction and minimize
       metal pickup and die wear.
(72)   According to the market investigation, the majority of competitors active in MWF
       agree that Forging fluids form a separate product category within Forming
       fluids50. The respondents indicated that entering the sub-segment of Forging
       fluids can take anywhere up to 24 months, depending on whether or not the
       company has some pre-existing knowledge and manufacturing equipment51.
       According to the Notifying Party, the manufacturing equipment for Forging fluids
       is the same as for any other Forming fluid or even MWF.
(73)   The vast majority of customers of MWF having responded to the market
       investigation consider that different types of Forming fluids (e.g. Forging fluids),
       cannot be substituted with other Forming fluids52.
(74)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, Forging fluids can be considered as a separate product market
               v.   Can Cupper fluids
(75)   Can Cupper fluids provide lubrication in the cup and protect against bleed-
       through in the manufacturing of aluminium cans. They also give ferrous and non-
       ferrous corrosion protection to can making equipment and tooling. Typical
       customers are beverage can manufacturers.
(76)   According to the market investigation, the majority of competitors active in MWF
       agree that Can Cupper fluids form a separate product category within Forming
       fluids53. The respondents indicated that entering the sub-segment of Can Cupper
       fluids requires a R&D process and substantial efforts to receive the necessary
       qualifications from potential customers, as the actual manufacturing process of
       cans is very sensitive in terms of quality and output performance54.
(77)   The vast majority of customers of MWF replying to the market investigation
       consider that different types of Forming fluids (e.g. Can Cupper Fluids), cannot
       be substituted with other Forming fluids55.
(78)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, Can Cupper fluids can be considered as a separate product market.
50 Replies to Q1 –questionnaire to competitors, question 16.
51 Replies to Q1 – questionnaire to competitors, questions 21.7 and sub-questions and 22.3.
52 Replies to Q2 – questionnaire to customers, question 9.
53 Replies to Q1 – questionnaire to competitors, question 16.
54 Replies to Q1 – questionnaire to competitors, questions 21.7 and sub-questions and 22.2.
55 Replies to Q2 – questionnaire to customers, question 9.
                                                       14
 ---pagebreak---               vi.    Can Bodymaker fluids
(79)   Can Bodymaker fluids are coolants used in a second step of the can-making
       process, whereby the body of the can is made from a cup. Typical customers are
       again beverage can manufacturers.
(80)   According to the market investigation, the majority of competitors active in MWF
       agree that Can Bodymaker fluids form a separate product category within
       Forming fluids56. The respondents indicated that entering the sub-segment of Can
       Bodymaker fluids requires a R&D process and substantial efforts to receive the
       necessary qualifications from potential customers, as the actual manufacturing
       process of cans is very sensitive in terms of quality and output performance57.
(81)   The vast majority of customers of MWF replying to the market investigation
       consider that different types of Forming fluids (e.g. Can Bodymaker fluids),
       cannot be substituted with other Forming fluids58.
(82)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, Can Bodymaker fluids can be considered as a separate product market.
                      5.1.1.4.    Protecting fluids
(83)   Protecting fluids are used to temporarily shield metal surfaces from air, water and
       other corrosive substances. Common Protecting fluids are rust preventives, which
       are applied to iron and steel. Protecting fluids are also used on non-ferrous metals
       such as copper, aluminium and brass. Protecting fluids sometimes have a dual
       function. In addition to providing corrosion protection, they are also used as a
       prelube for stamping operations.
(84)   According to the information submitted by the Notifying Party, the following sub-
       segments may be identified within the Protecting fluids category: (i) prelubes and
       (ii) other Protecting fluids.
       (i)       Prelubes are Protecting fluids which are used by steel mill operators
                 primarily for the preservation of sheet metal. Prelubes are particularly
                 relevant for the production of steel sheets for automotive OEMs.
       (ii)      All other Protecting fluids have the same function: to protect a surface
                 against rust and/or corrosion.
(85)   According to the Notifying Party, the manufacturing of Protecting fluids is not
       different from the manufacture of any other industrial lubricant. The Notifying
       Party continues that most suppliers of Protecting fluids provide all types and
       categories of Protecting fluids.
(86)   The market investigation shows that the vast majority of competitors consider that
       Protecting fluids constitute a separate product segment within the market of
56 Replies to Q1 – questionnaire to competitors, question 16.
57 Replies to Q1 – questionnaire to competitors, question 21.7 and sub-questions and 22.2.
58 Replies to Q2 – questionnaire to customers, question 9.
                                                       15
 ---pagebreak---        MWF59. The results of the market investigation with competitors are mixed when
       it comes to plausible further segmentations of the market for Protecting fluids60,
       indicating plausible sub-segments based on the chemical composition of the
       Protecting fluid, the end-industry or the duration of the protection.
(87)   According to the results of the market investigation with customers of metal
       working fluids, the majority of customers consider Protecting fluids a separate
       product segment of the market for MWF61. Further indication that Protecting
       fluids form a separate market segment within MWF is provided by the fact that,
       as for all other MWF, the majority of customers consider it impossible to
       substitute Protecting fluids with another type of MWF62.
(88)   The market investigation with customers also suggests that prelubes form a
       further sub-segment of the market of Protecting fluids. Several respondents
       indicated that a switch from a prelube to any other Protecting fluid is not
       straightforward and requires customer approval (in particular for the automotive
       industry)63. Indeed, before a steel mill can decide to switch its prelube (either for
       another prelube, or for a different type of Protection fluid), it needs to obtain the
       qualification and approval of its own customers. The market investigation also
       indicated that the majority of customers would not switch from using a prelube to
       a different Protecting fluid if the prices of the former would increase by 5-10% on
       a permanent base.
(89)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, (i) Protecting fluids constitute a relevant product market; and (ii) the
       question of whether the market for Protecting fluids should be segmented
       between prelubes and other Protecting fluids can be left open, since the notified
       concentration does not raise serious doubts as to its compatibility with the internal
       market, regardless of the exact product market definition.
            5.1.2.    Hydraulic fluids
(90)   HF are used for hydraulic machining operations and serve the main purpose to
       transfer the power within the hydraulic system. In addition, HF also serve the
       purpose – similar to MWF – to lubricate, to reduce heat, to remove contamination
       and to seal the hydraulic machine.
(91)   According to the Notifying Party, the segment for HF could possibly be further
       segmented into (i) synthetic/fire resistant HF and (ii) mineral-based HF. The
       Notifying Party submits that both types of HF are completely interchangeable
       with respect to their intended use, the only difference being that one type is
       resistant to flame and the other is not. Because of the claimed complete
       interchangeability of the HF, the Notifying Party submits that it is not appropriate
       to sub-segment HF.
59 Replies to Q1 – questionnaire to competitors, question 5.
60 Replies to Q1 – questionnaire to competitors, questions 6 and 84 (including sub-questions).
61 Replies to Q2 – questionnaire to customers, questions 5 and 5.1.
62 Replies to Q2 – questionnaire to customers, question 7.
63 Replies to Q2 – questionnaire to customers, question 65 and sub-questions.
                                                       16
 ---pagebreak--- (92)   However, the Parties have provided a further sub-segmentation of synthetic/fire
       resistant HF: (i) HFA, (ii) HFB, (iii) HFC and (iv) HFD-U.
(93)   According to the market investigation, the vast majority of the competitors agree
       that there are two main types of HF, namely synthetic/fire resistant HF and
       mineral HF64. The results of the market investigation are not clear on the costs
       and time needed to enter either one of the possible markets for a company that
       was not previously active on the market. One respondent indicated it would take
       3-5 years to enter the markets, while another respondent considered it
       straightforward with little to no special know-how needed. Another respondent
       indicated that it depends on the type of HF and even distinguished between the
       different types of synthetic/fire resistant HF.65
(94)   The competitors replying to the market investigation indicated that the market for
       synthetic/fire resistant HF can be segmented further to the level of HFA, HFB,
       HFC and HFD-U.66
(95)   The results of the market investigation with customers of HF are balanced in
       relation to the possibility to substitute mineral HF with synthetic/fire resistant
       HFs and vice versa. Half of the respondents consider both products are
       substitutable with one another, while the other half considers that it is not
       possible67. However, when asked whether a permanent increase in price of
       approximately 5-10% for either type or HF would lead them to switch between
       the types of fluids, the majority of customers indicated that they would not do
       so68, suggesting that the products are not easily substitutable.
(96)   The majority of customers do not consider the above mentioned types of
       synthetic/fire resistant HF as interchangeable. This is due to the different
       chemical components, but also due to the requirements imposed on them by the
       manufacturers of their production equipment.69
(97)   In light of the results of the market investigation and taking account of all
       evidence available to it, the Commission considers that, for the purpose of this
       Decision, (i) HF constitute a relevant product market; and (ii) the question of
       whether the market for HFs should be segmented between synthetic/fire resistant
       and/or to the level of HFA, HFB, HFC, HFD-U and mineral HF can be left open,
       since the notified concentration does not raise serious doubts as to its
       compatibility with the internal market, regardless of the exact product market
       definition.
            5.1.3.    Industrial surface treatment products
(98)   Industrial surface treatment products are used to make the treated substrate more
       uniform and better suited for coating as well as to enhance corrosion protection.
       The information submitted by the Notifying Party indicates that in the EEA, the
64 Replies to Q1 – questionnaire to competitors, question 105.
65 Replies to Q1 – questionnaire to competitors, question 107.
66 Replies to Q1 – questionnaire to competitors, question 108 and sub-questions.
67 Replies to Q2 – questionnaire to customers, question 90 and sub-questions.
68 Replies to Q2 – questionnaire to customers, question 90.3.
69 Replies to Q2 – questionnaire to customers, question 92 and sub-questions.
                                                       17
 ---pagebreak---          Parties' activities in this respect overlap only to a limited extent. The Notifying
         Party's estimates indicate that the Parties' combined market share on a potential
         EEA market for industrial surface treatment products or on the possible narrower
         market segments of metal finishing and metal cleaning products does not exceed
         5%.70 In light of the information submitted by the Notifying Party in relation to
         the overlapping activities of the Parties in the EEA regarding industrial surface
         treatment products and the fact that no substantiated concerns were raised in this
         regard by the Commission's market investigation, this Decision does not discuss
         this market further.
5.2.     Geographic market definition
              5.2.1.      Metal working fluids
(99)     In Exxon/Mobil71, the Commission left open the geographic market definition for
         industrial lubricants, including MWF, but assessed market participants' market
         shares at EEA level.
(100) The Notifying Party submitted that the relevant geographic scope of the markets
         for the supply of industrial lubricants, including MWFs, is at least EEA-wide. In
         particular, the Notifying Party noted that all major producers of MWFs sell their
         products within the entire EEA, regardless of the particular product considered,
         and that products travel easily and at low cost (with transport costs representing
         between [0-10]% of the total costs).72
(101) Competitors having responded to the market investigation indicated that they are
         generally able to supply MWFs across the EEA. Although suppliers may optimise
         logistics by serving customers from plants which are as close as possible to
         customers' premises, they indicated that there are no substantial barriers to ship
         MWFs across the EEA.73 As one major player of MWF explained, "even higher
         transport cost to end customers would not justify investments in additional plants
         even if they are closer to customers."74 Overall, it emerged that major suppliers of
         MWFs do sell lubricants across the EEA.
(102) In addition, competitors explained that using warehouses and/or distributors may
         allow them to ensure just-in-time deliveries to customers if they do not possess
         manufacturing facilities which are relatively close to customers' premises, at least
         in relation to those products that have a commodity nature.75 Overall, competitors
70  In its decision in case COMP/M.8136 - BASF/Chemetall dated 28 October 2016, the Commission
    considered all surface treatment products together but also looked into surface treatment products by
    end-application. In that decision, the Commission found that the geographical market for surface
    treatment products and services is at least EEA-wide. The Parties hold the view that Metal Finishing
    Products and Metal Cleaning Products belong to the product market for the manufacture and sale of
    Industrial Surface Treatment Products and that the market should not be segmented further. The
    Parties activities in Metal Finishing Products and Metal Cleaning Products are a small business line for
    the Parties.
71  Commission decision in case IV/M.1383 - Exxon/Mobil dated 29 September 1999.
72  Form CO, paragraph 279.
73  Replies to Q1 – questionnaire to competitors, questions 33, 66 and 88.
74  One competitor's reply to Q1 – questionnaire to competitors, question 33.
75  Replies to Q1 – questionnaire to competitors, questions 33, 66 and 88.
                                                        18
 ---pagebreak---        indicate that transport costs for MWFs generally range between 5% and 10% of
       the total price to customers.76
(103) Although many customers indicated that it is more convenient to source MWFs
       from suppliers located relatively close to their plants, the majority confirmed that,
       within the EEA, there is generally no maximum distance above which it would be
       inefficient to source MWFs from a supplier, as long as providers are able to
       guarantee an adequate lead time at reasonable costs.77 Overall, while the
       geographic proximity of suppliers was identified as a relevant criterion when
       choosing a supplier by some respondents, the majority identified more important
       criteria, such as the quality of products and related technical support.78
(104) The market investigation further revealed that imports of MWFs from outside the
       EEA do not play a significant role, with the vast majority of customers indicating
       that they do not import any MWFs from outside the EEA.79
(105) On balance, the Commission considers that the evidence gathered in the context
       of the market investigation did not differ substantially on the basis of the type of
       MWF considered, and that such evidence point to EEA-wide markets.
(106) For the reasons set out above, the Commission considers that, for the assessment
       of this case, the markets for MWFs, as defined in Section 5.1.1 are EEA-wide in
       scope.
            5.2.2.    Hydraulic Fluids
(107) According to the results of the market investigation, the majority of customers of
       HF organises its purchases on a national level, irrespective of the type of HF 80.
       The results of the market investigation with customers also indicate that
       customers do not import HF from outside the EEA81. According to the customers,
       the decision to source locally is not based on transport costs, but on security of
       supply (steady supply flow)82. However, when asked about potential price
       differences within the EEA, the vast majority of customers indicated that prices
       are comparable throughout the EEA.83
(108) According to the results of the market investigation with competitors, customers
       organise their purchasing decisions on multiple geographic levels, depending on
       the size of the customer and its supply-needs (1 plant or multiple plants
       throughout a specific region)84. The majority of competitors also indicated that (at
       least part of) their commercial staff is organised at both national and international
       (EEA or even wider) levels85. The results of the market investigation with
       competitors also indicated that the majority of competitors make use of
76 Replies to Q1 – questionnaire to competitors, questions 36, 67 and 89.
77 Replies to Q2 – questionnaire to customers, questions 16, 46 and 71.
78 Replies to Q2 – questionnaire to customers, questions 19, 49 and 74.
79 Replies to Q2 – questionnaire to customers, questions 15, 45 and 70.
80 Replies to Q2 – questionnaire to customers, question 96.
81 Replies to Q2 – questionnaire to customers, question 97.
82 Replies to Q2 - questionnaire to customers, question 98.
83 Replies to Q2 – questionnaire to customers, question 99 and sub-questions.
84 Replies to Q1 – questionnaire to competitors, question 110.
85 Replies to Q1 – questionnaire to competitors, question 111.
                                                       19
 ---pagebreak---         warehouse facilities, effectively addressing the customer’s questions of security
        of supply and proximity.86 Competitors also indicated that transport costs are
        generally low (between 1and 10% of the total price of HF).
(109) For the purpose of the present Decision, and in light of the evidence gathered in
        the market investigation and in particular the comparability of prices throughout
        the EEA and the use of warehouses to ensure security of supply, the Commission
        considers that the geographic scope of the market for HF is EEA-wide,
        irrespective of the type of HF.
             5.2.3.    Industrial Surface Treatment Products
(110) In its decision in case COMP/M.8136 - BASF/Chemetall dated 28 October 2016,
        the Commission found that the geographical market for surface treatment
        products and services is at least EEA-wide.
