CELEX: 32018M8915
Language: en
Date: 2018-11-14 00:00:00
Title: Commission Decision of 14/11/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8915 - DS Smith plc / Papeles y Cartones de Europa, S.A.) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 14.11.2018
                                                                C(2018) 7662 final
  In the published version of this decision, some
  information has been omitted pursuant to Article                       PUBLIC VERSION
  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                To the notifying party
  omitted has been replaced by ranges of figures or a
  general description.
Subject:            Case M.8915 – DS Smith / Europac
                    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 24 September 2018, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          DS Smith plc ("DSS") will acquire sole control over Papeles y Cartones de
          Europa, S.A. (Europac Group) ("Europac") by way of purchase of shares (the
          "Transaction")3. DSS is designated hereinafter as the "Notifying Party" and
          together with Europac as the "Parties".
1.        THE PARTIES
(2)       DSS is active mainly in the manufacture and sale of corrugated packaging in the
          EEA, and plastic packaging worldwide. DSS also collects used paper and
          corrugated cardboard, to produce recycled paper for corrugated packaging. DSS'
          corrugated packaging activities are spread across the EEA.
1    OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the Treaty on
     the Functioning of the European Union ('TFEU') has introduced certain changes, such as the
     replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The terminology of
     the TFEU will be used throughout this decision.
2    OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
3    Publication in the Official Journal of the European Union No C 353, 2.10.2018, p. 4.
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--- (3)      Europac is a paper and packaging company. It is primarily active in the
         manufacture and sale of paper, corrugated board and corrugated packaging. Its
         activities are based in France, Spain and Portugal, and for its production of paper
         and corrugated board, it also has forestry operations in those countries.
2.       THE CONCENTRATION
(4)      The Transaction consists of the acquisition by DSS of the entire issued share
         capital of Europac, with the exception of one plant in Bretagne ("the Caradec
         plant"). Post-Transaction, DSS will therefore exercise sole control over Europac.
(5)      In 2012, the Commission conditionally cleared the acquisition by DSS of SCA
         (M.6512 - DSS/SCA Packaging). One of the conditions for clearance in that case
         was the divestiture of the Caradec plant. Following the conditional clearance,
         DSS sold the Caradec plant to Europac. DSS is, as a result of the commitments in
         that case, bound by a 10-year non-reacquisition clause preventing it from
         acquiring the Caradec plant. For this reason, [Details regarding the sale of the
         Caradec plant].
3.       EU DIMENSION
(6)      The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 5 000 million (DSS: EUR 6 521.9 million; Europac: EUR 856.8
         million).4 Each of them has an EU-wide turnover in excess of EUR 250 million
         (DSS: EUR 5 300 million;5 Europac: EUR […]), but they do not achieve more
         than two-thirds of their aggregate EU-wide turnover within one and the same
         Member State. The Transaction therefore has an EU dimension pursuant to
         Article 1(2) of the Merger Regulation.
4.       MARKET DEFINITION
(7)      DSS and Europac are both vertically integrated companies active in the collection
         and supply of recovered paper, manufacture and supply of corrugated case
         materials ("CCM"), manufacture and supply of corrugated sheets, and
         manufacture and supply of corrugated cases.
  4.1. Collection of recovered paper
(8)      Waste paper is collected from waste generators (i.e. supermarkets, industrial
         businesses, etc.) and is either used internally by the collector or sold to third
         parties. In respect of supply of recovered paper, only this latter activity on the
         merchant market is considered in this decision.
4    Turnover calculated in accordance with Article 5 of the Merger Regulation.
5    The EU turnover only comprises the turnover achieved in the following Member States: Austria,
     Belgium, the Czech Republic, Denmark, France, Germany, Italy, the Netherlands, Slovenia, Spain,
     Sweden and the UK.
                                                         2
 ---pagebreak--- 4.1.1. Product market definition
Commission's decision-making practice
(9)     The Commission has previously defined separate product markets for the
        collection and the supply of recovered paper.6
(10)    The Commission has previously considered that the market for the collection of
        recovered paper may be further segmented according to the quality of paper
        collected.7
The Notifying Party's view
(11)    The Notifying Party defines a separate relevant market for the collection of
        recovered paper. It submits that the further sub-segmentation of this market based
        on the different paper grades is not appropriate because market players are active
        across all grades and waste generators of different types of paper do not require
        specialised services.8
The Commission's assessment
(12)    The market investigation did not elicit anything that would contradict the
        Commission's earlier findings of defining a separate relevant product market for
        the collection of recovered paper. In any event, for the purpose of this decision,
        the exact scope of the product market definition and thus the question whether
        this market should be further sub-segmented based on the different market grades
        can be left open, as the Transaction does not give rise to serious doubts as to its
        compatibility with the internal market with regard to the collection of recovered
        paper even on the basis of this narrowest plausible product market definition.
