CELEX: 32021M9981
Language: en
Date: 2021-01-08 00:00:00
Title: Commission Decision of 08/01/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.9981 - BAIN CAPITAL / AHLSTROM-MUNKSJÖ) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 08.01.2021
                                                                C(2021) 149 final
                                                                                  PUBLIC VERSION
                                                                 In the published version of this decision,
                                                                 some information has been omitted
                                                                 pursuant to Article 17(2) of Council
                                                                 Regulation (EC) No 139/2004 concerning
                                                                 non-disclosure of business secrets and other
                                                                 confidential information. The omissions are
                                                                 shown thus […]. Where possible the
                                                                 information omitted has been replaced by
                                                                 ranges of figures or a general description.
                                                                Bain Capital Investors, LLC
                                                                200 Clarendon Street
                                                                Boston, Massachusetts 02116
                                                                United States of America
Subject:              Case M.9981 – Bain Capital/Ahlstrom-Munksjö
                      Commission decision pursuant to Article 6(1)(b) of Council Regulation
                      No 139/20041 and Article 57 of the Agreement on the European Economic
                      Area2
Dear Sir or Madam,
(1)        On 25 November 2020, the European Commission received notification of a
           proposed concentration pursuant to Article 4 of the Merger Regulation by which
           Bain Capital Investors L.L.C. (“Bain Capital” or the “Notifying Party”) intends to
           acquire sole control of Ahlstrom-Munksjö Oyj (together with its subsidiaries,
           “Ahlstrom-Munksjö” or the “Target”), by way of purchase of shares (the
1     OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
      Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of
      “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will
      be used throughout this decision. For the purposes of this Decision, although the United Kingdom
      withdrew from the European Union as of 1 February 2020, according to Article 92 of the Agreement on
      the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union
      and the European Atomic Energy Community (OJ L 29, 31.1.2020, p. 7), the Commission continues to be
      competent to apply Union law as regards the United Kingdom for administrative procedures which were
      initiated before the end of the transition period.
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---         “Transaction”).3 In this Decision, Bain Capital and the Target are collectively
        referred to as the “Parties”.
1.      THE PARTIES
(2)     Bain Capital is a private equity investment firm that invests, through its family of
        funds, in companies across a number of industries, including information
        technology, healthcare, retail and consumer products, communications, financial
        services and industrial/manufacturing.
(3)     Ahlstrom-Munksjö is a global manufacturer and supplier of fibre-based materials. Its
        product offering includes, inter alia, filter materials, release liners, food and
        beverage, processing materials, décor papers, abrasive and tape backings, electro-
        technical paper, glass fibre materials, medical fibre materials and solutions for
        diagnostics as well as a range of specialty papers for industrial and consumer end-
        uses.
2.      THE OPERATION
(4)     The Transaction concerns the acquisition of all of the outstanding issued share
        capital of Ahlstrom-Munksjö, which is currently publicly listed on the Nasdaq
        Helsinki and Nasdaq Stockholm exchanges, by funds managed by Bain Capital, in
        partnership with Ahlstrom Invest B.V., Viknum AB and Belgrano Inversiones Oy
        (together, the “Lead Family Investors”).
(5)     Following the proposed Transaction, Bain Capital will hold 55% of the ordinary
        shares of the Target, while the Lead Family Investors will own 45%.
(6)     None of the Lead Family Investors will, collectively or individually, acquire control
        over Ahlstrom-Munksjö within the meaning of the EU Merger Regulation. The
        board of the Target will comprise of […] voting members, […] of which appointed
        by Bain Capital and […] by the Lead Family investors. The Board will vote by […]
        save for certain reserved matters, which provide for customary protection of
        minority shareholders’ interests and do not allow to veto any strategic decision of the
        Target such as its business plan or its budget.
3.      THE CONCENTRATION
(7)     After the Transaction, Ahlstrom-Munksjö, will be solely controlled by Bain Capital
        within the meaning of Article 3(1)(b) of the EU Merger Regulation.
4.      EU DIMENSION
(8)     The undertakings concerned have a combined aggregate worldwide turnover of more
        than EUR 5,000 million (Bain Capital: EUR […]; Ahlstrom-Munksjö: EUR […])4.
        Each of them has an EU-wide turnover in excess of EUR 250 million (Bain Capital:
        EUR […]; Ahlstrom-Munksjö: EUR […]) and they do not achieve more than two-
3   Publication in the Official Journal of the European Union No C 417, 2.12.2020, p. 58.
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                          2
 ---pagebreak---          thirds of their aggregate EU-wide turnover within one and the same Member State.
         The notified operation therefore has an EU dimension pursuant to Article 1(2) of the
         EU Merger Regulation.
5.       MARKET DEFINITION
(9)      Bain Capital has one existing controlled investment, Fedrigoni S.P.A. (“Fedrigoni”),
         which has some activities that overlap with, or are vertically related to, those of
         Ahlstrom-Munksjö. Fedrigoni is an Italian company active in the manufacturing and
         supply of various types of paper, including graphic and fine paper, security paper
         and solutions, self-adhesive label stock (“SAL”) and stationery.
(10)     The only relationship between Fedrigoni and Ahlstrom-Munksjö giving rise to
         affected markets relates to a vertical link as regards the production and supply of
         release liners by Ahlstrom-Munksjö (upstream) for use in the production and supply
         of SAL5 by Fedrigoni (downstream). 6
5.1.     Product market definition
5.1.1. The production and supply of release liners
(11)     Release liners (also called release base papers) are surface-treated specialty papers
         used as release carrier and backing webs for a wide range of self-adhesive products,
         including labels, graphic arts (e.g. for printed graphic face stock), industrial
         applications (e.g. casting sheets, industrial processing sheets), envelopes (to cover
         the self-adhesive strips of postal envelopes and mailing bags), tapes (e.g. as carrier
         for supported and unsupported adhesives) and medical (e.g. for medical dressings
         and tapes) and hygiene products.
(12)     Release liners are typically coated with silicone to provide low surface energy to the
         paper, which allows the pressure sensitive adhesives to release from the liner with a
         constant force. The main properties of release liners include smoothness, high
         strength, low porosity, sealed surface, dimensional stability and compatibility with
         different silicone systems. The surface finish can be (super-) calendered7, coated, or
         similar.
(13)     All release liners are produced using similar production processes. The main step is
         to siliconise the surface of the substrate with either solventless, solvent or emulsion
         silicones. Following siliconisation, lines are cured, using either a thermal or a
         radiation curing technique.
5   A possible wider market for release liners for other uses was also considered, even though SAL account
    for about three quarters of the total demand for release liners. However, the Parties only use release liners
    for the production of SAL and therefore this decision focuses only on the smallest plausible market which
    is the market for SAL.
6   The Notifying Party confirms that there are no horizontal overlaps between Ahlstrom-Munksjö and any
    other controlled Bain Capital portfolio company, and that other actual or potential vertical links between
    the Parties do not give rise to affected markets (Form CO, paragraphs 28-32).
7   Calendering is the process of smoothing the surface of the paper by pressing it between hard pressure
    cylinders or rollers (the calenders) at the end of the papermaking process. It is the last step of the process
    before the paper is cut to standard sizes. Kraft paper is the most commonly used material in packaging and
    made from at least 80% sulfate wood pulp. It is also used in the manufacturing of various types of release
    liners.
                                                             3
 ---pagebreak--- (14)    Release liners can be paper-based or film-based8:
        (a)      Paper-based release liners:
                 –         Glassine release liners/Supercalendered Kraft (“SCK”) are
                           supercalendered in a stack of 16-18 rolls, resulting in a dense, smooth
                           and translucent paper.9 They are predominantly used in SAL but are
                           also used for tapes and in industrial applications.