(111) The Notifying Party submits that the relevant geographic scope of the market for
        Industrial Surface Treatment Products is at least EEA-wide, taking into account
        that customers frequently source Industrial surface treatment products on an EEA-
        wide scale and that the Parties and their competitors supply customers all
        throughout the EEA from one of their production plants.
(112) For the purpose of the present Decision, the Commission considers that the
        market for Industrial surface treatment products can be considered as EEA-wide.
5.3.    Competitive assessment
             5.3.1.    Horizontal non-coordinated effects
                       5.3.1.1.    Framework for the assessment
(113) 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.
(114) In this respect, 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.87
(115) For the assessment of the Transaction, it should in particular be recalled that the
        Horizontal Merger Guidelines describe horizontal non-coordinated effects as
        follows: "A merger may significantly impede effective competition in a market by
        removing important competitive constraints on one or more sellers who
        consequently have increased market power. The most direct effect of the merger
        will be the loss of competition between the merging firms. For example, if prior to
        the merger one of the merging firms had raised its price, it would have lost some
86  Replies to Q1 – questionnaire to competitors, question 112.
87  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.
                                                        20
 ---pagebreak---         sales to the other merging firm. The merger removes this particular constraint.
        Non-merging firms in the same market can also benefit from the reduction of
        competitive pressure that results from the merger, since the merging firms’ price
        increase may switch some demand to the rival firms, which, in turn, may find it
        profitable to increase their prices. The reduction in these competitive constraints
        could lead to significant price increases in the relevant market."88
(116) Under the substantive test set out in Article 2(2) and (3) of the Merger
        Regulation, also mergers that do not lead to the creation or the strengthening of
        the dominant position of a single firm may be incompatible with the internal
        market. Indeed, the Merger Regulation recognises that in oligopolistic markets, it
        is all the more necessary to maintain effective competition. This is in view of the
        more significant consequences that mergers may have on such markets. For this
        reason, the Merger Regulation provides that "under certain circumstances,
        concentrations involving the elimination of important competitive constraints that
        the merging parties had exerted upon each other, as well as a reduction of
        competitive pressure on the remaining competitors, may, even in the absence of a
        likelihood of coordination between the members of the oligopoly, result in a
        significant impediment to effective competition".89
(117) 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.
(118) Furthermore, not all of these factors need to be present to make significant non-
        coordinated effects likely and it is not an exhaustive list.90
(119) Finally, 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.
                        5.3.1.2.     Overview of the affected markets
(120) The Transaction gives rise to the following horizontally affected markets in the
        EEA:91
88 Horizontal Merger Guidelines, paragraph 24.
89 Merger Regulation, recital 25. Similar wording is also found in paragraph 25 of the Horizontal Merger
   Guidelines.
90 Horizontal Merger Guidelines, paragraph 26.
91 In relation to vertical relationships, while Quaker […] certain raw materials (synthetic esters) used in
   the production of different types of MWFs and HFs, Houghton […]. In light of the fact that (i)
   Houghton's demand for these products represents less than [0-10]% of the consumption of synthetic
   esters used in the market for lubricants in the EEA, and that (ii) suppliers of synthetic esters also
   provide these products to other significant consuming markets such as food, cosmetics or coatings, the
   Transaction is unlikely to give rise to customer foreclosure effects. Given that Quaker […], no input
                                                        21
 ---pagebreak---  ---pagebreak---        fluids, both to reduce supply risk and to allow for a perfect fit between the fluid
       and the production circumstances in their plants.
(123) Parties’ competitors having responded to the market investigation indicated that
       the Transaction is likely to have an impact on the market in general and more
       precisely on their business due to the reduction of one competitor, which is
       assumed to reduce the options of the consumers. However, other respondents
       suggested that the Transaction could have a positive effect by increased price
       competition between the suppliers of Removal fluids due to the strengthened
       portfolio of the combined Parties. The competitors also argue that the Parties will
       become the market leader.92
(124) However, the vast majority of the customers having responded to the
       questionnaire consider the Transaction will have no impact on their business on
       the market of Removal fluids (and its plausible sub-segments Neat oils and
       Emulsifiables). Some respondents go even further and consider the Transaction
       will have a positive impact, such as an increase in the range of offered products
       and innovation93. The market investigation with customers also indicated that
       only a minority of the respondents consider the Parties to be close competitors.
       The Commission considers that the impact of the Transaction on the market is
       relatively minor, taking into account that the market shares remain modest (only
       slightly above [20-30]%). According to recital 32 of the Preamble to the Merger
       Regulation, “Concentrations which, by reason of the limited market share of the
       undertakings concerned, are not liable to impede effective competition may be
       presumed to be compatible with the internal market. Without prejudice to Articles
       [101] and [102] of the Treaty, an indication to this effect exists, in particular,
       where the market share of the undertakings concerned does not exceed 25%,
       either in the common market or in a substantial part of it.”
(125) Moreover, while some competitors have noted that the Transaction would remove
       one supplier from the market, the Commission considers that this does not mean
       that the Transaction would remove an important competitive constraint. Firstly, as
       said above, the combined market shares are relatively limited. Secondly, the
       customers indicated that the Parties are not close competitors and that the notified
       concentration would have no impact on their business. Finally, some customers
       and competitors actually seem to suggest that the notified concentration will have
       a positive effect on the market.
(126) For the reasons set out above, the Commission concludes that the notified
       concentration does not raise serious doubts as to its compatibility with the internal
       market in the markets for Removal fluids (including on the possible narrower
       markets of Emulsifiables and Neat oils) in the EEA.
                      5.3.1.4.     MWF - Forming fluids
               i.    Rolling oils
(127) The Transaction leads to affected markets in relation to the EEA markets for the
       supply of (a) AHRO, (b) SHRO, and (c) SCRO (including TRO and Pickle oils).
92 Replies to Q1 - questionnaire to competitors, question 82.
93 Replies to Q2 - questionnaire to customers, question 63.
                                                       23
 ---pagebreak---  ---pagebreak--- (131) Starting the assessment by looking at the market shares of the Parties as a proxy
        of their likely market power, the Commission notes that the Parties' combined
        market shares post-Transaction will be about [60-70]% both in value and volume,
        raising a presumption of dominance. The market investigation results confirmed
        that, besides the Parties, there are only a limited number of alternative players
        active on this market and that their activities are either limited or not comparable
        to the Parties'.98
        Quaker and Houghton are close competitors
(132) AHRO customers having responded to the market investigation indicated that the
        most relevant criteria they consider when selecting a supplier are the quality of
        the product and the technical expertise / support provided.99 AHRO represents a
        critical input for customers since it directly affects the characteristics and the
        quality of the metal produced. Quaker and Houghton are consistently ranked as
        the top two suppliers active in the EEA by customers of AHRO, with some of
        them actually stating that the Parties are the only suitable suppliers active in the
        EEA.100 The Parties are perceived as the closest competitors by both customers
        and competitors responding to the market investigation.101 Therefore, the Parties
        exert important competitive constraints on each other, as well as on the few
        remaining players active on the market. The Transaction would result in the
        removal of such constraint.
        Customers have limited possibilities of switching supplier
(133) Contrary to the Notifying Party's views, the market investigation revealed that
        customers have limited possibility of switching supplier. The vast majority of
        customers of AHRO responding to the market investigation believe that switching
        supplier is not easy, due to the time and costs involved in such switching.102
(134) AHRO is generally adapted to the needs of the specific mills where it is used.
        Before being able to switch supplier, customers need to test the new product, first
        in laboratory and then in the production facility, which can take several months
        (even up to three years, according to one customer). In addition, certain end-
        customers (for example, in the automotive sector) may need to test the metal
        produced by their suppliers with the new lubricant.103 Only a very small number
        of customers of AHRO reported to have switched their supplier in the past five
        years, which constitutes further evidence that switching is difficult and thus does
        not occur often.104
(135) As explained above, customers have generally identified Quaker and Houghton as
        the main credible suppliers active on the EEA market for AHRO, and many of
        them have actually identified the Parties as the only available alternatives to them.
98  Replies to Q1 – questionnaire to competitors, question 20.
99  Replies to Q2 – questionnaire to customers, question 19.
100 Replies to Q2 – questionnaire to customers, question 21. For example, one customer stated that
    "[besides Quaker and Houghton] no alternative [has been] found at the moment."
101 Replies to Q1 – questionnaire to competitors, question 48 and replies to Q2 – questionnaire to
    customers, question 22.
102 Replies to Q2 – questionnaire to customers, question 23.
103 Replies to Q2 – questionnaire to customers, questions 23 and 24.
104 Replies to Q2 – questionnaire to customers, question 24.
                                                        25
 ---pagebreak---         The critical reduction in the number of suitable suppliers brought about by the
        concentration further limits customers' possibility to switch provider.
(136) In view of the above, and also in light of the fact that the profit margins on the
        AHRO market are high for both Parties ([…]% for Quaker and […]% for
        Houghton)105, the Parties are likely to profit from increasing pricing on a larger
        sales base, post-Transaction. Overall, a significant number of customers of
        AHRO, including large aluminium mills, believe that the Transaction will have a
        negative impact on competition in the market. Notably, customers believe that the
        number of suitable suppliers active on the market will be critically reduced, which
        is likely to lead to increases in prices and to a worsening of the quality of services
        provided by suppliers.106
        Lack of countervailing factors
(137) As regards countervailing factors, the Commission makes the following
        considerations. First, the bargaining power of customers purchasing AHRO
        appears to be relatively limited. While customers of AHRO may be large
        aluminium producers (and thus relatively concentrated in number), many of these
        customers believe that their bargaining power will decrease as a result of the
        Transaction.107 While customers may use the threat to change supplier to increase
        their negotiation power, this threat appears not to be credible in view of the high
        switching costs that characterise the AHRO market. Besides this, even if one were
        to consider that customers hold a certain degree of bargaining strength in
        commercial negotiations due to their size, the possibilities for customers to switch
        suppliers will be significantly reduced post-merger, in light of the loss of a key
        supplier.
(138) Second, customers explained that they could not start producing AHRO in-house
        due to the lack of the necessary equipment, know-how and expertise.108 For the
        same reasons, many of them would not be in the position to sponsor the entry of a
        new supplier in the market.109
(139) Third, as explained in Section 5.1.1.3, significant barriers to entry exist in relation
        to the AHRO market. In this respect, many competitors pointed to the need to
        build the necessary know-how, which requires long development periods (up to
        several years) and might entail substantial costs, as well as to the difficulties
        arising in securing a trial with customers, which are generally considered to be
        conservative and risk-adverse. In addition, many competitors believe that
        formulations cannot be easily sourced from third parties on the market; while
        general formulas could be in principle provided by third party suppliers, such as
        private label companies, the adjustments of these formulas to the specific mills
        (which are key to compete) cannot be provided off the shelf and require
        specialised knowledge and expertise.110 Customers responding to the market
        investigation do not report any recent entry in the market and do not expect any
105 Form CO, paragraphs 501-503.
106 Replies to Q2 – questionnaire to customers, question 37.
107 Replies to Q2 – questionnaire to customers, question 38.
108 Replies to Q2 – questionnaire to customers, question 26.
109 Replies to Q2 – questionnaire to customers, question 34.
110 Replies to Q1 – questionnaire to competitors, question 24.
                                                        26
 ---pagebreak---  ---pagebreak--- (143) The Notifying Party considers that the Transaction does not create or enhance
        market power in the market for SHRO in the EEA. First, the Notifying Party
        argued that switching costs for customers are low. In relation to SHRO, the
        customer does not need to change the fluid in the entire lubrication system (no
        cleaning needed) and testing a new product generally takes up to six months.114
        Second, customers of SHRO are large steel mills that are able to exercise strong
        countervailing buyer power.115 Third, barriers to entry are relatively low.
(144) While the Notifying Party recognised that product formulation development
        requires time and expertise, it also considered that the relevant know-how could
        be sourced on the market, notably from private label companies.116
        The Commission's assessment
        The Transaction further strengthens Quaker's large market share, leading to a
        combined market share of over 50%
(145) Starting the assessment by looking at the market shares of the Parties as a proxy
        of their likely market power, the Commission notes that the Parties' combined
        market shares post-Transaction will be close to [70-80]% both in value and
        volume, raising a presumption of dominance. In addition, the market investigation
        revealed that the Parties' market shares are likely to be underestimated and that
        the market is even more concentrated. Notably, two competitors indicated by the
        Parties as being active on the EEA market for SHRO, actually explained that they
        do not enjoy sales on such market.117 Therefore, the Parties' combined market
        shares post-Transaction are likely to be even higher than those submitted by the
        Notifying Party, and likely to be close to [80-90]%.
        Quaker and Houghton are close competitors
(146) SHRO customers indicated that the most relevant criteria they consider when
        selecting a supplier are the quality of the product and the technical expertise /
        support provided, followed by price.118 SHRO represents an important input for
        its customers in light of its effects on the quality of the produced steel. Customers
        explained that if the quality of the steel is not sufficient, the metal has to be
        downgraded and sold for a lower price, which negatively impacts their activities.
        Quaker and Houghton are consistently ranked as the top two suppliers active in
        the EEA by customers of SHRO119 and competitors120, and are perceived as the
        closest competitors by both sets of respondents.121 Therefore, the Parties appear to
        exert important competitive constraints on each other, as well as on the remaining
        players active on the market; and this would be removed by the Transaction.
        Customers have limited possibilities of switching supplier
114 Form CO, paragraphs 654 and 656.
115 Form CO, paragraph 659.
116 Form CO, paragraph 866.
117 Replies to Q1 – questionnaire to competitors, question 20.
118 Replies to Q2 – questionnaire to customers, question 19.
119 Replies to Q2 – questionnaire to customers, question 21.
120 Replies to Q1 – questionnaire to competitors, question 45.
121 Replies to Q1 – questionnaire to competitors, question 48 and replies to Q2 – questionnaire to
    customers, question 22.
                                                        28
 ---pagebreak--- (147) Contrary to the Notifying Party's views, the market investigation revealed that
        customers have limited possibility of switching supplier. All customers of SHRO
        responding to the market investigation believe that switching supplier is not easy,
        due to the time and costs involved in such switching.122 SHRO is generally
        adapted to the needs of the specific mills where it is used. Before being able to
        switch supplier, customers need to test the new product, first in laboratory and
        then in the production facility, which can take several months.123 Virtually no
        customer of SHRO reported to have switched its supplier in the past five years.124
        This is also confirmed by the data submitted by the Notifying Party on the Parties'
        trends as regards losing and winning customers in the past years: while Houghton
        reported [...] customers' switching to/from itself, Quaker reported […] existing
        customer switching to it from another supplier in 2015.125
(148) Customers have generally identified as credible suppliers active on the EEA
        market for SHRO: Houghton, Quaker and Fuchs. Therefore, post-Transaction,
        only one main credible supplier, beside the merged entity, will remain active on
        the market. In addition, most customers of SHRO do not allocate 100% of their
        demand to a single supplier, but rather have multiple suppliers, for security of
        supply and for leveraging purposes in the negotiation process. In general, this
        multi-sourcing strategy is organised at the company level, whilst each mill / plant
        is generally served by the same supplier, since products need to be adapted to the
        specific needs of the mill / plant and products of different suppliers cannot be
        mixed.126 This means that post-Transaction, the choice of alternative sources of
        supply will be severely reduced in this market.