4.1.2. Geographic market definition
Commission's decision-making practice
(13)    The Commission has previously assessed the market for the collection of
        recovered paper on both an EEA-wide and a national basis.9
The Notifying Party's view
(14)    The Notifying Party does not contest those market definitions and submits that the
        competitive assessment of the Transaction would not lead to competition
        concerns even when based on the narrower – national – market definition.10
6   See cases COMP/M.6512 – DS Smith/SCA Packaging, paragraphs       15-17; COMP/M.6101 –
    UPM/Myllykoski and Rhein Papier¸ paragraphs 204-210; COMP/M.3935 – Jefferson Smurfit/Kappa,
    paragraph 12.
7   See cases COMP/M.6512 – DS Smith/SCA Packaging, paragraphs       19-21; COMP/M.6101 –
    UPM/Myllykoski and Rhein Papier¸ paragraphs 204-210; COMP/M.3935 – Jefferson Smurfit/Kappa,
    paragraph 12.
8   Paragraphs 6.28 and 6.32 of the Form CO.
9   See cases COMP/M.6512 – DS Smith/SCA Packaging, paragraphs       27-29; COMP/M.6101 –
    UPM/Myllykoski and Rhein Papier, paragraphs 211-214; COMP/M.3935 – Jefferson Smurfit/Kappa,
    paragraph 13.
                                                  3
 ---pagebreak--- The Commission's assessment
(15)    The market investigation did not bring to light any indication that would
        contradict the Commission's earlier findings. The Commission considers that in
        any case, for the purpose of this decision, the exact scope of the geographic
        market definition can be left open, as the Transaction does not give rise to serious
        doubts with regard to the collection of recovered paper even when based on the
        narrowest plausible – national – geographic market definition.
 4.2. Supply of recovered paper
(16)    Following the collection, recovered paper is processed at a facility where it is
        sorted into recyclable and non-recyclable materials. The recyclable paper is sorted
        into grades and then inspected before either being used captively or sold to third
        party paper mills. Only this latter market-facing activity is considered in this
        decision.
4.2.1. Product market definition
Commission's decision-making practice
(17)    The Commission has previously defined separate product markets for the
        collection and the supply of recovered paper.11
(18)    The Commission has also previously considered that the market for the supply of
        recovered paper may be further segmented according to the quality of paper
        collected as qualities of paper do not have the same use and the same price.12
The Notifying Party's view
(19)    The Notifying Party does not contest the Commission's decisional practice to the
        extent that it defined a separate relevant market for the supply of recovered paper.
        However, it submits that the further sub-segmentation of this market based on the
        different paper grades is not appropriate because the supply of recovered paper of
        any grade requires exactly the same equipment and know-how and therefore
        market players are active across all grades and all grades are used to some extent
        in the manufacturing of corrugated case materials.13
The Commission's assessment
(20)    The market investigation did not elicit anything that would contradict the
        Commission's earlier findings of defining a separate relevant product market for
        the supply of recovered paper. In any event, for the purpose of this decision, the
        exact scope of the product market definition and thus the question whether this
        market should be further sub-segmented based on the different paper grades can
        be left open, as the Transaction does not give rise to serious doubts as to its
10  Paragraphs 6.34-6.35 of the Form CO.
11  See cases COMP/M.6512 – DS Smith/SCA Packaging, paragraphs 15-17; COMP/M.6101 –
    UPM/Myllykoski and Rhein Papier¸ paragraphs 204-210; COMP/M.3935 – Jefferson Smurfit/Kappa,
    paragraph 12.
12 See cases COMP/M.6512 – DS Smith/SCA Packaging, paragraphs 22-26; COMP/M.3935 – Jefferson
    Smurfit/Kappa, paragraph 12.
13 Paragraphs 6.28 and 6.32 of the Form CO.
                                                  4
 ---pagebreak---         compatibility with the internal market with regard to the supply of recovered
        paper even on the basis of this narrowest plausible product market definition.
4.2.2. Geographic market definition
Commission's decision-making practice
(21)    The Commission has previously assessed the markets for the supply of recovered
        paper on both an EEA-wide and a national basis, whilst leaving the market
        definition open.14
The Notifying Party's view
(22)    The Notifying Party considers that the market for the supply of recovered paper
        cannot rationally be narrower than EEA-wide based on the current trading
        patterns.15
The Commission's assessment
(23)    The Commission considers that for the purpose of this decision, the exact scope
        of the geographic market definition can be left open, as the Transaction does not
        give rise to serious doubts as to its compatibility with the internal market with
        regard to the supply of recovered paper even on the basis of the narrowest
        plausible – national – geographic market definition.