                 –         Clay coated kraft (“CCK”) release liners have a paper surface that
                           is closed with mineral coating to control the silicone uptake. Typical
                           CCK applications include graphics and office.
                 –         Polyolefin Film Coated release liners (“Poly-Coated Kraft” or
                           “PCK”) are liners where a molten web of polymer is extruded on to
                           paper either on one or both surfaces. They are paper-based release
                           liners on which a film material is extruded, thus being a hybrid
                           between paper and film. Typical applications include SAL, self-
                           adhesive graphics, and applications for the construction industry.
                 –         Other release liners include machine finished (“MF”) and machine
                           glazed (“MG”) kraft papers, pre-coated or latex saturated and other
                           specialty grades that do not fit the categories described above. Typical
                           applications for these types of release liners include hygiene and niche
                           applications.
        (b)      Film- based release liners are coated with polyester (“PET”), polypropylene
                 (“PP”) or polyethylene (“PE”) films. Typical applications for films release
                 liners include SAL with transparent film facestock (no label look), film
                 facestock applied in a wet environment and release liners used in hygiene and
                 medical applications, as well as electronic and other industrial applications.
(15)    Ahlstrom-Munksjö does not manufacture or supply film-based release liners. It only
        produces glassine and CCK release liners in its production mills in […]. Fedrigoni
        produces only a negligible volume of glassine release liners in the EEA10
        (approximately […] in 2019) and exclusively for internal consumption, not for sale
        to third parties.
8  Paper-based release liners can be used for both paper-based and film-based SAL (in sheets and in rolls).
   Similarly, film-based release liners can be used for both paper-based and film-based SAL (in sheets and in
   rolls). See reply to RFI 5.
9  Whereas glassine is the primary release liner type used in Europe, in North America the primary release
   liner types used is SCK, which is a slightly different product (in terms of process and composition) but is
   used for the same applications (i.e. SAL, tape, industrial and medical applications). Glassine release liners
   is the term used in this Decision.
10 For the purposes of this Decision, the EEA is understood to cover the 27 Member States of the European
   Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France,
   Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland,
   Portugal, Romania, Slovakia, Slovenia, Spain and Sweden) and the United Kingdom, as well as Iceland,
   Liechtenstein and Norway. Accordingly, any references made to the EEA in this Decision are meant to
   also include the United Kingdom (UK).
                                                          4
 ---pagebreak--- (16)   The Commission has considered release liners on a number of occasions and has
       ultimately left open the question of whether all types of release liners belong to the
       same relevant product market or whether they should be segmented by substrate
       (namely film-based and paper-based release liners).11
(17)   The Notifying Party submits that all types of release liners belong to the same
       relevant product market since (i) customers can and do partially substitute film-based
       release liners for paper-based release liners and (ii) most manufacturers can produce
       release liners for a number of different applications and can work with different
       substrates.
       Film-based versus paper-based release liners
(18)   The market investigation carried out by the Commission indicated that film-based
       and paper-based release liners are not substitutable from the supply-side perspective.
       Only two competitors, responding to the market investigation indicated that they
       produce both film-based and paper-based release liners. Even one of the respondents
       that produce both types of release liners submitted that it is “difficult to switch from
       film to paper and vice versa”.12 Other respondents indicated that “papermaking
       equipment can’t be suited for filmic/plastic material production and vice versa”13,
       that “companies typically focus on either paper or film, not both”, and that “for
       substrate providers (like paper manufacturer or film manufacturer), they could only
       provide one type of release liners separately”.14 In line with the Notifying Party’s
       argument, another respondent indicated that “film based release liner can, and has
       substituted, particularly glassine type release liner in many end uses. However, also
       paper based release liners have replaced film based release liners depending on the
       Customer’s choice.”15
(19)   As regards the demand-side substitutability, the results of the market investigation
       were mixed. Competitors said that “film based release liner can, and has substituted,
       particularly glassine type release liner in many end uses”. One customer of release
       liners indicated that it would switch its purchases from film-based to paper-based
       release liners in case of a price increase of the former “depending on market
       situation and end-user preferences”.16 Another respondent explained that “paper
       based and film based release liners have different applications”.17
(20)   For the purposes of this decision, the Commission considers that it can be left open
       whether paper-based and film-based release liners belong to separate product
       markets, as the Transaction does not raise any competition concerns, irrespective of
       the exact market definition adopted. As Ahlstrom-Munksjö does not produce film-
       based release liners (see paragraph (15)), this decision looks only at paper-based
       release liners.
11 M.5155, Mondi/Loparex Assets, paras. 10-26, M.6668, Mondi/Nordenia, paras. 16-18.
12 Reply to question 7.1 of the Questionnaire for release liners suppliers.
13 Reply to question 6.1 of the Questionnaire for release liners suppliers.
14 Reply to question 8.1 of the Questionnaire for release liners suppliers.
15 Reply to question 9.1 of the Questionnaire for release liners suppliers.
16 Reply to question 20.1 of the Questionnaire for SAL suppliers.
17 Reply to question 18.1 of the Questionnaire for SAL suppliers.
                                                          5
 ---pagebreak---         Possible distinction within different types of paper-based release liners
(21)    The results of the market investigation were also mixed with regard to whether the
        market for the production and supply of paper-based release liners should be
        segmented by type (i.e., glassine, CCK, other). Ahlstrom-Munksjö only produces
        glassine and CCK release liners.
(22)    From the supply side perspective, several release liners suppliers responding to the
        market investigation indicated that they produced several types of paper-based
        release liners.18 Another respondent submitted that “technically, switching from one
        base paper to another one is impossible in some application (silicone 2 sides for
        tapes for example). Still there is some room for changes in some other application
        (function of the release liner should be more important than the habits)”.19
(23)    As regards demand-side substitutability, one competitor said that “[they are
        substitutable] to a certain extent by making specific process adjustment”.20 Another
        competitor said that “there are segments which are overlapping or substitutable by
        the other but not each of them by all others.”21
(24)    The majority22 of the customers who replied to the market investigation indicated
        that release liners should be segmented between Glassine Release Liners, CCK
        Release Liners, PCK release liners, Film release liners23 and that there are specific
        end use applications which require the use of a specific type of release liner.24 One
        customer indicated that “SCK, CCK, PCK, film release liners differ in terms of price
        and application”.25
(25)    For the purposes of this decision, the Commission considers that it can be left open
        whether different types of paper-based release liners belong to separate product
        markets, as the Transaction does not raise any competition concerns, irrespective of
        the exact market definition adopted. For the purpose of this decision, the assessment
        will look at both the market for paper-based release liners (as Ahlstrom-Munksjö
        does not produce film-based release liners) and then specifically at the plausible
        segment of glassine release liners alone.26
18 Reply to question 5.1.1 of the Questionnaire for release liners suppliers.
19 Reply to question 7.1 of the Questionnaire for release liners suppliers.
20 Reply to question 9.1 of the Questionnaire for release liners suppliers.
21 Reply to question 11.1 of the Questionnaire for release liners suppliers.
22 “Majority” in this Decision stands for more than 50% of the participants in the market investigation who
   replied to the question, excluding those that replied “other”, or “I do not know”.
23 Reply to question 17 of the Questionnaire for SAL suppliers.
24 Reply to question 18 of the Questionnaire for SAL suppliers.
25 Reply to question 17.1 of the Questionnaire for SAL suppliers.
26 The plausible market for the manufacture and supply of CCK release liners will not be further discussed
   as it is not affected under any plausible geographic market definition.