(149) In view of the reasons set out above, and also in light of the fact that the profit
        margins on the SHRO market are high for both Parties (around […]%)127, the
        Parties are likely to profit from increasing pricing on a larger sales base, post-
        Transaction. Overall, a significant number of customers of SHRO, including large
        steel mills, believe that the Transaction will have a negative impact. Notably,
        customers believe that they the number of suitable suppliers active on the market
        will be critically reduced, which is likely to lead to increases in prices and to a
        worsening of the quality of services provided by suppliers.128
        Lack of countervailing factors
(150) As regards countervailing factors, the Commission makes the following
        considerations. First, the bargaining power of customers purchasing SHRO
        appears to be relatively limited. While customers of SHRO are generally large
        steel producers (and thus relatively concentrated in number), many of these
        customers believe that their bargaining power will decrease as a result of the
        Transaction.129 While customers may use the threat to change supplier to increase
        their negotiation power, this threat appears not to be credible in view of the high
122 Replies to Q2 – questionnaire to customers, question 23.
123 Replies to Q2 – questionnaire to customers, questions 23 and 24.
124 Replies to Q2 – questionnaire to customers, question 24.
125 See Annex 8.2(c) to Form CO.
126 Replies to Q2 – questionnaire to customers, questions 27 and 28.
127 Form CO, paragraphs 501-503.
128 Replies to Q2 – questionnaire to customers, question 37.
129 Replies to Q2 – questionnaire to customers, question 38.
                                                       29
 ---pagebreak---         switching costs that characterise the SHRO market. As one large steel producer
        explained: "[The threat to change supplier is] used in price negotiations, however
        suppliers are well aware that a change of supplier is not easily possible."130
        Besides this, even if one were to consider that customers hold a degree of
        bargaining strength in commercial negotiations due to their size, the possibilities
        for customers to switch suppliers will be significantly reduced post-Transaction,
        in light of the loss of a key supplier.
(151) Second, customers responding to the market investigation explained that they
        could not start producing SHRO in-house due to the lack of the necessary
        equipment, know-how and expertise.131 For the same reasons, they would not be
        in the position to sponsor the entry of a new supplier in the market.132
(152) Third, as explained in Section 5.1.1.3, significant barriers to entry exist in relation
        to the SHRO market. In this respect, many competitors pointed to the need to
        build the necessary know-how, which requires long development periods (up to
        several years) and might entail substantial costs, as well as to the difficulties
        arising in securing a trial with customers, which are generally considered to be
        conservative and risk-adverse. In addition, many competitors believe that
        formulations cannot be easily sourced from third parties on the market; while
        general formulas could be in principle provided by third party suppliers, such as
        private label companies, the adjustments of these formulas to the specific mills
        (which are key to compete) cannot be provided off the shelf and require
        specialised knowledge and expertise.133 Customers responding to the market
        investigation do not report any recent entry in the market and do not expect any
        entry to occur in the short term.134 The same holds true for competitors
        responding to the market investigation.135
(153) For these reasons, the Commission considers that entry and buyer power are
        unlikely to countervail the anticompetitive effects likely to arise from the
        concentration.
        Conclusion
(154) For the reasons set out above, the Commission concludes that the concentration
        raises serious doubts as to its compatibility with the internal market with regard to
        horizontal non-coordinated effects in the market for SHRO in the EEA.
                     c) SCRO
        Market structure
(155) The table below shows the Parties' and their competitors' market shares, as
        submitted by the Notifying Party, on the EEA market for SCRO (including TRO
        and Pickle oils) in 2017. As can been seen from the table, the Parties' combined
130 Replies to Q2 – questionnaire to customers, question 25.
131 Replies to Q2 – questionnaire to customers, question 26.
132 Replies to Q2 – questionnaire to customers, question 34.
133 Replies to Q1 – questionnaire to competitors, question 24.
134 Replies to Q2 – questionnaire to customers, questions 31 and 33.
135 Replies to Q1 – questionnaire to competitors, questions 53 and 55.
                                                        30
 ---pagebreak---  ---pagebreak---         time.137 Second, customers of SCRO are large steel mills that are able to exercise
        strong countervailing buyer power.138 Third, barriers to entry are relatively low.
(158) While the Notifying Party recognised that product formulation development
        requires time and expertise, it also considered that the relevant know-how could
        be sourced on the market at least to a certain extent, notably from private label
        companies.139
        Commission's assessment
        The Transaction further strengthens Quaker's large market share, leading to a
        combined market share of over 50%
(159) Starting the assessment by looking at the market shares of the Parties as a proxy
        of their likely market power, the Commission notes that the Parties' combined
        market shares post-Transaction will be close to [60-70]% (both in value and
        volume), raising a presumption of dominance. On the one hand, the market
        investigation revealed that there are a few additional competitors present on the
        market, namely petrol companies, which however only supply very specific types
        of SCRO (e.g. for stainless steel) and currently have limited activities in this field.
        On the other hand, the market investigation showed that the Parties are likely to
        have overestimated the sales of some of their competitors, in a few cases quite
        substantially.140 As a result of this, the Parties' market shares are likely to be
        underestimated. Therefore, post-Transaction, the Parties' combined shares will
        likely be above [60-70]%.
        Quaker and Houghton are close competitors
(160) SCRO customers responding to the market investigation indicated that the most
        relevant criteria they consider when selecting a supplier are the quality of the
        product and the technical expertise / support provided, followed by price.141 In
        fact, SCRO represents a critical input since it has direct effects on the quality of
        the steel produced. Quaker and Houghton are consistently ranked among the top
        suppliers active in the EEA by customers of SCRO142 and competitors143, together
        with Henkel and, to a lesser extent, Fuchs. Overall, customers and competitors
        believe that Quaker, Houghton and Henkel closely compete with each other on
        the market for SCRO in the EEA, and that they compete to a lesser extent with
        Fuchs.144 In particular, customers consider SCRO products of Quaker, Houghton
        and Henkel to be of high quality and to be provided with adequate technical
        support.145 Only very few customers responding to the market investigation
137 Form CO, paragraphs 654 and 656.
138 Form CO, paragraph 659.
139 Form CO, paragraph 865.
140 Replies to Q1 – questionnaire to competitors, question 20.
141 Replies to Q2 – questionnaire to customers, question 19.
142 Replies to Q2 – questionnaire to customers, question 21.
143 Replies to Q1 – questionnaire to competitors, question 45.
144 Replies to Q1 – questionnaire to competitors, question 48 and replies to Q2 – questionnaire to
    customers, question 22.
145 Replies to Q2 – questionnaire to customers, question 21.
                                                        32
 ---pagebreak---          mentioned other companies as real alternatives to the top four suppliers currently
         active on the market.146 As regards specialised suppliers like Fratelli Ricci and
         Lubritalia, it appears that these companies are mainly active in Italy, and thus do
         not fully compete with pan-European players like the Parties on the whole EEA
         market.147 This is in line with the internal documents submitted by the Parties. For
         example, when assessing its position on primary metals products, Quaker
         positions itself as […] and […]."148
(161) Therefore, the Parties appear to exert important competitive constraints on each
         other, as well as on the remaining players active on the market; and this would be
         removed by the Transaction.
         Customers have limited possibilities of switching supplier
(162) Contrary to the Notifying Party's views, the market investigation revealed that
         customers have limited possibility of switching supplier. Almost all customers of
         SCRO believe that switching supplier is not easy, due to the time and costs
         involved.149 As for SHRO, SCRO needs to be adapted to the needs of the specific
         mills where it is used. Before being able to switch supplier, customers need to test
         the new product, first in laboratory and then in the production facility, which can
         take several months.150
(163) Some customers explicitly mentioned that switching is risky due to the impact
         that the oil may have on the final product, that is to say the steel being
         produced.151 Some customers of SCRO reported that they have never switched
         their supplier in the past five years. Others explained that some switching
         occurred on an occasional basis, when the product performance needed to be
         improved, but generally only in relation to specific mills within the company. 152
         This is also confirmed by the data submitted by the Notifying Party on the Parties'
         trends as regards losing and winning customers in the past years: both Houghton
         and Quaker reported […] losses / gains of customers, mostly related to specific
         mills. For example, […]. In particular, […]. This further shows that the three top
         suppliers, which closely compete with each other on the market, are Quaker,
         Houghton and Henkel.153
(164) As it is the case for SHRO, most customers of SCRO do not allocate 100% of
         their demand to a single supplier, but rather have multiple suppliers, for security
         of supply and for leveraging purposes in the negotiation process. In general, this
         multi-sourcing strategy is organised at the company level, whilst each mill / plant
         is generally served by the same supplier, since products need to be adapted to the
         specific needs of the mill / plant and products of different suppliers cannot be
146 Replies to Q2 – questionnaire to customers, question 21.
147 Replies to Q1 – questionnaire to competitors, question 33.
148 Annex 5.4(ii)(a)(27) to Form CO, [Reference to internal documents].
149 Replies to Q2 – questionnaire to customers, question 23.
150 Replies to Q2 – questionnaire to customers, questions 23 and 24.
151 Replies to Q2 – questionnaire to customers, question 23. For example, one customer mentions that a
    relevant barrier to switch is "[… ] the fear of the influence of a new oil on the surface aspect of the
    finished product […]."
152 Replies to Q2 – questionnaire to customers, question 24.
153 See Annex 8.2(c) to Form CO.
                                                         33
 ---pagebreak---         mixed.154 Given that, as explained above, most customers consider as credible
        suppliers active on the market, beyond the merged entity, only Henkel and, to a
        lesser extent, Fuchs, the choice of alternative sources of supply will be severely
        reduced post-Transaction in this market.
(165) In view of the above, and also in light of the fact that the profit margins on the
        SCRO market are very high for both Parties (around […]%)155, the Parties are
        likely to profit from increasing pricing on a larger sales base, post-Transaction.
        Overall, as significant number of customers of SCRO, including large steel mills,
        believe that the Transaction will have a negative impact. Notably, customers
        believe that they the number of suitable suppliers active on the market will be
        critically reduced, which is likely to lead to increases in prices and to a worsening
        of the quality of services provided by suppliers.156
        Lack of countervailing factors
(166) As regards countervailing factors, the Commission refers to the assessment made
        in paragraphs (150) to (153) of this Decision in relation to SHRO, which fully
        applies to the market for SCRO as well. In view of that, the Commission
        considers that entry and buyer power are unlikely to countervail the
        anticompetitive effects likely to arise from the Transaction.
        Conclusion
(167) For the reasons set out above, the Commission concludes that the concentration
        raises serious doubts as to its compatibility with the internal market with regard to
        horizontal non-coordinated effects in the market for SCRO (including TRO and
        Pickle oils) in the EEA.
               ii.   Wet Temper fluids
(168) On the market for Wet Temper fluids in the EEA, to combined market share of
        the Parties is about [40-50]%, with a negligible increment of [0-5]% brought by
        Houghton’s business.
(169) Other competitors on the market include Exxon, Total, Henkel, Chemetal,
        Condoroil, Shell, Petrofer, Lubrigroup, Burgdorf, Lubrix and Fuchs157.
(170) The market investigation has indicated that the Parties will face competition from
        alternative suppliers post-Transaction and that they are not considered as close
        competitors158. The majority of customers do not foresee an impact on the market
        for Wet Temper fluids in general, or for the Wet Temper fluids they purchase159.
(171) In light of the above, and in particular in view of the minor increment and the
        presence of alternative Wet Temper fluid suppliers, the Commission concludes
154 Replies to Q2 – questionnaire to customers, questions 27 and 28.
155 Form CO, paragraph 501-503.
156 Replies to Q2 – questionnaire to customers, question 37.
157 Replies to Q2 – questionnaire to customers, questions 21 and 29.3.
158 Replies to Q2 – questionnaire to customer, question 22.
159 Replies to Q2 – questionnaire to customer, question 37.
                                                       34
 ---pagebreak---  ---pagebreak---  ---pagebreak---              Fuchs               [10-       [10-        [20-       [30-  N/A  [30-      [10-
                                20]%       20]%        30]%       40]%       40]%      20]%
             Petrofer           N/A        N/A          [20-       [30-  N/A  [30-      [10-
                                                       30]%       40]%       40]%      20]%
             Bechem             N/A        N/A         [0-5]-     [0-5]- N/A [0-5]-    [0-5]-
                                                        [10-       [10-       [10-      [10-
                                                       20]%       20]%       20]%      20]%
                                Source: Annex 6.3.(4) to Form CO
(183) Quaker and Houghton are both active in the manufacture and supply of
        synthetic/fire resistant HF and its sub-segment of HFC fluids.
(184) As can be seen from the table, the combined market share on the market of
        synthetic/fire resistant HF is limited [20-30]%, with an increment of [5-10]%.
        Other competitors on the market include Fuchs, Petrofer, Total, Condat, Shell,
        Brugarolas, Henkel, Verkol, BP Castrol, CEPSA, and ENI.165
(185) The market investigation has indicated that the Parties will face competition from
        alternative suppliers post-Transaction and that they are not considered as close
        competitors166. The majority of the customers also indicated that if the Parties
        would increase the prices of synthetic/Fire resistant HF by 5 – 10% on a
        permanent basis, they would allocate all or part of their purchases to one of the
        alternative suppliers.167
(186) The majority of customers does not foresee any impact on the market for
        synthetic/fire resistant HF in general, or on the synthetic/fire resistant HF they
        purchase from the market.168
(187) In light of the above, and in particular in view of the presence of alternative HF
        suppliers and the customers’ neutral position to the impact of the Transaction, the
        Commission concludes that the concentration does not raise serious doubts as to
        its compatibility with the internal market for synthetic/Fire resistant HF in the
        EEA.
(188) As can be seen from the table, the impact of the Transaction on the market of
        HFC is minimal, with an increment of only [0-5]%. According to the market
        investigation with competitors of the Parties, several alternative suppliers remain
        active on the market (CEPSA, BP PLC, ExxonMobil, Fuchs, MOL Nyrt, Petrofer,
        Petronas and Total.169
(189) In light of the above, and in particular in view of the negligible increment in the
        market share and the presence of alternative HFC suppliers, the Commission
        concludes that the notified concentration does not raise serious doubts as to its
        compatibility with the internal market for HFC in the EEA.
165 Replies to Q2 – questionnaire to customers, questions 100 and 103.
166 Replies to Q2 – questionnaire to customers, question 104.
167 Replies to Q2 – questionnaire to customers, question 107.4.
168 Replies to Q2 – questionnaire to customers, question 115.
169 Replies to Q1 – questionnaire to competitors, question 115.
                                                        37
 ---pagebreak---              5.3.2.    Non-horizontal effects: conglomerate effects
(190) Customers of industrial lubricants purchase different types of products for their
        manufacturing process. Therefore, the Commission has considered whether the
        combination of products in related markets may confer on the merged entity the
        ability and incentive to leverage a strong market position from one market to
        another by means of tying or bundling or other exclusionary practice.170
(191) In particular, the Parties have a significant degree of market power in the EEA
        markets for AHRO, SHRO and SCRO, as discussed in Section 5.3.1.4. These
        rolling oils are purchased by aluminium and steel producers, which also buy other
        types of lubricants produced by the Parties (e.g. protecting fluids, hydraulic
        fluids, etc.). AHRO, SHRO and SCRO are viewed as critical inputs by customers
        in light of their critical effect on the quality of the produced aluminium and steel,
        respectively. In relation to all three markets, there are very few, if any, relevant
        alternatives for customers and switching costs are very high.
(192) Therefore, the merged entity might have the ability and the incentive to foreclose
        competitors in other markets by conditioning sales in a way that links products
        belonging to separate markets together, that is to say by conditioning sales of
        AHRO, SHRO and SCRO to the purchase of other lubricants (e.g. protecting
        fluids or hydraulic fluids).
(193) In any event, the remedies proposed in relation to the EEA markets for AHRO,
        SHRO and SCRO would also remedy any hypothetical conglomerate effects
        arising from the notified concentration. Therefore, the Commission considers that
        there is no need to conclude as to whether the notified concentration raises serious
        doubts as to its compatibility with the internal market with regard to conglomerate
        effects.
6.      COMMITMENTS
(194) In order to render the notified concentration compatible with the internal market,
        the Notifying Party formally submitted commitments to the Commission on 25
        October 2018 (the “Initial Commitments”) and subsequently submitted a revised
        version of those commitments on 3 December 2018 (the “Final Commitments”).
        The proposed Final Commitments are annexed to the present Decision and form
        an integral part thereof.
6.1.    Framework for the assessment of the Commitments
(195) Where the Commission finds that a concentration raises competition concerns in
        that it could significantly impede effective competition, in particular as a result of
        the creation or strengthening of a dominant position, the Parties may seek to
        modify the concentration in order to resolve the competition concerns and thereby
        gain clearance of their merger.171
170 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control
    of concentrations between undertakings, paragraph 93.