 4.3. Manufacture and supply of corrugated case materials
(24)    Corrugated case materials refer to a portfolio of products which are the main
        inputs for the manufacturing of corrugated packaging. CCM includes both liners,
        forming the flat outer layers of corrugated packaging, and fluting, which is the
        rippled middle layer of corrugated packaging providing rigidity, bulkiness and
        strength.
(25)    Both liners and fluting can be made from virgin wood fibres or from recycled
        fibres, as well as from a mix of the two. Liners produced from virgin wood fibres
        are called "kraftliners"; while "testliners" are made from recycled fibres.
(26)    Fluting from virgin wood fibres can be (i) Nordic semi-chemical fluting
        ("NSCF") containing (almost) exclusively Nordic birch tree fibres and (ii) semi-
        chemical fluting ("SCF") containing a large proportion (around 70-80%) of virgin
        wood fibres, as well as recycled fibres (around 20-30%).
(27)    Recycled fluting can be (i) high performance ("HP") recycled fluting, made out of
        100% recycled fibres but the performance of which is improved by the addition of
        starch and other chemicals; and (ii) standard recycled fluting made out of 100%
        recycled fibres, also known as "Wellenstoff".16
14  See M.6512, DS Smith/SCA Packaging, paragraphs. 30-33; M.3935, Jefferson Smurfit/Kappa,
    paragraph 13.
15 Paragraph 6.36 of the Form CO.
16 See M.8831, Mondi/Powerflute, paragraphs 13-16.
                                                   5
 ---pagebreak--- 4.3.1. Product market definition
Commission's decision-making practice
(28)     In previous decisions, the Commission has considered a separate product market
         for CCM,17 and within CCM it has identified separate relevant markets for fluting
         and liners.18 Furthermore, the Commission considered but ultimately left open,
         whether the market for liners should be further sub-segmented between kraftliner
         and testliner,19 and whether the market for fluting should be further sub-
         segmented by different types of fluting.20
The Notifying Party's view
(29)     The Notifying Party submits that the relevant product market encompasses all
         CCM based on strong supply- and demand-side substitutability.
(30)     First, the Notifying Party argues that in the EEA, [80-90]% of the recycled CCM
         mills produce both liners and fluting (representing [90-100]% of recycled CCM
         production). It does, however, admit that the production of virgin wood fibre
         CCM requires different machinery.21
(31)     Second, the Notifying Party claims that while there is generally a performance
         difference between kraft- and testliners, (i) sheet feeders and box plants (i.e.
         plants that manufacture corrugated sheets and corrugated cases) can and do
         switch between the two; (ii) paper type is only one element that determines the
         performance of the end-product; and (iii) the performance level of recycled CCM
         is constantly improving due to technology improvements.
(32)     Finally, it also submits that dual-use paper grades are available, which can be
         used as both fluting and liner.22
The Commission's assessment
(33)     The Commission notes that it has analysed the market for the manufacture and
         supply of CCM in a very recent decision,23 concluding that liners and fluting
         constitute separate relevant product markets. Furthermore, in that same decision
         the Commission considered the potential further sub-segmentation of the fluting
         market by the various types of fluting. Based on this, the Commission focused its
         market investigation in the present case on the market for liners which was not
         analysed in the Mondi/Powerflute decision.
(34)     The market investigation results suggest that there is limited supply-side
         substitutability with regard to virgin wood fibre and recycled CCM. Indeed, the
17  See M.8831, Mondi/Powerflute, paragraph 17; M.7885, DS Smith/Duropack, paragraphs. 8-9; M.6512,
    DS Smith/SCA, paragraphs. 54-55; M.6882, Kinnevik/BillerudKorsnas, paragraphs 56 and 71; M.3935,
    Jefferson Smurfit/Kappa, paragraphs 17-18.
18  See M.8831, Mondi/Powerflute, paragraphs 26-28.
19  See M.7885, DS Smith/Duropack, paragraph 9; M.6512, DS Smith/SCA, paragraphs 54-55; M.6882,
    Kinnevik/BillerudKorsnas, paragraphs 55-56; M.3935, Jefferson Smurfit/Kappa, paragraphs 17-18.