                                                           6
 ---pagebreak--- 5.1.2. The production and supply of SAL
(26)     SAL is paper or film (i.e. synthetic material) pre-coated with a pressure-activated
         adhesive and protected by a backing material or paper. SAL is used in a number of
         different products, e.g. price tags, product information, functional, security and
         promotional labels. Labels are used in turn in various industries, such as logistics
         and retail, food and beverage, non-food consumer goods including household and
         personal care products, durables/automotive, chemicals, pharmaceuticals,
         construction, office products, visual communications and others.
(27)     SAL consists of the following components: (i) the face material, also called
         facestock, is the part that remains visible on which text and/or decoration is printed;
         (ii) the adhesive, which is used to make the paper adhere to the surface being
         labelled; (iii) the base material, also called release liner, which protects the adhesive
         and which is covered by a silicone layer allowing an easy release.
         Figure 1 – SAL Components
(28)     SAL is manufactured in rolls (also called reels), generally with a width of
         100-200 cm, which are then cut/slit in two forms: (i) sheets cut in primarily
         standardised sizes are normally purchased by merchants, who resell the SAL to their
         customers as part of a wide range of other products; (ii) narrow rolls are cut
         according to customer specifications and are accordingly subject to one or more
         additional converting steps as compared to sheets. SAL is used in a myriad of end
         applications, such as graphic arts, tapes, hygiene, medical, envelopes, industrial or
         other, and manufacturers of SAL typically cover a wide range of end applications.27
(29)     Fedrigoni’s Pressure Sensitive Labels business unit manufactures and supplies
         paper-based and film-based SAL for a range of applications, including for the food
         and wine, pharmaceuticals, visual communications and publishing industries as well
         as for various industrial applications. Fedrigoni manufactures and distributes
         pressure sensitive labels through its subsidiaries Arconvert and Manter, with
         locations in both Italy and Brazil, together with subsidiary Ritrama (acquired in
27  One respondent to the Commission’s market investigation explained that “[t]he decision on paper, film,
    rolls, sheets depends on myriad factors including, without limitation, the end use application and the
    preferences and needs of the end-user and converter. The environment and purpose of the end-use
    application often dictates whether paper or filmic SAL is used, but end-user preference and cost are also
    very important. […] All automated label applicators require roll materials (vast majority of end use
    applications). Sheets are typically used for hand applied applications and smaller quantities (e.g. stickers)
    Squeezable containers often require a squeezable (i.e. filmic/PE) label For cost and recycling reasons,
    you would not put a filmic shipment label on a carton box.” Reply to question 7.1 of the questionnaire for
    SAL suppliers.
                                                           7
 ---pagebreak---        January 2020), which has manufacturing facilities and logistics centres in Italy,
       Spain, the UK, the US, Chile and China.
(30)   The Commission has previously considered whether (i) film-based and paper-based
       SAL and (ii) SAL sold in reels and SAL sold in sheets could be distinct markets but
       ultimately left the question open.28 The Commission has also previously considered
       that, while alternatives to SAL (such as labels that are fixed on the basis of gum,
       labels fixed by glue activated by heat, wet-glue labels, sleeves, in-mould labels and
       direct printing) may to some extent be substitutable with SAL on the demand-side,
       they are not to be regarded as forming part of the same relevant product market.29
(31)   The Notifying Party submits that all SAL, irrespective of the substrate material (film
       or paper) or form (sheets or reels), is part of the same relevant product market based
       mainly on supply-side substitution considerations. According to the Notifying Party,
       from the demand-side, the bulk of the demand (approx. […]%) is addressed through
       standard, commoditised SAL which is used in a variety of applications without any
       significant variation in the production process and, therefore, any SAL supplier can
       cater for this demand, by simply adjusting the configuration of the machines.
       According to the Notifying Party, only the remaining […]% of the demand concerns
       applications with higher technical requirements (for instance high strength or heat or
       chemicals resistance) required for use in adverse conditions such as in the
       durables/automotive, pharmaceuticals (requiring pasteurisation) and chemicals
       sectors, or in the food and beverage sector, which may require specific productive
       assets, which can however be acquired by any SAL supplier without incurring
       significant investments. Nonetheless, for the purposes of the Transaction, the
       Notifying Party submits that the exact product market definition can be left open, as
       the Transaction would not raise concerns under any plausible product market
       definition.30
       Film-based and paper-based SAL
(32)   The results of the market investigation were inconclusive as to whether film-based
       and paper-based SAL belong to separate product markets.
(33)   From a demand-side perspective, half of the respondents to the Questionnaire for
       SAL suppliers and 60% of respondents to the Questionnaire for SAL customers
       considered that they are not substitutable, while the others considered that they are.31
       To illustrate this, one SAL customer explained that “[t]he application window and
       the intended application of paper and film-based products are completely different
       in terms of technical properties, application requirements, design and functionality”
       while another one considered them to be substitutable based on supply-side
       considerations as “[t]he high level of quality shown by the suppliers provides the
       advantage of changing according to the most favorable interests of the client”.32 A
       SAL supplier explained that they are not substitutable under the consideration that
       “[p]aper-based SAL are generally less durable and lower priced than film-based
28 M.2867 UPM/Kymmene Corporation/Morgan Adhesives Companies, paras. 15-19.
29 M.2867 UPM/Kymmene Corporation/Morgan Adhesives Companies, para 13.
30 Form CO, paragraphs 126-128.
31 Reply to question 5 of the Questionnaire for SAL suppliers and to question 4 of the Questionnaire for SAL
   customers.
32 Replies to question 4.1 of the Questionnaire for SAL customers.
                                                         8
 ---pagebreak---        SAL. A highly durable industrial application would generally not use a paper-based
       SAL”, while another one considered that “[p]aper and film based labelstock can be
       used in the same end use segments and are somewhat interchangeable in terms of
       technical characteristics (they perform the same). Commercial differences are rather
       small”.33
(34)   From a supply-side perspective, the majority of the SAL manufacturers responding
       to the Commission investigation produce SAL based on any substrate.34 Those who
       do not produce SAL based on any given substrate claim to face significant barriers to
       switch the production of SAL based on different substrates.35 At the same time, all36
       of the respondents to the Questionnaire for SAL suppliers and the majority of the
       respondents to the Questionnaire for SAL customers considered that manufacturers
       of SAL generally cover a wide-range of SAL products with regard to the substrates
       (paper-based or film-based) used in the production process, including
       Arconvert/Ritrama (both brands of Fedrigoni), Avery Dennison, CCL, Flexcon,
       Frimpex, Intercoat, Lintec, Mactac, UPM Rafaltac, VPF, Torras Papel and 3M.37
(35)   For the purposes of this decision, the Commission considers that it can be left open
       whether paper-based and film-based SAL belong to separate product markets, as the
       Transaction does not raise any competition concerns, irrespective of the exact market
       definition adopted.
       SAL sold in reels and SAL sold in sheets
(36)   The results of the market investigation were inconclusive as to whether SAL sold in
       reels and SAL sold in sheets belong to separate product markets.
(37)   From a demand-side perspective, all of the respondents to the Questionnaire for SAL
       suppliers and the majority of the respondents to the Questionnaire for SAL
       customers considered that SAL sold in reels and SAL sold in sheets are not
       substitutable.38 According to one supplier of SAL “SAL in sheets usually have a
       higher price due to a thicker liner for layflat applications and are intended often for
       screen printing. SAL in rolls have various liners and can be used in various types of
       printed applications”39. One customer of SAL explained that “[t]he technical
       properties and intended product application of reels vs. sheets regularly differ
       according to technology, technical material properties, production assets and end-
       use application”.40
33 Replies to question 5.1 of the Questionnaire for SAL suppliers.
34 Reply to question 8.1 of the Questionnaire for SAL suppliers.
35 Reply to questions 8.1 and 9.1. of the Questionnaire for SAL suppliers.
36 “All” in this Decision stands for 100% of the participants in the market investigation who replied to the
   question, excluding those that replied “other”, or “I do not know”.