171 Commission notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under
     Commission Regulation (EC) No 802/2004 (the "Remedies Notice"), OJ 2008/C 267/01, para 5.
                                                      38
 ---pagebreak--- (196) Under the Merger Regulation, it is the responsibility of the Commission to show
       that a concentration would significantly impede effective competition. The
       Commission then communicates its competition concerns to the parties to allow
       them to formulate appropriate and corresponding remedies proposals. It is then
       for the parties to the concentration to put forward commitments.172 The
       Commission only has power to accept commitments that are deemed capable of
       rendering the concentration compatible with the internal market so that they will
       prevent a significant impediment of effective competition in all relevant markets
       where competition concerns were identified.173 To this aim, the commitments
       have to eliminate the competition concerns entirely174 and have to be
       comprehensive and effective from all points of view.175
(197) In assessing whether the proposed commitments will likely eliminate the
       competition concerns identified, the Commission considers all relevant factors
       including inter alia the type, scale and scope of the proposed commitments,
       judged by reference to the structure and particular characteristics of the market in
       which the competition concerns arise, including the position of the Notifying
       Party and other participants on the market.176
(198) In order for the commitments to comply with these principles, commitments must
       be capable of being implemented effectively within a short period of time.177
       Where, however, the Notifying Party submits remedies 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.178 The requisite degree of
       certainty concerning the implementation of the proposed commitments may in
       particular be affected by risks in relation to the transfer of a business to be
       divested.179
(199) Commitments in Phase I can only be accepted where the competition concerns are
       readily identifiable and can be easily remedied. The remedies need to be so clear-
       cut that it is not necessary to enter into an in-depth investigation as to whether
       they are sufficient to rule out 'serious doubts' within the meaning of Article
       6(1)(c) of the Merger Regulation.180
(200) As concerns the form of acceptable commitments, the Merger Regulation leaves
       discretion to the Commission as long as the commitments meet the requisite
172 Remedies Notice, para 6.
173 Remedies Notice, para 9.
174 See also Case C-202/06 P Cementbouw Handel & Industrie v Commission [2007] ECR 2007 I-12129,
    para 54.
175 Remedies Notice, paras 9 and 61.
176 Remedies Notice, para 12.
177 Remedies Notice, para 9.
178 Remedies Notice, paras 13, 14 and 61.
179 Remedies Notice, para 11.
180 Remedies Notice, para 81.
                                                 39
 ---pagebreak---         standard.181 In general structural commitments are the best way to eliminate
        competition concerns resulting from horizontal overlaps.
(201) In this regard divested activities must consist of a viable business that, if operated
        by a suitable purchaser, can compete effectively with the merged entity on a
        lasting basis and that is divested as a going concern.182 Normally, a viable
        business is a business that can operate on a stand-alone-basis, which means
        independently of the merging parties as regards the supply of input materials or
        other forms of cooperation other than during a transitory period. 183 The
        Commission has a clear preference for an existing stand-alone business. In
        proposing a viable business for divestiture, it is necessary to take into account the
        uncertainties and risks related to the transfer of a business to a new owner. These
        risks may limit the competitive impact of the divested business, and, therefore,
        may lead to a market situation where the competition concerns at stake will not
        necessarily be eliminated.184
(202) While divested businesses should in principle contain all tangible assets including
        manufacturing assets which contribute to its current operation185, carve out of
        manufacturing assets may be acceptable only exceptionally in very specific
        circumstances if their workability is fully ensured by effective implementation
        and monitoring.186 A divestiture consisting of a combination of certain assets
        which did not form a uniform and viable business in the past creates risks as to
        the viability and competitiveness of the resulting business. In such circumstances,
        the package must be sufficient to allow the Commission to conclude that the
        resulting business will be immediately viable in the hands of a suitable
        purchaser.187
(203) It is against this background that the Commission assessed the viability, the
        workability, the effectiveness and the ability of the proposed commitments to
        entirely eliminate the competition concerns identified.
6.2.    Proposed Commitments
             6.2.1.     Initial Commitments
(204) The Initial Commitments consist in the global divestment, under an upfront buyer
        provision, of all know-how and IP rights in relation to Houghton's AHRO, SHRO
        and SCRO businesses in the EEA (the “Divestment Business”). More specifically,
        such know-how and IP rights include all unpatented product formulations
        constituting trade secrets, Houghton’s US patent in relation to NOA technology,
181  Case T-177/04, EasyJet v Commission [2006] ECR II-1913, para 197: "Article 6(2) of Regulation No
     4064/89 provides that the Commission may authorise a merger if the commitments proposed by the
     parties dispel the serious doubts as to the compatibility of the merger with the common market.
     Regulation No 4064/89 thus lays down the objective to be achieved by the Commission, but leaves it a
     wide discretion as to the form which the commitments in question may take."
182  Remedies Notice, para 23.
183  Remedies Notice, para 32.
184  Remedies Notice, para 24.
185  Remedies Notice, para 25-27.
186  Remedies Notice, para 17.
187  Remedies Notice, para 37.
                                                      40
 ---pagebreak---          brand names188 and R&D capabilities. The divested know-how includes both
         formulations of products that are currently produced by Houghton's businesses, as
         well as formulations of former products produced by Houghton. In addition, such
         know-how includes all the relevant formulation adjustments and products in
         development related to the divested businesses. Under the proposed
         commitments, the merged entity will benefit from a non-exclusive license-back
         for use exclusively outside the EEA and outside any geographic areas where the
         Federal Trade Commission (“FTC”) in the United States may require a remedy.189
(205) With this respect, the Initial Commitments include the transfer of [20-40]
         Houghton employees active in sales, technical servicing and R&D190 and who are
         to a large extent, if not entirely, dedicated to the Divestment Business, as well as
         [10-30] product support engineers from Houghton’s EEA fluidcare services
         related to steel rolling oils. The Initial Commitments also provide that the merged
         entity cannot solicit the personnel transferred with the Divestment Business for a
         period of […]. In addition to this transfer of personnel, the remedy package also
         contains specific tangible assets such as laboratory equipment necessary for the
         continuation of R&D activity related to divested products.
(206) The Initial Commitments further provide for the divestment of the entirety of
         Houghton’s existing customer contracts and records in relation to the Divestment
         Business and under a […] non-solicitation clause. Similarly, all of Houghton’s
         relationships with its existing suppliers of raw materials as well as any inventory
         of finished goods, packaging and raw materials related to the Divestment
         Business are included in the divested package. Moreover, in order to facilitate the
         technology transfer, the Initial Commitments provide for transitional services and
         toll-manufacturing agreements for a transitional period of up to […], extendable
         twice with […] extensions, on terms and conditions equivalent to those currently
         afforded by Houghton to the Divestment Business. At the option of the purchaser,
         the Initial Commitments also include a commitment for the Notifying Party to
         provide technical training services for R&D.
(207) The Parties explicitly proposed Total S.A. (“Total”, France) as remedy buyer.
         Given Total’s pre-existing activities in neighbouring lubricant markets and its
         manufacturing footprint in the EEA, the Initial Commitments do not provide for
         the divestment of any production facility in the EEA.
(208) While the Initial Commitments do not provide for the divestment to Total of
         Houghton’s formulations used in regions outside the EEA and outside any
         geographic areas where the FTC may require a remedy, the divested package
188 The following brand names are included in the Initial Commitments: NOA, Tandemol, Rodshield,
    ARC, Roll Collar, Rollshield, Fenella, Rolkleen, Rollub, Tempershield and MWR. Following the
    transfer of these brand names, the merged entity will have a […] usage right for these brand names for
    existing products that do not compete with the Divestment Business. Conversely, the purchaser will
    have a […] usage right for Houghton's brand name Houghto Roll for products relying in whole or in
    part on the divested know-how. Following such […] period, the merged entity commits to abstain from
    any use of this brand for products competing with the Divestment Business for a further blackout
    phase of […].
189 In fact, the Initial Commitments provide for a licence-back to the merged entity "for all areas outside
    the EEA to the extent permitted by the US FTC in its proceedings".
190 [1-10] business leaders, [10-30] sales/technical services/assistance personnel and [5-15] R&D staff
    members.
                                                        41
 ---pagebreak---         nevertheless enables Total to use the acquired know-how and IP rights on a global
        basis, i.e. without any geographic restriction. In other words, under the Initial
        Commitments, Total is in the position to supply rolling oils, for instance, in Asia,
        should it decide to do so.
(209) In addition, the undertakings concerned have entered into related commitments,
        inter alia regarding the separation of the divested businesses from their retained
        businesses, the preservation of the viability, marketability and competitiveness of
        the divested businesses, including the appointment of a monitoring trustee.
             6.2.2.    Results of the market test
(210) The Commission launched a market test on 5 November 2018 to assess the
        suitability and viability of the Initial Commitments.
(211) Results of the market test indicate that the Initial Commitments are in general
        sufficient to address the competition concerns raised by the Commission on the
        EEA markets for AHRO, SHRO and SCRO.191 Several market participants
        nevertheless identify some implementation risks and suggest a number of
        improvements to help mitigate such risks. Only a small minority of customers and
        competitors express negative views on the remedy package, but such concerns
        remain isolated and are not in line with the views expressed by the majority of
        market participants.
(212) Both customers and competitors are confident that the proposed remedy would be
        viable and that Total could effectively compete on the EEA markets for AHRO,
        SHRO and SCRO.192 Moreover, the majority of respondents agree that the Initial
        Commitments include all necessary tangible and intangible assets, such as
        equipment, know-how and pipeline products necessary for Total to viably and
        competitively run the Divestment Business on a lasting basis in the EEA. 193 More
        specifically, market participants have consulted the list of products included in the
        Divestment Business and generally confirm that no additional Houghton's
        products are required in the Divestment Business for viability purposes, with the
        exception of a limited number of specific HFs which are technically compatible
        with Houghton's divested rolling oils (in particular, AHRO).194
(213) Results of the market test also generally confirm the adequacy of the toll-
        manufacturing and servicing arrangements envisaged for the transitional period195
        as well as the appropriateness and sufficiency of the Parties’ commitment not to
        solicit any transferred personnel, customer or distributor included in the
        Divestment Business for a period of five years.196
191 Replies to R1 – questionnaire to competitors, question 15, and to R2 – questionnaire to   customers,
    question 14.
192 Replies to R1 – questionnaire to competitors, question 3, and to R2 – questionnaire to    customers,
    question 4.
193 Replies to R1 – questionnaire to competitors, question 4.
194 Replies to R1 – questionnaire to competitors, question 17.1, and to R2 – questionnaire to customers,
    question 16.1.
195 Replies to R1 – questionnaire to competitors, question 8, and to R2 – questionnaire to    customers,
    question 8.
196 Replies to R1 – questionnaire to competitors, questions 11 and 12.
                                                        42
 ---pagebreak--- (214) While market participants largely acknowledge the need for requalification of the
        divested products once transferred to Total (notably in light of the change in the
        manufacturing facilities where the products will be produced), they also generally
        indicate that this situation would not substantially differ from general industry
        practice and that estimated re-qualification delays would require between 3 to 18
        months, depending on the different end-use application of aluminium and steel
        products.197 Similarly, a smaller number of customers indicate that their company
        would need to requalify the products in the event that Total were to source certain
        input raw materials from alternative suppliers,198 but generally consider such
        requalification step could be accomplished within the timeframe of the initial
        transitional period of […].199
(215) A sizable proportion of customers and competitors, however, also consider that
        the Initial Commitments involve certain implementation and operational risks.200
        First of all, market participants stress the importance of a sufficiently long
        transitional period in order to enable Total to replicate Houghton’s service and
        product quality after the technology transfer, and to provide sufficient time for
        customers to complete all necessary re-qualification steps, with a buffer for
        unforeseeable events.201 Second, some respondents stress that, during the
        transitional period, Houghton may not supply Total with sufficient volumes of
        toll-manufactured products202 and raise doubts that, under the Initial
        Commitments, Houghton may not be bound to offer the same level of services
        and products to Total during the transitional period, including the two possible
        extension periods.203 Third, some market participants highlight the risk that a few
        key employees of Houghton are not transferred with the Divestment Business.204
        Fourth, customers consider the availability to Total of the same raw materials as
        used by Houghton pre-Transaction to be crucial in order to enable Total to
        replicate the same quality and performance level of the divested products. Finally,
        a small minority of competitors raise the observation that global customers may
        require globally consistent technology and products.205 However, with respect to
        the latter observation, none of the global customers of Houghton raised similar
        concerns during the market test.
(216) In terms of mitigation proposals to the above risks, some customers suggest the
        possibility to extend the transitional period by an additional six months in order to
        provide for greater reassurance and flexibility in case of unforeseen issues related
        to the technology transfer.206 The vast majority of competitors and customers
        further consider that the Initial Commitments would need to be amended in order
        to explicitly enable Total to increase the volume of its purchases of toll-
197 Replies to R1 – questionnaire to competitors, question 5, and to R2 – questionnaire to customers,
    question 5.
198 Replies to R2 – questionnaire to customers, question 10.
199 Replies to R2 – questionnaire to customers, question 10.2.
200 Replies to R1 – questionnaire to competitors, question 3.2, and to R2 – questionnaire to customers,
    questions 4.2, 6 and 15.
201 Replies to R2 – questionnaire to customers, questions 4.2.1 and 6.1.
202 Replies to R2 – questionnaire to customers, question 4.2.1., 7.1., 8.1.
203 Replies to R2 – questionnaire to customers, question 8.1.
204 Replies to R1 – questionnaire to competitors, question 16.1, and to R2 – questionnaire to customers,
    question 6.1.
205 Replies to R1 – questionnaire to competitors, question 3.
206 Replies to R2 – questionnaire to customers, question 9.1.
                                                        43
 ---pagebreak---         manufactured products in order to meet potential increases in customer demand
        during the transitional period.207
(217) Concerning the risks associated to the identification of key personnel and given
        that names of specific members of personnel to be transferred to Total could not
        be disclosed to market participants for the purpose of the market test, the
        Commission asked Houghton’s customers to identify all Houghton's employees
        that they consider essential for the viability of the Divestment Business. In this
        context, replies to the market test largely confirm the relevance of the [20-40] key
        employees proposed by the Parties in the Initial Commitments. Nevertheless,
        customers also mentioned a limited number of Houghton's employees that were
        not part of the remedy package as being necessary for the viability of the
        Divestment Business. Out of these employees,208 however, most (i) are only
        marginally active in the EEA, or (ii) changed role within the company a few years
        ago, or (iii) are identified on an isolated basis and without justification as to why
        their position could not be taken over by existing Total employees (e.g.
        administrative personnel or non-specialised commercial personnel). Only one of
        the said employees, a technical sales manager active in the EEA, is consistently
        considered as crucial for the viability of the Divestment Business in the replies of
        Houghton's customers.
(218) The Commission also obtained the views of customers and competitors as to the
        suitability of Total as a potential purchaser during the market test. Most market
        participants believe that Total would be able to compete effectively and on a
        lasting basis on the EEA markets for AHRO, SHRO and SCRO.209 Although a
        small minority of respondents expressed concerns that Total does not currently
        have sufficient knowledge of the specific chemistry and market dynamics related
        to the divested products,210 most respondents stressed Total’s relevant experience
        and know-how in the lubricants industry.211
(219) In view of the above, although the overall remedy concept and specific purchaser
        proposed by the Parties in the Initial Commitments positively resonated with
        market participants, the responses to the market test identified some risks and
        mitigation possibilities in order to ensure the continued viability and
        competitiveness of the Divestment Business in the EEA.
             6.2.3.    Final Commitments
(220) Taking into account the results of the market test as well as certain considerations
        being commercially negotiated with Total, the Parties submitted the Final
        Commitments, which incorporate several improvements to the Divestment
        Business. As described in Section 6.2.2, market participants identified some
        implementation risks in relation to: (i) the need to include in the remedy package
207 Replies to R1 – questionnaire to competitors, question 8.2, and to R2 – questionnaire to customers,
    question 8.2.
208 Replies to R2 – questionnaire to customers, questions 11.1 and 12.
209 Replies to R1 – questionnaire to competitors, question 18, and to R2 – questionnaire to customers,
    question 17.
210 Replies to R1 – questionnaire to competitors, questions 3 and 18.1, and to R2 – questionnaire to
    customers, question 17.1.
211 Replies to R1 – questionnaire to competitors, question 18.1, and to R2 – questionnaire to customers,
    question 17.1.
                                                       44
 ---pagebreak---         certain products which are technically complementary to some of the divested
        products, (ii) the duration of the transitional period, (iii) the flexibility for Total to
        increase its purchases of toll-manufactured products during the transitional
        period, (iv) the quality level of products and services offered by the merged entity
        during the transitional period, (v) key personnel, and (vi) the safeguard of Total’s
        access to Houghton's raw material suppliers. Compared to the Initial
        Commitments, the Final Commitments have been adapted so as to effectively
        mitigate the identified implementation risks in practice.
(221) First, the Final Commitments provide for the divestment of hydraulic fluids which
        are technically compatible with the divested products, namely “Vital Fluid”,
        “Vital Fluid NOA” and “Hydro Drive”, as identified by market participants.212
        The products included in the Divestment Business relate to both current
        formulations and formulations used in the past. “Vital Fluid” and “Vital Fluid
        NOA” products are respectively water-based and mineral oil based hydraulic
        fluids developed either with the same raw materials used in the divested AHRO
        products or with specific additives that do not mix with the divested AHRO
        products. In case of leakage of these hydraulic fluids, the performance of the
        AHRO rolling oil is therefore not impacted. Similarly, the “Hydro Drive BM 46”
        is a mineral oil based hydraulic fluid the components of which are more easily
        separable from divested products in case of a leakage. In line with the addition of
        these products to the divestment package, the Final Commitments also provide for
        the addition of the “Vital Fluid” and “Hydro Drive” brand names to the divested
        brands already included in the Initial Commitments.
(222) Second, in order to ensure a seamless technology transfer to Total, the Final
        Commitments proposed by the Parties provide for the possibility of extending the
        transitional arrangements for an additional period of […]. More specifically,
        while the Initial Commitments offer the possibility of two separate […]
        extensions at the option of Total and subject to agreement of the monitoring
        trustee, the Final Commitments extend the first extension […]. In total, the
        maximum duration of the transitional period therefore increases […], as
        suggested by market participants in the market test. While the Final Commitments
        offer more flexibility in case of unforeseen complications during the technology
        transfer, they also include a revised pricing formula for the toll-manufactured
        products purchases during the last potential extension […]. This means that the
        price for the toll-manufactured products will be higher during the last possible
        extension (compared to the price offered during the initial […] and the first […]
        extension), while remaining non-punitive for Total in case such ultimate
        extension were to be necessary. This way, Total will have more flexibility to
        implement the technology transfer and to perform all the necessary customers'
        qualifications, while being incentivised to terminate the transitional arrangements
        with the merged entity as soon as practicable. In addition, the Final Commitments
        provide that during the transitional period strict ring-fencing obligations will be in
        place, so that the merged entity will obtain and use confidential information from
        the Divestment Business for the sole purpose of providing toll-manufacturing
212 Following products have been added to the divestment package: VITAL FLUID AG 46, VITAL
    FLUID HS 320, VITAL FLUID L 46 AL, VITAL FLUID NOA 46, VITAL FLUID NOA 68, VITAL
    FLUID NOA 150, VITAL FLUID NOA 220, VITAL FLUID NOA 320, VITAL FLUID NOA 460,
    HYDRO DRIVE BM 46 (to become VITAL FLUID BM 46).
                                                   45
 ---pagebreak---        services, and will be subject to the obligation not to retain nor use any such
       information after the termination of the toll manufacturing arrangement.
(223) Third, compared to the Initial Commitments, the Final Commitments explicitly
       mention that no volume cap shall apply for the volumes of toll-manufactured
       products to be provided to Total during the transitional period, including during
       possible extensions. Nevertheless, quantities ordered by Total remain subject to
       verification by the monitoring trustee and to commercial justification.
(224) Fourth, under the Final Commitments, the Parties formally commit to offer
       quality levels for transitional services and toll-manufactured products equivalent
       to those performed and manufactured by Houghton pre-Transaction throughout
       the transitional period, including during possible extensions.
(225) Fifth, in the Final Commitments, the Parties commit to use reasonable best efforts
       not only to facilitate, but also to incentivise the transfer of key personnel.
       Moreover, concerning specific key employees, the Final Commitments provide
       for the replacement of one technical service manager for non-ferrous products. In
       fact, the added employee corresponds to one of the key personnel identified
       during the market test by Houghton customers, while the removed employee was
       identified as being […] and active in a geographic region already covered by
       another technical service manager. Eventually, the Final Commitments include
       provisions whereby the Parties undertake that any personnel currently involved
       directly in the research, development, and commercialization of divested
       products, but that are not part of the personnel transferred to the Divestment
       Business (notably because they do not play a key role and/or they only spend a
       negligible part of their time working on the divested products), will not, for a
       period of […] after the Effective Date, engage directly or indirectly in any R&D
       for or commercialization of products which compete with the products
       comprising the Divestment Business.
(226) Finally, the Parties also commit, for a period of […], to offer to Total back-to-
       back agreements for the supply of raw materials used in the production of the
       divested products. Under the Final Commitments, such agreement may only be
       requested by Total in case it were not able to conclude supply contracts with the
       relevant third party suppliers.
(227) The full description of the assets and obligations of the Final Commitments is
       contained in the schedule thereof.
     6.3.  Overall assessment of the Final Commitments
           6.3.1.    Scope of the Final Commitments and their suitability to remove
                     identified concerns
(228) As explained in the present Decision, the serious doubts as to the compatibility of
       the Transaction with the internal market reside in the combination of Quaker's and
       Houghton's activities in relation to the manufacture and supply of AHRO, SHRO
       and SCRO products in the EEA.
(229) The Final Commitments consist of the divestment of Houghton’s activities in
       AHRO, SHRO and SCRO products in the EEA, representing more than the
       horizontal overlap between the Parties as regards such products. The Final
                                                46
 ---pagebreak---         Commitments therefore ensure that the markets in question continue to be
        populated by different credible suppliers.
(230) In light of the above, the Commission considers that the Final Commitments
        proposed by the Parties are suitable to address the competition concerns that the
        Transaction would otherwise lead to on the EEA markets for AHRO, SHRO and
        SCRO.
             6.3.2.    Viability and competitiveness of the Divestment Business
(231) The Commission considers that the Divestment Business is a viable and
        competitive business, despite the fact that it is not currently operated on a stand-
        alone basis by Houghton. The volumes of the AHRO, SHRO and SCRO products
        currently manufactured by Houghton suggest that the products could be produced
        at existing plants owned by Total in the EEA. Total has several plants that are
        capable of producing industrial lubricants in the EEA and, according to its
        preliminary business plan, the EEA Divestment Business is expected to be
        transferred to at least three of such lubricant plants, in order to cover the markets
        for AHRO, SHRO and SCRO.
(232) Despite the limited volumes represented by the divested products in the EEA, the
        Divestment Business achieves sales of EUR […] in 2017213, and is a highly
        profitable business as illustrated by Houghton’s profit margins achieved in the
        EEA in 2016 ([…]% for AHRO, […]% for SHRO, and […]% for SCRO
        products214).
(233) The Commission considers that the transitional period […], extendable twice by a
        […] and a […] extension respectively, up to a maximum duration of […] in total,
        as provided for in the Final Commitments, is sufficient to ensure that Total can
        transfer and acquire the necessary know-how in order to (i) be able to
        successfully take over the production of Houghton’s AHRO, SHRO and SCRO
        products, and (ii) allow sufficient time for transferred customers to requalify the
        products.
(234) In light of the results of the market test and the identity of the proposed purchaser,
        the Commission considers that the Divestment Business includes the necessary
        personnel needed to be run viably and competitively. In addition, the Commission
        notes that the Final Commitments include adequate provisions to incentivise the
        relevant personnel to be transferred to the Divestment Business.
(235) In light of the above, the Commission considers that the Final Commitments are
        adequate to ensure the viability and competitiveness of the Divestment Business.
             6.3.3.    Ability of the Final Commitments to be implemented in practice
(236) The Parties must enter into a final binding sale and purchase agreement for the
        sale of the Divestment Business with a purchaser approved by the Commission
        before the Transaction can be closed.
213 Including revenues generated by Houghton’s services to EEA customers of steel rolling oils. See
    Annexes 6 and 7 of the Final Commitments.
214 Table 19 of the Form CO.
                                                   47
 ---pagebreak--- (237) The Commission considers that the criteria set out in the Final Commitments are
      adequate to ensure the suitability of the purchaser. In particular, the Final
      Commitments stipulate that, besides being independent from the Parties and
      having sufficient financial resources, proven expertise and incentive to maintain
      and develop the Divestment Business as a viable and active competitive force in
      the EEA, the purchaser is required to be a well-established lubricant supplier with
      activities in the EEA. Moreover, the purchaser must have (i) a proven track record
      in lubricant markets, (ii) manufacturing capabilities in the EEA, (iii) capability of
      sourcing raw materials at competitive terms, and (iv) sufficient resources,
      including those acquired with the Divestment Business, in order to effectively
      carry out R&D activity for the Divestment Business, produce divested products at
      the same quality as Houghton, market these products cost-effectively throughout
      the EEA and provide all necessary technical support to customers.
(238) The Commission also notes that the purchaser proposed by the Notifying Party in
      the Final Commitments, Total, appears to meet the criteria set out above without
      prejudice to the outcome of the assessment of Total as suitable buyer at a later
      stage of the procedure. The Commission will formally assess the suitability of
      Total as a purchaser in a separate decision. Nonetheless, the identity of the
      proposed purchaser, Total, removes concerns about the viability of the remedy
      that the Commission may otherwise have had at this stage. In particular, Total's
      experience in neighbouring markets and lubricants production assets located in
      the EEA contribute to reducing implementation risks that might have otherwise
      endangered the transfer of Houghton’s AHRO, SHRO and SCRO products.
(239) In light of the above, the Commission considers the Final Commitments to be
      sufficient in scope and suitable to remove the serious doubts that would otherwise
      result from the Transaction on the EEA markets for AHRO, SHRO and SCRO.
          6.3.4.     Conclusion on Final Commitments
(240) For the reasons outlined above, and in view of the results of the market test and
      the ensuing improvements to the Initial Commitments, the Commission considers
      the Final Commitments are sufficient to eliminate the serious doubts as to the
      compatibility of the Transaction with the internal market.
6.4.  Conditions and obligations
(241) 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 a
      notified concentration compatible with the internal market.
(242) The achievement of the measure that gives rise to the structural change of the
      market is a condition, whereas the implementing steps which are necessary to
      achieve this result are generally obligations on the Parties. Where a condition is
      not fulfilled, the Commission's decision declaring the concentration compatible
      with the internal market no longer stands. Where the undertakings concerned
      commit a breach of an obligation, the Commission may revoke the clearance
      decision in accordance with Article 8(6) 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.
                                              48
 ---pagebreak--- (243) In accordance with the distinction described above, this Decision is conditioned
      on the full compliance with the requirements set out in Section B of the Final
      Commitments (including the Schedule), which constitute conditions. The
      remaining requirements set out in the other Section of the Final Commitments
      constitute obligations on Quaker.
(244) The detailed text of the Final Commitments is annexed to this Decision. The full
      text of the final Commitments forms an integral part of this Decision.
7.    CONCLUSION
(245) For the above reasons, the Commission has decided not to oppose the notified
      operation as modified by the Final Commitments and to declare it compatible
      with the internal market and with the functioning of the EEA Agreement, subject
      to full compliance with the conditions in Section B of the Final Commitments
      annexed to the present Decision and with the obligations contained in the other
      Sections of the said commitments. This Decision is adopted in application of
      Article 6(1)(b) in conjunction with Article 6(2) of the Merger Regulation and
      Article 57 of the EEA Agreement.
                                                   For the Commission
                                                   (Signed)
                                                   Margrethe VESTAGER
                                                   Member of the Commission
                                             49
 ---pagebreak---                                                                       03 December 2018
               COMP/M. 8492 – QUAKER/GLOBAL HOUGHTON
            COMMITMENTS TO THE EUROPEAN COMMISSION
Pursuant to Article 6(2) of Council Regulation (EC) No 139/2004 (the “Merger Regulation”),
Quaker Chemical Corporation (the “Notifying Party”) and Houghton International Inc. hereby
enter into the following Commitments (the “Commitments”) vis-à-vis the European
Commission (the “Commission”) with a view to rendering the acquisition of Global
Houghton Limited (the “Concentration”) 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 Concentration 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 the Parties and/or by the ultimate
    parents of the Parties, 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").
    AHRO: Aluminium Hot Rolling Oils (see also "Houghton EEA AHRO Business")
    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), (b), (c) and (d) and described more in detail in the Schedule.
    Closing: the transfer of the Divestment Business to the Purchaser.
    Closing Period: the period of […] from the approval of the Purchaser and the terms of
    sale by the Commission.
    Confidential Information: any business secrets, know-how, commercial information, or
    any other information of a proprietary nature that is not in the public domain.
 ---pagebreak--- 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 or businesses as defined in Section B and in the
Schedule which the Notifying Party commits to divest.
Divestiture Period: the period of […] from the Effective Date.
Effective Date: the date of adoption of the Decision.
Hold Separate Manager: the person appointed by Quaker for the Divestment Business to
manage the day-to-day business under the supervision of the Monitoring Trustee.
Houghton: Houghton International Inc., incorporated under the laws of the
Commonwealth of Pennsylvania, with its registered office at Madison and Van Buren
Avenues, Valley Forge, PA 19482, USA.
Houghton EEA AHRO Business: the Houghton business relating to the development,
manufacture and sale of AHRO products in the EEA.
Houghton EEA Steel Rolling Oil Business: collectively (1) the Houghton SCRO
business relating to the development, manufacture and sale of SCRO products, including
Pickle Oils and TPRO, in the EEA, and (2) the Houghton SHRO business relating to the
development, manufacture and sale of SHRO products in the EEA.
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.
Monitoring Trustee: one or more natural or legal person(s) who is/are approved by the
Commission and appointed by Quaker, and who has/have the duty to monitor Quaker’s
compliance with the conditions and obligations attached to the Decision.
Parties: the Notifying Party and Houghton.
Personnel: all staff currently employed by the Divestment Business, including staff
seconded to the Divestment Business and shared personnel, as identified 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 16 of these Commitments that the
Purchaser must fulfil in order to be approved by the Commission.
Quaker: Quaker Chemical Corporation, incorporated under the laws of the
Commonwealth of Pennsylvania, with its registered office at One Quaker Park, 901
Hector Street, Conshohocken, PA 19428, USA.
                                               2
 ---pagebreak---    Schedule: the schedule to these Commitments describing more in detail the Divestment
   Business.
   SCRO: Steel Cold Rolling Oils (see also "Houghton EEA Steel Rolling Oil Business")
   SHRO: Steel Hot Rolling Oils (see also "Houghton EEA Steel Rolling Oil Business")
   Technical Expert: one or more natural or legal person(s), appointed by and reporting to
   the Monitoring Trustee, who has/have expertise relevant to the Divestment Business. The
   Technical Expert will, if this is deemed necessary by the Monitoring Trustee, assist and
   advise the Monitoring Trustee with regard to all technical aspects related to the
   Divestment Business. All information provided to the Monitoring Trustee may also be
   exchanged with the Technical Expert. The Technical Expert will be independent of and
   will not have or be exposed to any conflict of interest in relation to the Parties. If the
   Monitoring Trustee has the necessary technical expertise, the Monitoring Trustee and
   Technical Expert can be the same natural or legal person. Quaker and the Purchaser shall
   have the right to be heard with any reasoned objections against technical expert
   candidates, e.g., lack of competence or conflict of interest. In cases of controversy
   between Quaker and the Monitoring Trustee, and/or Purchaser and the Monitoring Trustee
   as to the suitability of the technical expert candidate, the Commission will decide on the
   matter.