37 Reply to question 10.1 of the Questionnaire for SAL suppliers and question 8.1. of the Questionnaire for
   SAL customers.
38 Reply to question 6 of the Questionnaire for SAL suppliers and to question 5 of the Questionnaire for SAL
   customers.
39 Reply to question 6 of the Questionnaire for SAL suppliers.
40 Reply to question 5 of the Questionnaire for SAL customers.
                                                           9
 ---pagebreak--- (38)    From a supply-side perspective, the majority of the SAL manufacturers responding
        to the Commission investigation produce SAL in different forms (i.e. in reels and in
        sheets) and some of those who do not produce SAL in different forms claim to face
        significant barriers to switch the production of SAL based on different forms.41 At
        the same time, all of the respondents to the Questionnaire for SAL suppliers and the
        majority of the respondents to the Questionnaire for SAL customers considered that
        manufacturers of SAL generally cover a wide-range of SAL products with regard to
        the SAL’s form (i.e. in reels or in sheets), including Avery Dennison, Intercoat,
        Raflatac, Scandstick, Smith and Mc Lauren, UPM and Torras Papel.42
(39)    For the purposes of this decision, the Commission considers that it can be left open
        whether SAL sold in reels and SAL sold in sheets belong to separate product
        markets, as the Transaction does not raise any competition concerns, irrespective of
        the exact market definition adopted.
5.2.    Geographic market definition
5.2.1. The production and supply of release liners
(40)    The Commission has previously considered that the geographic market for the
        supply of release liners is at least EEA-wide, ultimately leaving the exact geographic
        market definition open.43
(41)    The Notifying Party submits that the market for the supply of release liners is at least
        EEA-wide because (i) release liners producers supply across the EEA and beyond
        regardless of their mills’ location; (ii) customers source release liners from different
        countries across the EEA notwithstanding their own plants’ location; (iii) transport
        costs are low; and (iv) prices are generally consistent across the EEA.
(42)    The vast majority of the release liners suppliers who responded to the market
        investigation indicated that they supply customers worldwide.44 Release liners
        suppliers submitted that although transportation costs are not insignificant
        (accounting for around 5-10% of the price), those do not appear to constrain cross-
        border trade.45
(43)    As regards differences in prices, according to the Notifying Party’s submissions, it
        appears that release liner prices are generally consistent across Member States.46 The
        results of the market investigation revealed, however, that prices may differ between
        the EEA and other parts of the world.47
41  Reply to questions 8.2 and 9.2. of the Questionnaire for SAL suppliers.
42  Reply to question 10.2 of the Questionnaire for SAL suppliers and question 8.2 of the Questionnaire for
    SAL customers.
43  M.5155, Mondi/Loparex Assets, para. 29.
44  Reply to question 12 of the Questionnaire for release liners suppliers.
45  Reply to question 14 of the Questionnaire for release liners suppliers.
46  Reply to RFI 2 and RFI 3.
47  Reply to question 13 of the Questionnaire for release liners suppliers.
                                                          10
 ---pagebreak--- (44)    The vast majority of the customers who replied to the market investigation
        confirmed that they purchase from any supplier worldwide48 and that they would
        switch to suppliers located at a further distance should their current supplier increase
        its prices.49 They all invite manufacturers of release liners located outside the EEA to
        participate in the procurement procedures for their plants located in the EEA.50
(45)    The Commission considers that the question of whether the geographic scope of the
        market for the manufacture and supply of release liners (and any plausible sub
        segmentation) is EEA-wide or global may be left open for the purposes of this
        decision as it does not alter the conclusions of the competitive assessment. However,
        the Commission has carried out the competitive assessment on the basis of the
        narrowest plausible geographic market, that is, an EEA-wide market.
5.2.2. The production and supply of SAL
(46)    In its prior decisions, the Commission considered that the geographic market for the
        manufacturing and supply of SAL is at least EEA-wide.51
(47)    The Notifying Party agrees with the Commission’s precedent and considers that
        geographic markets for SAL narrower than the EEA-wide are not plausible and that
        for large customers the geographic scope of the market is global. According to the
        Notifying Party, the market is at least EEA-wide in scope because suppliers located
        in different Member States do not face any impediment to commercialising their
        sales throughout and beyond the EEA. The Notifying Party notes that this was
        confirmed in the Commission’s market investigation in Case M.2867, UPM-
        Kymmene Corporation/Morgan Adhesives Company. The Notifying Party submits
        that the fact that the market is at least EEA-wide is sustained by the fact that (i) there
        is a significant cross-border flow of products between Member States and with third
        countries; (ii) none of the market players has a local presence in every country where
        they operate; (iii) the distribution network needed to penetrate and serve a market is
        easy to set up.52
(48)    The majority of the respondents to the Questionnaire for SAL suppliers stated that
        they manufacture for any customer worldwide and the majority of the respondents to
        the Questionnaire for SAL customers stated that they purchase from any supplier
        worldwide.53 According to one customer “[w]e can’t distinguish on regional areas
        as supplying site is determined by suppliers technical capabilities. There are
        suppliers in Germany, United Kingdom, France, Italy, Spain and many other
        countries supplying our different locations in Italy, Germany etc.”54 A supplier also
        explained that “[o]ur customers are located in both in EEA but also worldwide
        (smaller part)”.55 The majority of respondents to the Questionnaire for SAL
        suppliers and respondents to the Questionnaire for SAL customers stated that the
48  Reply to question 27 of the Questionnaire to SAL suppliers.
49  Reply to question 28 of the Questionnaire to SAL suppliers.
50  Reply to question 33 of the Questionnaire to SAL suppliers.
51  M.2867, UPM/Kymmene Corporation/Morgan Adhesives Companies, paras. 15-17.
52  Form CO, paragraphs 130-137.
53  Reply to question 11 of the Questionnaire for SAL suppliers and to question 10 of the Questionnaire for
    SAL customers.
54  Reply to question 10.1 of the Questionnaire for SAL customers.
55  Reply to question 11.1 of the Questionnaire for SAL suppliers.
                                                        11
 ---pagebreak---         prices for SAL in different parts of the world (e.g. Europe, Asia, Latin America,
        North America, the Middle East) do not differ to an appreciable extent.56 One
        supplier explained that “[w]hile freight and transport costs are not insignificant,
        these costs are not a constraint on trade within the EEA”.57
(49)    A minority of suppliers and customers stated that the scope of their sales / purchases
        of SAL was within a given distance of their EEA facilities, e.g. one supplier stated
        that “[w]e deliver SAL mainly to polish and european market”58 and one customer
        stated that “[a]ll our suppliers have and use the factories at their convenience […],
        then the production of materials is done where they have factories (CEE) and in
        each country they usually have conditioning and cutting centers, from where they re-
        […]ship the material we have bought from them”.59 None of the respondents
        considered the market to be national in scope.
(50)    For the purposes of this decision, the Commission considers that the question
        whether the geographic scope of the market for the manufacture and sale of SAL is
        EEA-wide or global may be left open for the purposes of this decision, as it does not
        alter the conclusions of the competitive assessment. However, the Commission has
        carried out the competitive assessment on the basis of the narrowest plausible
        geographic market, that is, an EEA-wide market.
6.      COMPETITIVE ASSESSMENT
(51)    The Transaction gives rise to vertically affected markets between the manufacture
        and sale of release liners by Ahlstrom-Munksjö (upstream) and the manufacture and
        sale of SAL by Fedrigoni (downstream).60
6.1.    Market Shares
(52)    The tables below illustrate the market shares of the Parties in each of the vertically
        affected markets.
56  Reply to question 12 of the Questionnaire for SAL suppliers and to question 13 of the Questionnaire for
    SAL customers.
57  Reply to question 13.1 of the Questionnaire for SAL suppliers.
58  Reply to question 11.1 of the Questionnaire for SAL suppliers.
59  Reply to question 10.1 of the Questionnaire for SAL customers.
60  Fedrigoni produces a negligible volume of glassine release liners in the EEA (approximately […] in
    2019), exclusively for internal consumption by the company’s Pressure Sensitive Labels business unit.
    Fedrigoni has never supplied the merchant market, […]. Accordingly, no horizontal overlap arises in the
    supply of release liners to the merchant market in the EEA.
                                                           12
 ---pagebreak--- Table 1: Market shares on a plausible market for all paper-based release liners in the
EEA in 20196162 by volume
                                   Capacity         Supply           Market          Supply          Market
   Release
                    Capacity      share (%)          (incl.        share (%)           (excl.      share (%)
      liner
                      (Kt)                          captive                          captive
   supplier
                                                  sales) (Kt)                      sales) (Kt)
  Ahlstrom-           […]             […]             […]              […]              […]
                                                                                                    [20-30]%
  Munksjö
  Fedrigoni           […]             […]             […]              […]              […]           [0-5]%
  Combined            […]             […]             […]              […]              […]         [20-30]%
  UPM                 […]             […]             […]              […]              […]         [10-20]%
  Sappi               […]             […]             […]              […]              […]          [5-10]%
  Dunafin             […]             […]             […]              […]              […]         [10-20]%
  Brigl &             […]             […]             […]              […]              […]
  Bergmeist                                                                                           [0-5]%
  er
  Aralar              […]             […]             […]              […]              […]          [0-5] ∗%
  Burgo               […]             […]             […]              […]              […]           [0-5]%
  Ermolli             […]             […]             […]              […]              […]           [0-5]%
  Others              […]             […]             […]              […]              […]         [30-40]%
  Total               […]            100%             […]             100%              […]            100%
Source: Form CO
61   The Notifying Party submitted that 2017 and 2018 market shares at EEA level do not differ significantly
     from 2019 market shares. According to the Parties’ estimates, the combined market shares of the Parties
     remain […] below 30% at worldwide level.
62   In the EEA, Ahlstrom-Munksjö is only active in the production and supply of glassine and CCK release
     liners, both of which are paper-based. Therefore, the release liner market sizes and shares presented in this
     Decision conservatively include all paper-based release liners but not film-based release liners. Capacity
     market sizes and shares include only glassine and CCK release liners.
∗    Should read [0-5].
                                                           13
 ---pagebreak--- Table 2: Release liner market shares in the EEA in 201963 by value
                                Capacity         Supply         Market         Supply         Market
   Release      Capacity       share (%)          (incl.      share (%)         (excl.      share (%)
     liner          (m                           captive                       captive
   supplier       EUR)64                        sales) (m                     sales) (m
                                                  EUR)                          EUR)
 Ahlstrom-         […]              […]            […]             […]           […]
                                                                                             [30-40]%
 Munksjö
 Fedrigoni         […]              […]            […]             […]           […]           [0-5]%
 Combined          […]              […]            […]             […]           […]         [30-40]%
 UPM               […]              […]            […]             […]           […]         [10-20]%
 Sappi             […]              […]            […]             […]           […]          [5-10]%
 Dunafin           […]              […]            […]             […]           […]         [10-20]%
 Brigl &           […]              […]            […]             […]           […]           [0-5]%
 Bergmeist
 er
 Aralar            […]              […]            […]             […]           […]           [0-5]%
 Burgo             […]              […]            […]             […]           […]           [0-5]%
 Ermolli           […]              […]            […]             […]           […]           [0-5]%
 Others            […]              […]            […]             […]           […]         [30-40]%
 Total             […]             100%            […]            100%           […]            100%
Source: Form CO
63  The Notifying Party submitted that 2017 and 2018 market shares at EEA level do not differ significantly
    from 2019 market shares. According to the Parties’ estimates, the combined market shares of the Parties
    remain below 30% at worldwide level.
64  [Methodology used to calculate capacity market shares].
                                                        14
 ---pagebreak--- Table 3: Glassine release liner market shares in the EEA in 201965 by volume
                             Market      Supply      Market      Supply       Market
   Release
              Capacity     share (%)      (incl.    share (%)     (excl.    share (%)
     liner
                (Kt)                     captive                 captive
   supplier
                                       sales) (Kt)             sales) (Kt)
 Ahlstrom-      […]            […]         […]         […]         […]
                                                                             [50-60]%
 Munksjö
 Fedrigoni      […]            […]         […]         […]         […]        [0-5]%
 Combined       […]            […]         […]         […]         […]      [50-60]%
 UPM            […]            […]         […]         […]         […]       [10-20]%
 Dunafin        […]            […]         […]         […]         […]       [20-30]%
 Sappi          […]            […]         […]         […]         […]        [0-5]%
 Ermolli        […]            […]         […]         […]         […]        [0-5]%
 YFY            […]            […]         […]         […]         […]        [0-5]%
 Total          […]          100%          […]        100%         […]          100%
Source: Form CO
Table 4: Glassine release liner market shares in the EEA in 201966 by value
                             Market      Supply      Market      Supply       Market
   Release                 share (%)      (incl.    share (%)     (excl.    share (%)
              Capacity
     liner                               captive                 captive
              (m EUR)
   supplier                             sales) (m               sales) (m
                                          EUR)                    EUR)
 Ahlstrom-      […]            […]         […]         […]         […]
                                                                             [50-60]%
 Munksjö
 Fedrigoni      […]            […]         […]         […]         […]         [0-5]%
 Combined       […]            […]         […]         […]         […]       [50-60]%
 UPM            […]            […]         […]         […]         […]       [10-20]%
 Dunafin        […]            […]         […]         […]         […]       [20-30]%
 Sappi          […]            […]         […]         […]         […]         [0-5]%
 Ermolli        […]            […]         […]         […]         […]         [0-5]%
 YFY            […]            […]         […]         […]         […]         [0-5]%
 Total          […]           100%         […]        100%         […]          100%
Source: Form CO
65  Ibid.
66  Ibid.
                                               15
 ---pagebreak--- Table 5: Fedrigoni’s market shares in all plausible product markets for the
manufacture and sale of SAL in 201967 by volume
                                                        Volume        Market size
                 Substrate                                                                   Market
Region                              Rolls/Sheets        sold (m       estimate (m
                 material                                                                  share (%)
                                                         Sqm)             Sqm)
Worldwide        Overall            Overall               […]              […]               [5-10]%
Worldwide        Paper-based        Overall               […]              […]               [5-10]%
Worldwide        Film-based         Overall               […]              […]               [5-10]%
Worldwide        Overall            Rolls                 […]              […]               [5-10]%
Worldwide        Overall            Sheets                […]              […]               [5-10]%
Worldwide        Paper-based        Rolls                 […]              […]               [5-10]%
Worldwide        Paper-based        Sheets                […]              […]               [5-10]%
Worldwide        Film-based         Rolls                 […]              […]               [5-10]%
Worldwide        Film-based         Sheets                […]              […]               [5-10]%
EEA              Overall            Overall               […]              […]              [10-20]%
EEA              Paper-based        Overall               […]              […]              [10-20]%
EEA              Film-based         Overall               […]              […]              [10-20]%
EEA              Overall            Rolls                 […]              […]              [10-20]%
EEA              Overall            Sheets                […]              […]              [20-30]%
EEA              Paper-based        Rolls                 […]              […]              [10-20]%
EEA              Paper-based        Sheets                […]              […]              [20-30]%
EEA              Film-based         Rolls                 […]              […]              [10-20]%
EEA              Film-based         Sheets                […]              […]              [10-20]%
Source: Form CO
67  The Notifying Party submitted that 2017 and 2018 market shares do not differ significantly from 2019
    market shares.