   TOTAL: TOTAL MARKETING SERVICES SA, incorporated under the laws of France,
   with its registered office at 24, cours Michelet - La Défense 10, 92069 Paris La Défense
   Cedex, and registered with the Trade and Companies Register at Nanterre under number
   542 034 921 16871.
   TPRO: Tinplate Rolling Oils (see also "Houghton EEA Steel Rolling Oil Business")
   Trustee: the Monitoring Trustee.
Section B.      The commitment to divest and the Divestment Business
      Commitment to divest
2. In order to maintain effective competition, Quaker commits to divest, or procure the
   divestiture of the Divestment Business by the end of the Divestiture Period as a going
   concern to TOTAL and on terms of sale approved by the Commission in accordance with
   the procedure described in paragraph 17 of these Commitments. To carry out the
   divestiture, Quaker commits to enter into a final binding sale and purchase agreement for
   the sale of the Divestment Business with TOTAL within the Divestiture Period.
3. The proposed concentration shall not be implemented before Quaker has entered into a
   final binding sale and purchase agreement for the sale of the Divestment Business with
   TOTAL and the Commission has approved TOTAL and the terms of sale in accordance
   with paragraph 17.
                                                   3
 ---pagebreak--- 4. Quaker shall be deemed to have complied with this commitment if:
      (a)      by the end of the Divestiture Period, Quaker has entered into a final binding
               sale and purchase agreement with TOTAL and the Commission has approved
               TOTAL and the terms of sale as being consistent with the Commitments in
               accordance with the procedure described in paragraph 17; and
      (b)      the Closing of the sale of the Divestment Business to the Purchaser takes place
               within the Closing Period.
5. In order to maintain the structural effect of the Commitments, the Parties 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 the Notifying Party showing good cause and accompanied by a
   report from the Monitoring Trustee (as provided in paragraph 38 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
   proposed concentration compatible with the internal market.
      Structure and definition of the Divestment Business
6. The Divestment Business consists of the Houghton EEA AHRO Business and the
   Houghton EEA Steel Rolling Oil Business, the latter comprising the Houghton EEA
   SCRO business, including Pickle Oils and TPRO, and the Houghton EEA SHRO
   business. The Houghton EEA AHRO Business and the Houghton EEA Steel Rolling Oil
   Business are currently operational business lines at Houghton and will be carved-out prior
   to the divestment. The legal and functional structure of the Divestment Business as
   operated to date is described in the Schedule. The Divestment Business, described in more
   detail in the Schedule, 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, know-
               how and other information used in connection with the Divestment Business)
               of the Divestment Business; provided however that manufacturing plants
               currently used by Houghton shall not be included in the Divestment Business.
      (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; all customer, credit and other records of the Divestment Business;
               and
                                                   4
 ---pagebreak---        (d)      the Personnel.
7. In addition, the Divestment Business includes the benefit, for a transitional period of up to
    […] after Closing, with a […] extension and an additional […] extension at the option of
    the Purchaser and subject to agreement of the Trustee, and on terms and conditions
    equivalent to those at present afforded to the Divestment Business, of all current
    arrangements under which Houghton or its Affiliated Undertakings supply products or
    services to the Divestment Business, as detailed in the Schedule, unless otherwise agreed
    with the Purchaser. The Purchaser shall use reasonable best efforts to complete the
    transition to the purchasing of such products or services from other sources as quickly as
    possible within the initial […] period. Strict firewall procedures will be adopted so as to
    ensure that any competitively sensitive information related to, or arising from such supply
    arrangements (for example, product roadmaps) will not be shared with, or passed on to,
    anyone outside the Houghton operations supplying the products or services.
8. In order to ensure a seamless transfer of the Divestment Business to the Purchaser, the
    Parties commit to provide toll-manufacturing services of the products of the Divestment
    Business for the Purchaser in accordance with the hold-separate obligations under
    paragraphs 11 and 12 of the Commitments and the ring-fencing obligations under
    paragraph 13 of the Commitments for a time period of up to […] after Closing, with a […]
    extension and an additional […] extension at the option of the Purchaser and subject to
    agreement of the Trustee. The Purchaser shall use reasonable best efforts to complete the
    transition to its own manufacturing as quickly as possible within the initial […] period.
    The remuneration of the Parties for such toll-manufacturing to be paid by the Purchaser is
    detailed in Annex 9 to the Schedule. The Parties commit to provide the Purchaser with the
    same commercial terms with respect to the material / services (including but not limited to
    packaging and transport) for which costs are passed through as applicable to the retained
    activities of the Parties. No cap shall apply for the volumes to be provided by the Parties
    under the toll-manufacturing services obligation. Upon reasoned request of Quaker, the
    Monitoring Trustee shall verify the commercial justification of the quantities ordered by
    the Purchaser.
9. To facilitate integration of the Divestment Business into the Purchaser's operation, the
    Parties further commit to provide to the Purchaser, at its option, training services for its
    personnel (employees and/or contractors) for a period of […] from Closing in relation to
    engineering and R&D, recipe formulation and know-how.
Section C.        Related commitments
       Preservation of viability, marketability and competitiveness
10. From the Effective Date until Closing, the Parties 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
                                                    5
 ---pagebreak--- as possible any risk of loss of competitive potential of the Divestment Business. In
particular, the Parties undertake:
  (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; and
  (c)        to use reasonable best efforts to the extent permitted by law, to incentivise and
             facilitate the transfer of Personnel. The Parties shall provide relevant contact
             details for the Personnel, or otherwise make such Personnel available to the
             Purchaser subject to compliance with applicable laws. The Parties shall
             facilitate interviews between such Personnel and the Purchaser, shall not
             discourage such Personnel from participating in such interviews, and shall not
             interfere in employment negotiations between such Personnel and the
             Purchaser. The Parties shall document all reasonable best efforts undertaken in
             order to incentivize and facilitate the transfer of such Personnel to the
             Purchaser.
  (d)        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 Personnel to remain with the Divestment Business, and not to
             solicit or move any Personnel to Quaker's remaining business. In particular,
             with respect to such Personnel who receive an offer of employment from the
             Purchaser (conditional on or following the Closing), the Parties shall do the
             following: (i) not prevent, prohibit or restrict or threaten to prevent, prohibit or
             restrict the Personnel from being employed by the Purchaser, and not offer any
             incentive to the Personnel to decline employment with the Purchaser; (ii) if the
             Personnel accepts such offer of employment from the Purchaser, the Parties
             shall cooperate with the Purchaser in effecting transfer of the Personnel to the
             employ of the Purchaser and the Parties shall amend or waive the relevant
             provisions of employment agreements, stock options and other employee
             benefit arrangements of Personnel so that they do not suffer adverse
             consequences as a result of their negotiations with, or acceptance of an offer
             from, the Purchaser.
             Where, nevertheless, individual members of the Personnel exceptionally leave
             the Divestment Business, the Parties shall provide a reasoned proposal to
             replace the person or persons concerned to the Commission and the
             Monitoring Trustee. The Parties must be able to demonstrate to the
                                                  6
 ---pagebreak---                Commission that the replacement is well suited to carry out the functions
               exercised by those individual members of the Personnel. The replacement shall
               take place under the supervision of the Monitoring Trustee, who shall report to
               the Commission.
      (e)      to use reasonable best efforts to the extent permitted by law, to facilitate the
               transfer of know-how in connection with the Divestment Business, including
               but not limited to through the appropriate training of the Purchaser staff and
               contractors and disclosure of technical documentation.
      Hold-separate obligations
11. The Parties commit, from the Effective Date until Closing, to procure that the Divestment
    Business is kept separate from the businesses that the Notifying Party will be retaining
    and, after closing of the notified transaction to keep the Divestment Business separate
    from the business that the Notifying Party is retaining and to ensure that unless explicitly
    permitted under these Commitments: (i) management and staff of the businesses retained
    by Quaker have no involvement in the Divestment Business; (ii) the Key Personnel and
    Personnel of the Divestment Business have no involvement in any business retained by
    Quaker and do not report to any individual outside the Divestment Business.
12. Until Closing, the Parties shall assist the Monitoring Trustee in ensuring that the
    Divestment Business is managed as a distinct and saleable entity separate from the
    businesses which Quaker is retaining. Immediately after the Effective Date, Quaker 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 with a view to ensuring its continued economic viability,
    marketability and competitiveness and its independence from the businesses retained by
    Quaker. The Hold Separate Manager shall closely cooperate with and report to the
    Monitoring Trustee. Any replacement of the Hold Separate Manager shall be subject to
    the procedure laid down in paragraph 10(d) of these Commitments. The Commission may,
    after having heard Quaker, require Quaker to replace the Hold Separate Manager.
      Ring-fencing
13. The Parties shall implement, or procure to implement, all necessary measures to ensure
    that they do not, after the Effective Date, obtain any Confidential Information relating to
    the Divestment Business and that any such Confidential Information obtained by Quaker
    before the Effective Date will be disclosed to the Purchaser and then eliminated and not be
    used by Quaker. This includes measures vis-a-vis Quaker's 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. The Parties may obtain or keep information relating to the Divestment Business
    which is reasonably necessary for the divestiture of the Divestment Business or the
                                                   7
 ---pagebreak---     disclosure of which to the Parties is required by law. The Parties undertake that any
    personnel of the Parties currently involved directly in the research development, and or
    commercialization (comprising technical support, sales and after-sales) of the products
    comprising the Divestment Business but not listed in 2 (f) and (g) of the Schedule will
    not, for a period of […] after the Effective Date, engage directly or indirectly in any R&D
    for or commercialization of products which compete with the products comprising the
    Divestment Business. The Parties shall implement all necessary measures to ensure that
    they do not, after the Effective Date, obtain any know-how, commercial information, or
    any other information of a confidential or proprietary nature relating to the Divestment
    Business from that personnel.
       Non-solicitation clause
14. The Parties undertake, subject to customary limitations, not to solicit, and to procure that
    Affiliated Undertakings do not solicit, the Personnel transferred with the Divestment
    Business for a period of […] after Closing.
15. The Parties undertake not to solicit, and to procure that Affiliated Undertakings do not
    solicit, for a period of […] after Closing, any of Houghton's distributors or customers for
    the products of the Divestment Business currently supplied by Houghton at the plants or
    mills of the respective customer as listed in Schedule 2(e) attached to these Commitments
    for the purpose of selling products which compete with the products manufactured on the
    basis of the formulations divested via the Divestment Business.
      Due diligence
In order to enable TOTAL to continue to carry out a reasonable due diligence of the
Divestment Business, the Parties shall, subject to customary confidentiality assurances and
dependent on the stage of the divestiture process:
(a)   provide to TOTAL sufficient information as regards the Divestment Business; and
(b) provide to TOTAL sufficient information relating to the Personnel and allow TOTAL
reasonable access to the Personnel.
Section D.        The Purchaser
16. 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 the Notifying Party and
      its Affiliated Undertakings (this being assessed having regard to the situation following
      the divestiture);
                                                   8
 ---pagebreak---       (b) The Purchaser shall have the financial resources, proven expertise and incentive to
      maintain and develop the Divestment Business as a viable and active competitive force
      in competition with the Parties and other competitors;
      (c) The Purchaser shall be a well-established lubricant supplier with activities in the
      EEA which fulfils the following criteria:
             (1) has a proven track record in related industrial lubricants markets;
             (2) has manufacturing capabilities for industrial lubricants in the EEA;
             (3) is capable of sourcing the key raw materials at competitive terms; and
             (4) has the necessary resources (in combination with the personnel and assets
                 included in the Divestment Business) to
                 -   effectively carry out R&D work for the products of the Divestment
                     Business;
                 -   produce the products of the Divestment Business at the same quality as
                     Houghton;
                 -   sell / distribute the products of the Divestment Business cost-effectively
                     throughout the EEA; and
                 -   provide the necessary technical support to customers.
      (d) 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.
17. The final binding 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 Quaker has reached an agreement with TOTAL, 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. Quaker must be able to demonstrate
    to the Commission that TOTAL 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 TOTAL 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
                                                    9
 ---pagebreak---     not affect the viability and competitiveness of the Divestment Business after the sale,
    taking account of TOTAL.
Section E.        Trustee
       I.         Appointment procedure
18. Quaker shall appoint a Monitoring Trustee to carry out the functions specified in these
    Commitments for a Monitoring Trustee. The Notifying Party commits not to close the
    Concentration before the appointment of a Monitoring Trustee. The Monitoring Trustee
    may be assisted by the Technical Expert with regard to all technical questions related to
    the Divestment Business. The Technical Expert shall be appointed by and report to the
    Monitoring Trustee (with Quaker and the Purchaser having the right to be heard as to their
    suitability). In cases of controversy between Quaker and the Monitoring Trustee, and/or
    Purchaser and the Monitoring Trustee as to the suitability of the technical expert
    candidate, the Commission will decide on the matter.
19. The Trustee shall:
      (i) at the time of appointment, be independent of the Notifying Party and its Affiliated
      Undertakings;
      (ii) possess the necessary qualifications to carry out its mandate, for example have
      sufficient relevant experience as an investment banker or consultant or auditor; and
      (iii) neither have nor become exposed to a Conflict of Interest.
20. The Trustee shall be remunerated by the Notifying Party in a way that does not impede the
    independent and effective fulfilment of its mandate.
                  Proposal by Quaker
21. No later than two weeks after the Effective Date, Quaker shall submit the names of two
    natural or legal persons whom Quaker proposes to appoint as the Monitoring 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;
                 and
      (b)        the outline of a work plan which describes how the Trustee intends to carry out
                 its assigned tasks.
                 Approval or rejection by the Commission
                                                   10
 ---pagebreak--- 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, Quaker 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, Quaker 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 Quaker
23. If all the proposed Trustees are rejected, Quaker 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 18 and 22 of these Commitments.
                  Trustee nominated by the Commission
24. If all further proposed Trustees are rejected by the Commission, the Commission shall
    nominate a Trustee, whom Quaker 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 Quaker, 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:
    (i)      propose in its first report to the Commission a detailed work plan describing how it
             intends to monitor compliance with the obligations and conditions attached to the
             Decision;
    (ii)     oversee, 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
             the Parties with the conditions and obligations attached to the Decision. To that
             end the Monitoring Trustee shall:
               (a) monitor the preservation of the economic viability, marketability and
                    competitiveness of the Divestment Business, and the keeping separate of the
                    Divestment Business from the business retained by the Parties, in
                    accordance with paragraphs 10 and 11 of these Commitments;
                                                    11
 ---pagebreak---         (b) supervise the management of the Divestment Business as a distinct and
             saleable entity, in accordance with paragraph 12 of these Commitments;
        (c) with respect to Confidential Information:
                determine all necessary measures to ensure that Quaker 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 Quaker before the Effective Date is eliminated
                   and will not be used by Quaker, and
                decide whether such information may be disclosed to or kept by
                   Quaker as the disclosure is reasonably necessary to allow Quaker to
                   carry out the divestiture or as the disclosure is required by law; and
        (d) monitor the splitting of assets and the allocation of Personnel between the
             Divestment Business and Quaker or Affiliated Undertakings;
(iii) propose to the Parties such measures as the Monitoring Trustee considers
      necessary to ensure the Parties' 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;
(iv)  review and assess TOTAL as well as the progress of the divestiture process and
      verify that, dependent on the stage of the divestiture process:
        (a) TOTAL receives 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
        (b) TOTAL are granted reasonable access to the Personnel;
(v)   act as a contact point for any requests by third parties, in relation to the
      Commitments;
                                               12
 ---pagebreak---     (vi)     provide to the Commission, sending Quaker 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;
    (vii)    promptly report in writing to the Commission, sending Quaker a non-confidential
             copy at the same time, if it concludes on reasonable grounds that the Parties are
             failing to comply with these Commitments;
    (viii) within one week after receipt of the documented proposal referred to in paragraph
             17 of these Commitments, submit to the Commission, sending Quaker a non-
             confidential copy at the same time, a reasoned opinion as to the suitability and
             independence of TOTAL and the viability of the Divestment Business after the
             Sale and as to whether the Divestment Business is sold in a manner consistent with
             the conditions and obligations attached to the Decision, in particular, if relevant,
             whether the Sale of the Divestment Business without one or more Assets or not all
             of the Personnel affects the viability of the Divestment Business after the sale,
             taking account of the proposed purchaser; and
    (ix)     assume the other functions assigned to the Monitoring Trustee under the
             conditions and obligations attached to the Decision.