                                                     16
 ---pagebreak---        Table 6: Fedrigoni’s and competitor’s market shares in the manufacture and sale of
       SAL in 201968 by volume and value
                                                                                         Market
                          Volume       Market size
                                                          Market      Value sold           size           Market
SAL supplier              sold (m      estimate (m
                                                        share (%)      (m EUR)          estimate        share (%)
                           Sqm)            Sqm)
                                                                                        (m EUR)
                           Market shares for SAL overall Worldwide in 2019
Fedrigoni                   […]             […]           [5-10]%         […]              […]            [5-10]%
Avery Dennison              […]             […]          [30-40]%         […]              […]           [30-40]%
UPM Raflatac                […]             […]          [10-20]%         […]              […]           [10-20]%
Lintec                      […]             […]           [5-10]%         […]              […]            [5-10]%
Fuzhou                      […]             […]            [0-5]%         […]              […]             [0-5]%
Green Bay                   […]             […]            [0-5]%         […]              […]             [0-5]%
Guanhao                     […]             […]            [0-5]%         […]              […]             [0-5]%
Others                      […]             […]          [30-40]%         […]              […]           [30-40]%
                           Market shares for SAL overall in the EEA in 2019
Fedrigoni                   […]             […]          [10-20]%         […]              […]           [10-20]%
Avery Dennison              […]             […]          [30-40]%         […]              […]           [30-40]%
UPM Raflatac                […]             […]          [30-40]%         […]              […]           [30-40]%
Herma                       […]             […]           [5-10]%         […]              […]            [5-10]%
Torraspapel                 […]             […]            [0-5]%         […]              […]             [0-5]%
Adestor
3M                          […]             […]            [0-5]%         […]              […]             [0-5]%
Others                      […]             […]           [5-10]%         […]              […]            [5-10]%
         Market shares for paper-based and film-based SAL in sheets Worldwide in 2019
Fedrigoni                   […]             […]           [5-10]%         […]              […]            [5-10]%
UPM Raflatac                […]             […]          [30-40]%         […]              […]           [30-40]%
Avery Dennison              […]             […]          [10-20]%         […]              […]           [20-30]%
Others                      […]             […]          [40-50]%         […]              […]           [40-50]%
          Market shares for paper-based and film-based SAL in sheets in the EEA in 2019
Fedrigoni                   […]             […]          [20-30]%         […]              […]           [20-30]%
UPM Raflatac                […]             […]          [30-40]%         […]              […]           [30-40]%
Avery Dennison              […]             […]          [10-20]%         […]              […]           [20-30]%
Others                      […]             […]          [20-30]%         […]              […]           [20-30]%
          Market shares for paper-based and film-based SAL in rolls Worldwide in 2019
Fedrigoni                   […]             […]           [5-10]%         […]              […]            [5-10]%
Avery Dennison              […]             […]          [30-40]%         […]              […]           [30-40]%
UPM Raflatac                […]             […]          [10-20]%         […]              […]           [10-20]%
Fuzhou                      […]             […]            [0-5]%         […]              […]             [0-5]%
Green Bay                   […]             […]            [0-5]%         […]              […]             [0-5]%
Others                      […]             […]          [40-50]%         […]              […]           [40-50]%
       68  The Notifying Party submitted that 2017 and 2018 market shares do not differ significantly from 2019
           market shares.
                                                             17
 ---pagebreak---                                                                                            Market
                          Volume        Market size
                                                           Market        Value sold          size         Market
SAL supplier              sold (m       estimate (m
                                                         share (%)        (m EUR)         estimate share (%)
                           Sqm)             Sqm)
                                                                                          (m EUR)
          Market shares for paper-based and film-based SAL in rolls in the EEA in 2019
Fedrigoni                   […]              […]          [10-20]%            […]            […]         [10-20]%
Avery Dennison              […]              […]          [30-40]%            […]            […]         [30-40]%
UPM Raflatac                […]              […]          [30-40]%            […]            […]         [30-40]%
Herma                       […]              […]           [5-10]%            […]            […]          [5-10]%
Others                      […]              […]          [10-20]%            […]            […]         [10-20]%
                 Market shares for film-based SAL in all forms Worldwide in 2019
Fedrigoni                   […]              […]           [5-10]%            […]            […]          [5-10]%
Avery Dennison              […]              […]          [30-40]%            […]            […]         [30-40]%
UPM Raflatac                […]              […]          [10-20]%            […]            […]         [10-20]%
Fuzhou                      […]              […]            [0-5]%            […]            […]           [0-5]%
Others                      […]              […]          [40-50]%            […]            […]         [40-50]%
                 Market shares for film-based SAL in all forms in the EEA in 2019
Fedrigoni                   […]              […]          [10-20]%            […]            […]         [10-20]%
Avery Dennison              […]              […]          [40-50]%            […]            […]         [40-50]%
UPM Raflatac                […]              […]          [30-40]%            […]            […]         [30-40]%
Herma                       […]              […]            [0-5]%            […]            […]           [0-5]%
Others                      […]              […]          [10-20]%            […]            […]         [10-20]%
                Market shares for paper-based SAL in all forms Worldwide in 2019
Fedrigoni                   […]              […]           [5-10]%            […]            […]          [5-10]%
Avery Dennison              […]              […]          [20-30]%            […]            […]         [30-40]%
UPM Raflatac                […]              […]          [10-20]%            […]            […]         [10-20]%
Green Bay                   […]              […]            [0-5]%            […]            […]           [0-5]%
Fuzhou                      […]              […]            [0-5]%            […]            […]           [0-5]%
Others                      […]              […]          [40-50]%            […]            […]         [40-50]%
                Market shares for paper-based SAL in all forms in the EEA in 2019
Fedrigoni                   […]              […]          [10-20]%            […]            […]         [10-20]%
Avery Dennison              […]              […]          [30-40]%            […]            […]         [30-40]%
UPM Raflatac                […]              […]          [30-40]%            […]            […]         [30-40]%
Herma                       […]              […]           [5-10]%            […]            […]          [5-10]%
Others                      […]              […]          [10-20]%            […]            […]         [10-20]%
       Source: Reply to RFI 4
       6.2.    Analytical framework
       (53)    As regards non-horizontal effects, the Commission Guidelines on the assessment of
               non-horizontal mergers,69 (“Non-Horizontal Merger Guidelines”) distinguish
               between two broad types of concentrations that concern undertakings which are
               active on different relevant markets (“non-horizontal mergers”), namely vertical
               mergers and conglomerate mergers.
       69  Guidelines on the assessment of non horizontal mergers under the Council Regulation on the control of
           concentrations between undertakings (OJ C 265, 18.10.2008, p. 6) (“Non-horizontal Merger Guidelines”).
                                                              18
 ---pagebreak--- (54)   A vertical merger may result in anti-competitive effects due to foreclosure.
       Foreclosure concerns a situation where actual or potential rivals’ access to supplies
       or markets is hampered or eliminated as a result of the vertical merger, thereby
       reducing these companies’ ability and/or incentive to compete.70 Two forms of
       foreclosure can be distinguished in a vertical relationship: input and customer
       foreclosure.
(55)   Input foreclosure arises where, post-transaction, the new entity would be likely to
       restrict access to the products or services that it would have otherwise supplied
       absent the vertical merger, thereby raising its downstream rivals’ costs by making it
       harder for them to obtain supplies of the input under similar prices and conditions as
       absent the vertical merger.71
(56)   Customer foreclosure may occur when a supplier integrates with an important
       customer in the downstream market. Because of this integration, the merged entity
       may foreclose access to a sufficient customer base to its actual or potential rivals in
       the upstream market and reduce their ability or incentive to compete. In turn, this
       may raise downstream rivals’ costs by making it harder for them to obtain supplies
       of the input under similar prices and conditions as absent the vertical merger.72
(57)   For an input or customer foreclosure scenario to raise competition concerns, three
       cumulative factors need to be taken into account: (i) the ability of the merged entity
       to engage in foreclosure; (ii) the incentives of the merged entity to do so; and
       (iii) whether a foreclosure strategy would have a significant detrimental effect on
       competition in the downstream market.73
6.3.   Input foreclosure
6.3.1. The Notifying Party’s views
(58)   The Notifying Party submits that the Parties do not have the ability to foreclose rival
       SAL suppliers from access to release liners since, although Ahlstrom-Munksjö has a
       […]% market share in the plausible market for the supply of glassine release liners,
       it only holds […]% of the EEA capacity. Moreover, it faces significant constraints
       from important EEA rivals, release liner capacity is increasing in the EEA and
       clients have strong bargaining power.74
(59)   The Notifying Party claims that the Parties would have no incentive to foreclose
       each other’s rivals namely because Fedrigoni is too small to be able to realistically
       capture a sufficient number of end-customers in the downstream market to
       compensate for foregoing profits made upstream by the lost sale of release liner.
(60)   Finally, the Notifying Party claims that this vertical relationship will result in no
       adverse effect on competition, as any hypothetical input foreclosure strategy would
       fail. According to the Notifying Party, if Ahlstrom-Munksjö ceased supplying
       release liners to Fedrigoni’s rivals, increased its prices or reduced its service levels,
70  Non-Horizontal Merger Guidelines, paragraph 29.
71  Non-Horizontal Merger Guidelines, paragraph 31.
72  Non-Horizontal Merger Guidelines, paragraph 58.
73  Non-Horizontal Merger Guidelines, paragraphs 32 and 59.
74  Form CO, paragraph
                                                      19
 ---pagebreak---          customers of release liners would be able to switch their demand to a number of
         other release liner suppliers and Ahlstrom-Munksjö would immediately lose a
         significant portion of its turnover.
6.3.2. The Commission’s assessment
(61)     Ahlstrom-Munksjö has high or relatively high combined market shares in the
         upstream markets for the manufacture and supply of release liners. In particular, in
         the plausible market for the manufacture and supply of glassine release liners its
         market shares are […]% by sales (including captive sales), [50-60]% (excluding
         captive sales) and […]% by capacity.75 However, the Commission considers that the
         merged entity will not likely have the ability and the incentive to foreclose
         downstream competitors in the manufacture and supply of SAL, and that any
         foreclosure strategy would not have a significant detrimental effect on competition
         downstream, for the following reasons.76
(62)     As regards ability to foreclose, first, as the Notifying Party has explained, there are
         numerous alternative suppliers who offer paper-based release liners, including also
         glassine release liners. These include UPM, Dunafin (Delfort), Torraspapel (Lecta),
         Sappi, Ermolli, ITASA, Loparex, etc.
(63)     Second, during the market investigation, release liners suppliers confirmed that there
         is significant spare capacity in the market. All the release liners suppliers who
         replied to the market investigation indicated that they would be able to increase
         production of release liners, including for paper-based release liners, if they received
         more customer orders in Europe.77 In particular, UPM confirmed that in 2020 it has
         expanded its capacity for the production of glassine release liners by 120 kt in its
         mill in Germany. Moreover, according to the respondents to the market
         investigation, other suppliers such as Cartiere Ermolli (Italy) and Rosella (Italy)
         would have expanded its release liners capacity in the last five years.78 As regards
         future capacity expansions, Delfort (Austria) confirmed that it plans to expand
         capacity within the next five years.79 According to some respondents, and in line
         with the Notifying Party’s argument, Lecta (France) is also expected to bring
         additional release liner capacity in the short-term.80 In this regard, the Commission
         considers that Ahlstrom-Munksjö’s high market shares in 2019 do not fully reflect
         the current competitive dynamics given the additional capacity brought to the market
         in 2020 (and in the next years) and in view of the fact that […].81
75  The combined market shares in the overall market for the manufacture and supply of release liners in the
    EEA are below 30%. In particular, the Parties achieve […]% of the sales including captive sales, [20-
    30]% excluding captive sales and […]% in terms of capacity.
76  The Commission notes that two SAL suppliers indicated in the market investigation that the Transaction
    may have a negative impact on competition. However, the Commission considers that these concerns are
    unfounded for the reasons set out in this section.
77  Out of which only one indicated that it would not be able to increase production of glassine release liners
    in the short term. See reply to questions 17 and 20 of the Questionnaire for release liners suppliers.
78  Reply to question 23 of the Questionnaire for suppliers of release liners.
79  Reply to question 24 of the Questionnaire for suppliers of release liners.
80  Reply to questions 25 and 27.3 of the Questionnaire for suppliers of release liners.
81  Form CO, paragraph 310.
                                                           20
 ---pagebreak--- (64)     In reply to the market investigation, the only barrier to entry that was consistently
         mentioned by release liners suppliers is the cost of building a new mill.82 In this
         regard, release liners suppliers have identified new entrants in China and Taiwan in
         2019 and 2020.83 These new entrants may supply customers located in the EEA
         since, as explained in section (5.2), the vast majority of customers purchase release
         liners at worldwide level.
(65)     Third, although there is a qualification process required to switch release liners
         suppliers,84 all the SAL suppliers who responded to the market investigation
         indicated that they already multisource from various release liners suppliers.85
(66)     Moreover, the Commission considers that the Parties would not have the incentive to
         engage in an input foreclosure strategy since release liners do not appear to be an
         important cost element of SAL.86 Moreover, Fedrigoni’s downstream market share
         for SAL, as well as its purchasing market share in the market for the manufacture
         and supply of glassine release liners in the EEA are moderate.87 Therefore, any
         attempt at foreclosure would result in a loss of the majority of its upstream business
         for the merged entity were it to pursue this strategy, and would not offer its
         downstream operation any material benefit.88
(67)     In conclusion, and in view of the above, the Parties do not appear to have the ability
         or the incentive to engage in input foreclosure strategies and any foreclosure strategy
         would not have a significant detrimental effect on competition downstream.