       III.       Duties and obligations of the Parties
27. The Parties 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 Quaker's or
    the Divestment Business’ books, records, documents, management or other personnel,
    facilities, sites and technical information necessary for fulfilling its duties under the
    Commitments and Quaker and the Divestment Business shall provide the Trustee upon
    request with copies of any document. Quaker 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.
28. The Parties 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. The Parties shall provide
    and shall cause their advisors to provide the Monitoring Trustee, on request, with the
    information submitted to TOTAL, in particular give the Monitoring Trustee access to the
    data room documentation and all other information granted to TOTAL in the due
    diligence procedure.
                                                    13
 ---pagebreak--- 29. Quaker 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 Quaker 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.
30. At the expense of Quaker, the Trustee may appoint advisors (in particular for corporate
    finance or legal advice), subject to Quaker's approval (this approval not to be
    unreasonably withheld or delayed) if the Trustee considers the appointment of such
    advisors necessary or appropriate for the performance of its duties and obligations under
    the Mandate, provided that any fees and other expenses incurred by the Trustee are
    reasonable. Should Quaker refuse to approve the advisors proposed by the Trustee the
    Commission may approve the appointment of such advisors instead, after having heard
    Quaker. Only the Trustee shall be entitled to issue instructions to the advisors. Paragraph
    29 of these Commitments shall apply mutatis mutandis.
31. Quaker agrees that the Commission may share Confidential Information proprietary to
    Quaker 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.
32. The Notifying Party 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.
33. For a period of 10 years from the Effective Date the Commission may request all
    information from the Parties that is reasonably necessary to monitor the effective
    implementation of these Commitments.
       IV.        Replacement, discharge and reappointment of the Trustee
34. 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 Quaker, require Quaker to replace
    the Trustee; or
    (b) Quaker may, with the prior approval of the Commission, replace the Trustee.
35. If the Trustee is removed according to paragraph 34 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
                                                     14
 ---pagebreak---     appointed in accordance with the procedure referred to in paragraphs 18-24 of these
    Commitments.
36. Unless removed according to paragraph 24 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, 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
37. The Commission may extend the time periods foreseen in the Commitments in response
    to a request from Quaker or, in appropriate cases, on its own initiative. Where Quaker
    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 the Notifying Party.
    Only in exceptional circumstances shall Quaker be entitled to request an extension within
    the last month of any period.
38. The Commission may further, in response to a reasoned request from the Notifying Party
    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 the Notifying Party. 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.
                                                    15
 ---pagebreak--- Section G.     Entry into force
39. The Commitments shall take effect upon the date of adoption of the Decision.
    Place and date:              […]
    Signature:                   […]
    Name and position:           […]
    On behalf of:                Quaker Chemical Corporation
    Signature:                   […]
    Name and position:           […]
    On behalf of:                Houghton International Inc.
                                               16
 ---pagebreak---                                                SCHEDULE
1. The Divestment Business as operated to date has the following legal and functional
   structure:
   The Divestment Business consists of the Houghton EEA AHRO Business and the
   Houghton EEA Steel Rolling Oil Business, the latter comprising the Houghton EEA
   SHRO business and the Houghton EEA SCRO business (including Pickle Oils and
   TPRO):
   a) The Houghton EEA AHRO Business comprises all activities of Houghton relating to
        the development, production and sale of AHRO products, starting from R&D through
        to production, sales and after-sales.
   b) The Houghton EEA Steel Rolling Oil Business comprises all activities of Houghton
        relating to the development, production and sale of SHRO products and SCRO
        products, starting from R&D through production, sales and after-sales:
   The Houghton EEA AHRO Business and the Houghton EEA Steel Rolling Oil Business
   are currently operational business lines at Houghton. Both business lines can be operated
   by the Purchaser on a standalone basis and independently from the business that Quaker
   will be retaining. The relevant assets and personnel of both businesses will be carved out
   and transferred to the Purchaser as part of the Divestment Business.
   Know-how (general know-how with regard to lubricants and the aluminium and steel
   industries and the Divestment Business as well as specific know-how with regard to
   formulations, processes, methods, manufacturing information, etc and specific customer
   demands relating to the Divestment Business), R&D capabilities (including for the
   development/improvement of products according to the demands of customers, the supply
   of after-sales services and the conduct of research) as well as strong customer relations are
   critical elements for the competitive strength of the Divestment Business.
   The Divestment Business therefore includes
      (1) Know-how in the form of the formulations, processes, methods and other
          information to develop, manufacture or sell the products of the Divestment Business
          (as described in detail in the section below on “Assets and personnel included in the
          Divestment Business”).
      (2) Key Personnel in the areas of sales/technical services and R&D dedicated
          exclusively or to a large extent to the Divestment Business, who have the necessary
          know-how, industry experience, R&D capabilities and customer contacts (as
          described in detail in the section below on “Assets and personnel included in the
                                                    17
 ---pagebreak---           Divestment Business”). This includes an experienced management team, which has
          a proven track record of integrating businesses following transactions and of
          successfully developing business and R&D operations, as well as personnel
          experienced in training new employees.
          To further strengthen the capabilities of the Divestment Business in the areas of
          sales/technical services and R&D, further Key Personnel, who are currently not
          (fully) dedicated to the Divestment Business, have also been included in the
          Divestment Business.
          In total, the Divestment Business includes [20-40] full-time key personnel compared
          to [20-40] full-time FTE key personnel who are currently dedicated to the Houghton
          EEA AHRO Business and the Houghton EEA Steel Rolling Oil Business.1
     (3) To ensure that the Purchaser will be able to maintain the service quality currently
          offered by Houghton, [10-30] product support engineers (fluidcare) employed at
          customer plants have also been included in the Divestment Business.
     (4) Furthermore, the Divestment business includes brand names for the Divestment
          Business (transfer or usage rights), specific R&D lab equipment, as well as an offer
          to enter into supply agreements with the Purchaser for products and services.
   These divested assets and personnel will form a viable and competitive business in the
   hands of the Purchaser. A transfer of production facilities or of personnel performing
   general functions (such as production, commercial or back office functions) to the
   Purchaser is not required. However, the Parties commit to offer, at the option of the
   Purchaser
    - Technical training services for R&D personnel, sales/technical services personnel and
       technical support personnel (such as quality chemists and product support engineers).
   To guarantee continuity of operations and to facilitate the transfer of the Divestment
   Business, the Parties further commit to provide transitional services and a toll
   manufacturing services to the Purchaser.
   Assets and personnel included in the Divestment Business
2. In accordance with paragraph 6 of the Commitments, the Divestment Business includes,
   but is not limited to:
1  Personnel which is partly dedicated to the business is partly considered in the calculation (Example: a
   position, which is dedicated 50% to a business, is counted as 0.5 FTE).
                                                          18
 ---pagebreak--- (a) the following main intangible assets:
    (i)      Intangible assets relating to the Houghton EEA AHRO Business
     -   Houghton's brand names NOA, Tandemol, Rodshield, Vital Fluid, Hydro
         Drive and ARC, which are currently used for the Houghton EEA AHRO
         Business. Following the transfer of these brand names, Quaker will have a
         […] usage right for these brand names for those already existing products
         not competing with the Divestment Business, i.e.: for (i) AHRO outside of
         the EEA to the extent permitted by the U.S. Federal Trade Commission in
         the proceedings with file no. 171-0125 and (ii) for all non-AHRO products
         (including the EEA and North America). The Parties shall use reasonable
         best efforts to re-brand any products using these brand names as quickly as
         possible.
     -   The know-how (including but not limited to trade secrets) in the form of
         the formulations, processes, method, and information to develop,
         manufacture or sell the products as listed in Annex 1, i.e. the products
         currently produced in the Houghton EEA AHRO Business as well as other
         lubricants. The Purchaser may use these rights (for example, for research,
         development, production, manufacture and sale) globally and without any
         restriction whatsoever, but at the request of Quaker, must grant a non-
         exclusive, royalty free license back for all areas outside the EEA to the
         extent permitted by the U.S. Federal Trade Commission in the proceedings
         with file no. 171-0125. The Parties undertake not to sell products relying
         on the transferred know-how which are the subject matter of that license,
         or on any know-how derived therefrom, in the EEA and (if/as applicable)
         in any other areas not permitted by the U.S. Federal Trade Commission as
         a result of the proceedings with file no. 171-0125.
     -   The know-how (including but not limited to trade secrets) in the form of
         the formulations, processes, method, and information to manufacture or
         sell the product RODSHIELD 90 E, which is primarily a rod drawing
         product but is used by […] of Houghton's AHRO customers in the EEA
         for aluminum rolling. The Purchaser may use these rights (for example,
         for research, development, production, manufacture and sale) globally and
         without any restriction whatsoever, but at the request of Quaker, must
         grant a non-exclusive, royalty free license back to use the formulation to
         manufacture products outside the Divestment Business, i.e. for (i) AHRO
         applications outside the EEA to the extent permitted by the U.S. Federal
         Trade Commission in the proceedings with file no. 171-0125 and (ii) for
         all non-AHRO applications (including the EEA and North America). The
         Parties undertake not to sell products relying on the transferred know-how
         which are the subject matter of that license, or on any know-how derived
                                         19
 ---pagebreak---   therefrom, in the EEA and (if/as applicable) in any other areas not
  permitted by the U.S. Federal Trade Commission as a result of the
  proceedings with file no. 171-0125.
- The know-how (including but not limited to trade secrets) in the form of
  the formulations, processes method, and information for former products
  produced in the Houghton EEA AHRO Business as well as predecessor
  versions of the other lubricants as identified in Annes 1 to this Schedule.
  The Purchaser may use these rights (for example, for research,
  development, production, manufacture and sale) globally and without any
  restriction whatsoever, but at the request of Quaker, must grant a non-
  exclusive, royalty free license back for all areas outside the EEA to the
  extent permitted by the U.S. Federal Trade Commission in the proceedings
  with file no. 171-0125. The Parties undertake not to sell products relying
  on the transferred know-how which are the subject matter of that license,
  or on any know-how derived therefrom, in the EEA and (if/as applicable)
  in any other areas not permitted by the U.S. Federal Trade Commission as
  a result of the proceedings with file no. 171-0125.
- The transfer of the formulations will include the full transfer of
        any formulation adjustments, including but not limited to those
           adjustments for particular customers and samples of products
           under development, and
        preliminary or final documentation or results of any current or past
           R&D. This includes any results obtained from tests or trials.
- The U.S. patent no. 6,818,609 ("NOA patent"). The Purchaser may use
  this patent (for example, for research, development, production,
  manufacture and sale) globally and without any restriction whatsoever, but
  at the request of Quaker, must grant a non-exclusive, royalty free license
  back to use the NOA patent to manufacture products outside the
  Divestment Business, i.e. for (i) AHRO outside the EEA to the extent
  permitted by the U.S. Federal Trade Commission in the proceedings with
  file no. 171-0125 and (ii) for all non-AHRO products (including the EEA
  and North America). The Parties undertake not to sell AHRO products
  relying on the NOA patent which is the subject matter of that license in the
  EEA and (if/as applicable) in any other areas not permitted by the U.S.
  Federal Trade Commission as a result of the proceedings with file no. 171-
  0125.
- The Parties confirm that all products listed in Annex 1, i.e. the products
  currently produced by the Houghton EEA AHRO and the other lubricants
  identified in Annex 1 to this Schedule, as well as RODSHIELD 90 E are
                                 20
 ---pagebreak---      all REACH compliant. The Parties also undertake to transfer ownership
     over all files related to the REACH registration of these products and
     inputs to the Purchaser.
(ii)     Intangible assets relating to the Houghton EEA Steel Rolling Oil
         Business
 -   Houghton's brand names Roll Collar, Rollshield, Fenella, Rolkleen,
     Rollub, Tandemol, Tempershield and MWR, which are currently used for
     the Houghton EEA Steel Rolling Oil Business. Following the transfer of
     these brand names, Quaker will have a […] usage right for these brand
     names for those already existing products not competing with the
     Divestment Business, i.e. for (i) Steel Rolling Oil outside of the EEA to
     the extent permitted by the U.S. Federal Trade Commission in the
     proceedings with file no. 171-0125 and (ii) for all non-Steel Rolling Oil
     products (including the EEA and North America). The Parties shall use
     reasonable best efforts to re-brand any products using these brand names
     as quickly as possible.
 -   A […] usage right for Houghton's brand name Houghto Roll solely for the
     products relying (whether in whole or in part) on the know-how being
     divested via the Divestment Business. Following this […] period, The
     Parties commit to abstain from any use of this brand for products
     competing with the Divestment Business for a further period of […]
     (blackout phase).
 -   The know-how (including but not limited to trade secrets) in the form of
     the formulations, processes, method, and information to develop,
     manufacture or sell the products currently produced in the Houghton EEA
     Steel Rolling Oil Business as listed in Annex 2 to this Schedule. The
     Purchaser may use these rights (for example, for research, development,
     production, manufacture and sale) globally and without any restriction
     whatsoever, but at the request of Quaker, must grant a non-exclusive,
     royalty free license back for all areas outside the EEA to the extent
     permitted by the U.S. Federal Trade Commission in the proceedings with
     file no. 171-0125. The Parties undertake not to sell products relying on the
     transferred know-how which are the subject matter of that license, or on
     any know-how derived therefrom, in the EEA and (if/as applicable) in any
     other areas not permitted by the U.S. Federal Trade Commission as a
     result of the proceedings with file no. 171-0125.
 -   The know-how (including but not limited to trade secrets) in the form of
     the formulations, processes, method, and information for former products
     produced in the Houghton EEA Steel Rolling Oil Business. The Purchaser
                                   21
 ---pagebreak---          may use these rights (for example, for research, development, production,
         manufacture and sale) globally and without any restriction whatsoever, but
         at the request of Quaker, must grant a non-exclusive, royalty free license
         back for all areas outside the EEA to the extent permitted by the U.S.
         Federal Trade Commission in the proceedings with file no. 171-0125. The
         Parties undertake not to sell products relying on the transferred know-how
         which are the subject matter of that license, or on any know-how derived
         therefrom, in the EEA and (if/as applicable) in any other areas not
         permitted by the U.S. Federal Trade Commission as a result of the
         proceedings with file no. 171-0125.
     -   The transfer of the know-how mentioned above will include the full
         transfer of:
               any formulation adjustments, including but not limited to those
                  adjustments for particular customers and samples of products
                  under development; and
               any existing preliminary or final documentation or results of any
                  current or past R&D. This includes any results obtained from tests
                  or trials.
     -   The Parties confirm that all products currently produced by the Houghton
         EEA Steel Business as listed in Annex 2 to this Schedule are REACH
         compliant. The Parties also undertake to transfer ownership over all files
         related to the REACH registration of these products and inputs to the
         Purchaser.
(b) the following main tangible assets:
    (i)      Lab equipment
             All laboratory equipment necessary for researching, developing, testing
             and customizing (both pre-sales and after-sales) the products
             comprising the Houghton EEA AHRO Business and the Houghton
             EEA Steel Rolling Oil Business as set out in Annex 3 to this Schedule.