6.4.     Customer foreclosure
6.4.1. The Notifying Party’s view
(68)     The Notifying Party submits that the Parties do not have the ability to foreclose
         Ahlstrom-Munksjö’s competitors given that Fedrigoni is not an important customer
         for release liners. According to the Notifying party, Fedrigoni’s EEA share for the
         supply of SAL overall is […]% and it purchases only a small share of the release
         liners sold in the EEA overall ([…]%), and an estimated […] Kt of glassine/SCK
         release liners in 2019 in the EEA, which corresponds to […]% of the total supply of
         glassine/SCK release liners in the merchant market ([…]). According to the
         Notifying Party, even if Fedrigoni purchased all of its release liner demand from
         Ahlstrom-Munksjö, a large customer base would still remain in the EEA for
         upstream competitors (including Avery Dennison, UPM Raflatac, Herma and 3M).89
82  Reply to question 28.1 of the Questionnaire for suppliers of release liners.
83  Reply to question 26.3 of the Questionnaire for suppliers of release liners.
84  Reply to question 35 of the Questionnaire for SAL suppliers.
85  Reply to question 38 of the Questionnaire for SAL suppliers.
86  The cost of release liners constitutes only a small proportion of the price of SAL, less than 20%.
87  Fedrigoni’s share in the downstream market for the supply of SAL in the EEA is only [10-20]%.
88  In 2019 Ahlstrom-Munksjö sold […] of glassine release liners, out of which […] were sold to Fedrigoni
    and […] to third parties. If post-Transaction Fedrigoni decided to purchase all its needs of glassine release
    liners (i.e., […]) from Ahlstrom-Munksjö, they would only represent […]% of the total sales made by
    Ahlstrom-Munksjö. Therefore, […]% of Ahlstrom-Munksjö’s production of glassine release liners would
    be available for competing SAL suppliers.
89  Form CO, paragraphs 33 and 34.
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 ---pagebreak--- 6.4.2. The Commission’s assessment
(69)     The Commission considers that the Parties will likely not have the ability to engage
         in customer foreclosure strategies and that any foreclosure strategy would in any
         event not have a significant detrimental effect on customers in the downstream
         market, for the reasons explained below.
(70)     As regards ability to foreclose and as explained in paragraph (57), customer
         foreclosure may occur when a supplier integrates with an important customer in the
         downstream market. However, Fedrigoni is not an important customer in the overall
         release liners market or in the glassine release liners market, neither in the EEA or
         worldwide.90
(71)     First, Fedrigoni’s market share in all plausible markets related to the manufacture
         and sale of SAL is clearly below 30%, as shown in Table 5:. In the EEA market for
         the supply of SAL, Fedrigoni has a market share between [10-20]% and [20-30]%
         for all plausible segments in the EEA, and purchases only a small share of the
         release liners sold ([…]%).91 Therefore, even if Fedrigoni decided to obtain all its
         needs for release liners from Ahlstrom-Munksjö, competitors in the release liners
         market would still have other customers available in the EEA, such as Avery
         Dennison, UPM Raflatac, Herma or 3M. Avery Dennison and UPM Raflatac are the
         largest suppliers of SAL in the EEA with market shares of [30-40]% and [30-40]%
         respectively in the supply of SAL overall (see Table 6).
(72)     Second, Fedrigoni purchased […] of glassine release liners92 in 2019 in the EEA,93
         corresponding to […]% of the total supply of glassine release liners to third parties
         (i.e. […], as shown in Table 3). Therefore, if post-Transaction Fedrigoni decided to
         purchase all of its glassine release liners from Ahlstrom-Munksjö, there would still
         remain a large customer base for third parties corresponding to […]% of the sales of
         glassine release liners made in the EEA in 2019.
(73)     Third, in 2019, Fedrigoni purchased […] of glassine release liners from Ahlstrom-
         Munksjö, representing […]% of its total purchases.94 Therefore, Fedrigoni’s
         purchases of release liners from third parties other than Ahlstrom-Munksjö
         represented […] Kt, that is […]% of the total sales made in the EEA in 2019.
(74)     Since the merged entity will thus not likely have the ability to engage in customer
         foreclosure, it is not necessary to analyse its incentives, as those conditions are
         cumulative.
90  Given that in any plausible SAL product market Fedrigoni’s market share worldwide is below its market
    share in the corresponding market in the EEA, the Commission will carry out the competitive assessment
    on the basis of the narrowest possible geographic market, that is, an EEA-wide market.
91  Form CO, paragraph 33.
92  The only type of release liner where Ahlstrom-Munksjö’s market share is above 30% is glassine release
    liners.
93  Form CO, paragraph 33 and footnote 15.
94  Reply to question 6 of RFI 2.
                                                         22
 ---pagebreak--- (75)     As regards the impact of any foreclosure strategy, all of the respondents to the
         Questionnaire for suppliers of release liners stated that they would have sufficient
         alternative customers for release liners if Fedrigoni were to source all its needs for
         release liners from Alhstrom-Munksjö.95 One supplier of release liners explained that
         “[name of supplier] is not depending on a unique customer [.] Ritrama/Fedrigoni is
         an important customer for [name of supplier] but in an organic growing market,
         [name of supplier] is not depending on an unique customer”.96 None of the suppliers
         of release liners considered that the Transaction would have a negative impact on
         their companies97 or in the market for release liners.98 One supplier of release liners
         explained that “[t]he deal creates a new forward integrated group of companies in
         the pressure sensitive materials business, but that is not new to the industry. There
         are globally other examples of similar instances.”99
(76)     One SAL material supplier expressed concerns that “[a]fter the consolidation
         between Arconvert(Fedrigoni) and Ritrama, the Arconvert-Ritrama Group has
         become one of the biggest Label Manufacturers around the world. (No.1 – Avery
         Dennison, No.2 – UPM Raflatac, No.3 – Arconvert-Ritrama). Based on our internal
         estimation, the aforesaid top 3 companies will occupy more than 70% of the global
         market share. UPM Group has internal integration and raw material supply between
         UPM Specialty Paper & UPM Raflatac. If Fedrigoni at the post-transaction stage
         were to source all its needs from Ahlstrom-Munksjo, it might create an unjustified
         competition environment for the release liner market, especially for glassine
         products” and that “[f]or the SAL users (ex: FMCG brand owner, Wine Brewer...),
         this integration will create an oligopoly environment in SAL markets around the top
         3 suppliers. The medium and small SAL suppliers will face a fierce competition from
         the behemoths. It might decrease the freedom and choice for the end-users in Europe
         Region”.100 However, given that Fedrigoni’s purchases of third-party glassine release
         are limited (see paragraphs (73) and (74)) and the fact that the Transaction does not
         result in an increment of Fedrigoni’s share of SAL, it can be concluded that the
         Transaction does not raise foreclosure concerns.101
(77)     In conclusion and in view of the above, the Parties do not appear to have the ability
         to engage in customer foreclosure strategies and any foreclosure strategy would not
         have a significant detrimental effect on customers in the downstream market.
95  Reply to question 30 of the Questionnaire for suppliers of release liners.
96  Reply to question 30.1 of the Questionnaire for suppliers of release liners.
97  Reply to question 31 of the Questionnaire for suppliers of release liners.
98  Reply to question 32 of the Questionnaire for suppliers of release liners.
99  Reply to question 31.1 of the Questionnaire for suppliers of release liners.
100 E-mail from a SAL material supplier of 29 December 2020.
101 Another release liners supplier raised concerns that “[t]here are non-integrated players, esp. in southern
    Europe, which may face disadvantages as a result of not being vertically integrated” (reply to
    question 33.1 of the Questionnaire for release liners suppliers). However, given the existence of spare
    capacity in the release liners market and the fact that Fedrigoni is a relatively small player in the SAL
    market, the Transaction is unlikely to result in competition concerns for non-integrated players, who will
    be able to continue to (i) supply release liners to other SAL producers and (ii) purchase release liners from
    different release liners manufacturers, as applicable.
                                                            23
 ---pagebreak--- 7.   CONCLUSION
(78) For the above reasons, the European Commission has decided not to oppose the
     notified operation and to declare it compatible with the internal market and with the
     EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the
     Merger Regulation and Article 57 of the EEA Agreement.
                                                   For the Commission
                                                   (Signed)
                                                   Margrethe VESTAGER
                                                   Executive Vice-President
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