    (ii)     Inventory
             Finished goods inventory, associated packaging assets, and other
             working capital (raw material/WIP inventory) for the Houghton EEA
             AHRO Business and the Houghton EEA Steel Rolling Oil Business.
                                        22
 ---pagebreak--- (c) the following main contracts, agreements, leases, commitments and
    understandings:
     -   Houghton's relationships with all of its current suppliers of raw materials
         for its EEA AHRO Business as indicated in Annex 4 to this Schedule
         ([…]), including all contact details, product specifications, information on
         lead times, pricing and any other information related to the past […] years
         required for the Purchaser to have full access to Houghton's supplier base.
     -   Houghton's relationships with all of its current suppliers of raw materials
         for its EEA Steel Rolling Oil Business as indicated in Annex 5 to this
         Schedule ([…]), including all contact details, product specifications,
         information on lead times, pricing and any other information related to the
         past […] years required for the Purchaser to have full access to Houghton's
         supplier base.
(d) the following customer, credit and other records:
     -   Houghton's customer, credit and other records for all of its current AHRO
         customers in the EEA as set out in Annex 6 to this Schedule with respect
         to the mills and the AHRO products currently supplied by Houghton as
         specified under (e). […]. The Parties shall transfer all assignable contracts
         with customers and shall use its best efforts to facilitate the transfer of the
         (remaining) customer relations to the Purchaser. Should the contracts be
         concluded on a global basis, the Parties shall use their best effort to assign
         the relevant portion of the existing contract to the Purchaser.
     -   For the avoidance of doubt, in case of supplies to end customers only the
         specific mills currently supplied by Houghton shall constitute the customer
         relation.
     -   Houghton's customer, credit and other records for all of its current EEA
         Steel Rolling Oil customers in the EEA as set out in Annex 7 to this
         Schedule with respect to the mills and the Steel Rolling Oil products
         currently supplied by Houghton as specified under (e). […]. The Parties
         shall transfer all assignable contracts with customers and shall use its best
         efforts to facilitate the transfer of the (remaining) customer relations to the
         Purchaser. Should the contracts be concluded on a global basis, the Parties
         shall use their best effort to assign the relevant portion of the existing
         contract to the Purchaser.
     -   For the avoidance of doubt, in case of supplies to end customers only the
         specific mills currently supplied by Houghton shall constitute the customer
         relation.
                                          23
 ---pagebreak---  ---pagebreak--- additional […] extension at the option of the Purchaser and subject to agreement of the
Trustee, until the Purchaser has set up and successfully tested production as well as
received the necessary customer approval for the respective product (where applicable).
The Purchaser shall use reasonable best efforts to complete the transition to its own
manufacturing as quickly as possible within the initial […] period. The quality level of
toll-manufacturing services and products offered to the Purchaser must be equivalent to
the quality level of the services performed and products manufactured, respectively, by
the Divestment Business prior to Closing and must remain the same during the toll-
manufacturing period, including its possible extensions. The toll-manufacturing services
must be rendered from the same factories or another factory the relevant customer has
duly qualified to produce the product in question during this time period. In case of
unavailability, a back up solution must be provided. The remuneration of the Parties for
such toll-manufacturing to be paid by the Purchaser is detailed in Annex 9. The Parties
commit to provide the Purchaser with the same commercial terms with respect to the
material / services (including but not limited to packaging and transport) for which cost
are passed through as applicable to the retained activities of the Parties. No cap for the
volumes to be provided by the Parties under the toll-manufacturing services obligation
shall apply. Upon reasoned request of Quaker, the Monitoring Trustee shall verify the
commercial justification of the quantities ordered by the Purchaser.
For the avoidance of doubt and without prejudice to paragraph 13 of the Commitments,
the Parties may obtain, keep or use information related to the Divestment Business which
is reasonably necessary for the sole purpose of providing toll-manufacturing services to
the Purchaser. The Parties shall implement all necessary measures not to retain nor use
any such information after the termination of the toll manufacturing arrangement.
Training offer
To facilitate integration of the Divestment Business into the Purchaser's operation, the
Parties further commit to provide to the Purchaser, at its option, training services for its
personnel for a period of […] from Closing in relation to engineering and R&D, recipe
formulation and transfer of know-how in relation to the Divestment Business. Training
will be offered on a reasonable cost basis to be agreed with the Purchaser and subject to
the approval of the Trustee.
Supply of raw materials
In case the Purchaser should not be able to conclude supply agreements or other
arrangements for any of the raw materials listed in Annex 4 and Annex 5 for the purpose
of the production of the products included in the Divestment Business, the Parties commit
for a period of […] from Closing and following the submission of a reasoned request from
the Purchaser and accompanied by a report from the Monitoring Trustee to enter into
                                               25
 ---pagebreak---    back-to-back agreements for the supply of the respective raw material, i.e. to source the
   respective raw material for account of the Purchaser.
3. The Divestment Business shall not include:
   Any production facilities currently used for the production of the products of the
   Divestment Business.
4. If there is any asset or personnel which is not covered by paragraph 2 of this Schedule but
   which is both used (exclusively or not) in the Divestment Business and necessary for the
   continued viability and competitiveness of the Divestment Business, that asset, personnel,
   or adequate substitute will be offered to the Purchaser.
                                                  26
 ---pagebreak--- Table of Annexes
                 Houghton's current AHRO products in the
 Annex 1
                 EEA and other lubricants
                 Houghton’s Steel Rolling Oil products in the
 Annex 2
                 EEA
 Annex 3         List of lab equipment
                 Houghton's raw material suppliers for its
 Annex 4
                 EEA AHRO products
                 Houghton's raw material suppliers for its
 Annex 5         EEA Steel Rolling Oil products
 Annex 6         List of Houghton's EEA AHRO customers
                 List of Houghton's EEA Steel Rolling Oil
 Annex 7         customers
                 Specification of all plants or mills in the
 Annex 8         EEA currently served by Houghton with
                 AHRO, SHRO or SCRO
                 Pricing formula for toll-manufacturing
 Annex 9         services rendered by Quaker
                             27
 ---pagebreak---                                                   3 December 2018
                  M.8492 QUAKER / GLOBAL HOUGHTON
                                   ANNEX 1
Houghton's AHRO products in the EEA:
    ARC 1 LV
    ARC 15 EU
    ARC 16
    ARC 18
    ARC 25
    ARC 30 M
    ARC 375
    ARC 380
    NOA AG 8314 A
    NOA AG 8314 B
    NOA AS 8356
    NOA AS 8356 A
    NOA CA 8341
    NOA HD 8701 ADDITIVE G
    NOA HD 8701 H
    NOA HD 8701 I
    NOA HH 8102 D
    NOA HHT 8712 D
    NOA K 8501 A
    NOA K 8501 HV
    NOA KF 8323 A
    NOA KG 8120
    NOA PK 8305
    NOA SHT 8107
    NOA SHT 8107 B
    NOA SHT 8737 B
    NOA TLM 8330
    TANDEMOL 2078
    TANDEMOL 99 EL 5
    TANDEMOL 99 EL 5 BF
    TANDEMOL ADDITIVE 24
    TANDEMOL ADDITIVE 3524
    TANDEMOL ADDITIVE 3524 EM
    TANDEMOL ADDITIVE 3561
    TANDEMOL ADDITIVE 5581
 ---pagebreak---                                                        3 December 2018
      TANDEMOL ADDITIVE 5594
      TANDEMOL ADDITIVE 849
      TANDEMOL ADDITIVE ACL 2
      TANDEMOL ADDITIVE B 45
      TANDEMOL ADDITIVE B 5
      TANDEMOL ADDITIVE EM 1
      TANDEMOL ADDITIVE O 35 D
      TANDEMOL ADDITIVE O 60-A
      TANDEMOL ADDITIVE R
      TANDEMOL ADDITIVE T
      TANDEMOL AG 298 G
      TANDEMOL AG 298 I
      TANDEMOL AG 298 J
      TANDEMOL ALIN 93
      TANDEMOL H 105 R
      TANDEMOL H 105 R HV
      TANDEMOL H 105 R ST
      TANDEMOL H 674 F ST
      TANDEMOL H 674 G LV
      TANDEMOL H 674 H LV
      TANDEMOL K 291 B
      TANDEMOL K 291 C
      TANDEMOL K9 F2 L
      TANDEMOL K9 IM 2
      TANDEMOL K9 SR GM
      TANDEMOL KG 292 C
      TANDEMOL KG 292 D
      TANDEMOL NT 291
      TANDEMOL O 105 H
Other lubricants:
      VITAL FLUID AG 46
      VITAL FLUID HS 320
      VITAL FLUID L 46 AL
      VITAL FLUID NOA 46
      VITAL FLUID NOA 68
      VITAL FLUID NOA 150
      VITAL FLUID NOA 220
      VITAL FLUID NOA 320
      VITAL FLUID NOA 460
      HYDRO DRIVE BM 46 (to become VITAL FLUID BM 46)
 ---pagebreak---                                                       3 December 2018
                      M.8492 QUAKER / GLOBAL HOUGHTON
                                        ANNEX 2
Houghton's Steel Rolling Oil products in the EEA:
 FENELLA CSS 200 / COLD ROLL SHEET
 FENELLA FLUID SRH 103 / HOT ROLLING LUBRICANTS
 FENELLA FLUID SRH 105 / HOT ROLLING LUBRICANTS
 FENELLA FLUID SRH 132 / HOT ROLLING LUBRICANTS
 FENELLA FLUID SRH 24 / HOT ROLLING
 FENELLA FLUID SRH 300 / HOT ROLLING LUBRICANTS
 FENELLA FLUID SRH 80 / HOT ROLLING LUBRICANTS
 FENELLA FLUID SRH 87 HOT ROLLING LUBRICANTS
 FENELLA SRC 832 T COLD ROLL TIN PLATE
 FENELLA SRC 849 S COLD ROLL SHEET
 FENELLA SRC 911 S COLD ROLL SHEET
 FENELLA SRC X 025 COLD ROLL SHEET
 FENELLA SRC X 026-1 COLD ROLL SHEET
 FENELLA SRC X 027 COLD ROLL SHEET
 FENELLA SRC X 031 COLD ROLL SHEET
 FENELLA SRC X 034 COLD ROLL SHEET
 FENELLA SRC X 035 COLD ROLL SHEET
 HOUGHTO ROLL AB 2000 COLD ROLL SHEET
 HOUGHTO ROLL ARDC PICKLE LINE LUBRICANT
 HOUGHTO ROLL CH COLD ROLL SHEET
 HOUGHTO ROLL HF 100 COLD ROLL SHEET
 HOUGHTO ROLL KL 11 SK HOT ROLLING LUBRICANTS
 HOUGHTO ROLL KL 4 SK HOT ROLLING
 HOUGHTO ROLL PK 1 COLD ROLL SHEET
 HOUGHTO ROLL PK 2 COLD ROLL SHEET
 HOUGHTO ROLL SPF 16 COLD ROLL SHEET
 HOUGHTO ROLL WX 4505 COLD ROLL SHEET
 MWR ADDITIVE AD 015 COLD ROLL SHEET
 ROLKLEEN 1375 COLD ROLL TIN PLATE
 ROLKLEEN 3070 COLD ROLL SHEET
 ROLKLEEN 1573 ROLL TIN PLATE
 ROLKLEEN 2290 A 122 COLD ROLL SHEET
 ROLKLEEN 3570 ORB COLD ROLL SHEET
 ROLKLEEN CC 2 COLD ROLL TIN PLATE
 ROLKLEEN CSS 200 AG 5 COLD ROLL SHEET
 ROLKLEEN DP 1410 COLD ROLL TIN PLATE
 ROLKLEEN DP 1553 E COLD ROLL TIN PLATE
 ROLKLEEN DP 1703 COLD ROLL TIN PLATE
 ROLKLEEN DP 1704 COLD ROLL TIN PLATE
 ROLKLEEN DP 2062 4M COLD ROLL SHEET
 ROLKLEEN DP 2361 HS COLD ROLL SHEET
 ---pagebreak---                                 COMP/M.8492
 ROLKLEEN DR 1807 COLD ROLL TIN PLATE
 ROLKLEEN DR 1832 COLD ROLL TIN PLATE
 ROLKLEEN EP 2125 AME COLD ROLL SHEET
 ROLKLEEN EP 2126 COLD ROLL SHEET
 ROLKLEEN EP 2205 TLA COLD ROLL SHEET
 ROLKLEEN EP 2290 I22 COLD ROLL SHEET
 ROLKLEEN EP 2340 COLD ROLL SHEET
 ROLKLEEN EP 2473 HFP COLD ROLL SHEET
 ROLKLEEN EP 2473 MAR COLD ROLL SHEET
 ROLKLEEN EP 2710A AMG COLD ROLL SHEET
 ROLKLEEN EP 3032 COLD ROLL SHEET
 ROLKLEEN EP 3420 ORB COLD ROLL SHEET
 ROLKLEEN HR 5200 E HOT ROLLING
 ROLKLEEN LP0 T5 PICKLE LINE LUBRICANT
 ROLL COLLAR VS 20 COLD ROLL SHEET
 ROLLSHIELD 630 PL HOT ROLLING LUBRICANTS
 ROLLSHIELD HM 100 AME HOT ROLLING
 ROLLSHIELD HM 650 HOT ROLLING
 ROLLUB 1202 COLD ROLL SHEET
 ROLLUB 1207 COLD ROLL SHEET
 ROLLUB 1210 COLD ROLL SHEET
 ROLLUB 1215 COLD ROLL SHEET
 ROLLUB 1216 COLD ROLL SHEET
 ROLLUB 1219 COLD ROLL SHEET
 ROLLUB 1263 COLD ROLL SHEET
 ROLLUB 948 COLD ROLL SHEET
 ROLLUB 948 M COLD ROLL SHEET
 ROLLUB 949 HFP A COLD ROLL SHEET
 ROLLUB 981 E COLD ROLL SHEET
 ROLLUB 982 E COLD ROLL SHEET
 ROLLUB 982 R-C COLD ROLL SHEET
 ROLLUB 982 WB B COLD ROLL SHEET
 ROLLUB 982 WR A COLD ROLL SHEET
 ROLLUB 984 COLD ROLL SHEET
 ROLLUB 988 A AR COLD ROLL SHEET
 ROLLUB 988 AR COLD ROLL SHEET
 ROLLUB 988 B A COLD ROLL SHEET
 ROLLUB 988 MUB B COLD ROLL SHEET
 ROLLUB 988 MUB C COLD ROLL SHEET
 ROLLUB 988 NF COLD ROLL SHEET
 ROLLUB 989 COLD ROLL SHEET
 ROLLUB 989 WC COLD ROLL SHEET
 ROLLUB 990 WWS D COLD ROLL SHEET
 ROLLUB 990 WWS D2 COLD ROLL SHEET
 ROLLUB 990 WWS D3 COLD ROLL SHEET
 ROLLUB 990 WWS E / COLD ROLL SHEET
 ROLLUB 995 W / COLD ROLL SHEET
                                            Seite 2
 ---pagebreak---                                 COMP/M.8492
 ROLLUB 996 / COLD ROLL SHEET
 ROLLUB HR 49 / HOT ROLLING
 ROLLUB HR 49 A / HOT ROLLING
 ROLLUB PO 53 / PICKLE LINE LUBRICANT
 ROLLUB SRC X 030 / COLD ROLL SHEET
 ROLLUB WH 68 120 / COLD ROLL SHEET
 TANDEMOL LP 200 / COLD ROLL SHEET
 TEMPERSHIELD 6019
                                            Seite 3
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---                                                                   3 December 2018
            M.8492 QUAKER / GLOBAL HOUGHTON
                               ANNEX 9
Pricing formula for toll-manufacturing services rendered by Quaker
1) Pricing formula applicable during the initial [...] period and a pos-
   sible first extension period of up to [...]
   Tolling cost = [...].
2) Pricing formula applicable to a possible second extension period
   of up to [...]
   Tolling cost = [...].