20  See M.8831, Mondi/Powerflute, paragraphs 29-43.
21  Paragraph 6.43 of the Form CO.
22  Paragraph 6.44 of the Form CO.
23  See M.8831, Mondi/Powerflute.
                                                     6
 ---pagebreak---         majority of competitors indicated that it is not possible to switch production on
        the same production lines between kraftliner and any recycled CCM product.24
        However, the majority of the competitors also submitted that such switching is
        possible between testliners and recycled fluting products.25 This finding is in fact
        in line with the Notifying Party's first argument set out in paragraph 30 above.
(35)    From a demand-side perspective, the majority of respondents indicated that it uses
        kraftliners and testliners interchangeably.26 However, many market participants
        noted that there are certain applications for which kraftliner must be used due to
        legal requirements or technical requirements (e.g. humidity or temperature
        resistance).27 This is in line with the findings made in the Mondi/Powerflute case
        for fluting.
(36)    For the purpose of this decision, the Commission considers that flutings and liners
        constitute separate markets as per the Mondi/Powerflute decision. As regards each
        of flutings and liners, the exact scope of the product market definition and thus
        the question whether the various fluting and liner products constitute separate
        relevant product markets can be left open, as the Transaction does not give rise to
        serious doubts as to its compatibility with the internal market with regard to the
        manufacture and supply of CCM even on the basis of the narrowest plausible
        product market definition.
4.3.2. Geographic market definition
Commission's decision-making practice
(37)    In previous cases the Commission has considered the market for the manufacture
        and supply of CCM, as well as its sub-segments to be at least EEA-wide in
        scope.28
The Notifying Party's view
(38)    The Notifying Party does not contest the Commission's decisional practice and
        submits that the CCM market is at least EEA-wide in scope.29
The Commission's assessment
(39)    The market investigation results support the previously retained geographic
        market definition. The majority of both competitors and customers indicated with
        regard to all CCM products that the market is at least EEA-wide in scope.30
24  Replies to question 7 of Questionnaire Q3 – Competitors Corrugated Case Materials and replies to
    question 8 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
25  Replies to question 7 of Questionnaire Q3 – Competitors Corrugated Case Materials.
26  Replies to question 9 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
27  Replies to question 7.3 of Questionnaire Q3 – Competitors Corrugated Case Materials and replies to
    question 9.1 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
28  See M.8831, Mondi/Powerflute, paragraphs 44-48; M.7885, DS Smith/Duropack, paragraphs 9 and 33-
    34; M.6512, DS Smith/SCA, paragraphs 56-57; M.6882, Kinnevik/BillerudKorsnas, paragraphs 58 and
    71; M.3935, Jefferson Smurfit/Kappa, paragraph 19.
29  Paragraph 6.47 of the Form CO.
30  Replies to question 9 of Questionnaire Q3 – Competitors Corrugated Case Materials and replies to
    question 10 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
                                                      7
 ---pagebreak--- (40)    Furthermore, with regard to kraftliners, the market investigation in the present
        case suggests that the market might even be global in scope. Indeed, the majority
        of the competitors and customers who replied explained that they supply/source
        kraftliner globally31 and the majority of competitors who replied indicated that
        roughly 10-20% of the total volumes sold in the EEA come from imports.32
(41)    The Commission considers that for the purpose of this decision, the exact scope
        of the geographic market definition can be left open, as the Transaction does not
        give rise to serious doubts as to its compatibility with the internal market with
        regard to the manufacture and supply of CCM even if it is considered on a
        narrower basis, i.e. on a market that is at least EEA-wide in scope.
 4.4. Manufacture and supply of corrugated sheets
(42)    Corrugated sheets ("sheets") are made from CCM, and comprise an upper and
        lower layer of liner, and a middle layer of fluting. Sheets are produced at two
        different types of production facilities, (i) sheet feeders, which are plants
        dedicated exclusively to the conversion of CCM into sheets, that are then supplied
        to sheet plants for conversion into corrugated cases, or (ii) integrated plants, or
        so-called box plants, which convert CCM into sheets and then convert the sheets
        into corrugated cases at the same production site. Whilst integrated plants are
        designed to sell cases, they can also sell sheets to sheet plants, though usually
        sheet feeders are more efficient at producing sheets.
4.4.1. Product market definition
Commission's decision-making practice
(43)    In previous decisions, the European Commission has considered a product market
        comprising all types of sheets. It has also further considered distinct markets for
        "conventional" sheets and "heavy duty" sheets, the latter comprising either (i)
        only triple wall sheets, or (ii) triple wall and double wall sheets insofar as the
        sheets contain at least one A flute (i.e. AA, BA and CA board) and weighs more
        than a given threshold (ranging between 300 and 1000 g/sqm).33
The Notifying Party's view34
(44)    The Notifying Party submits that the relevant product market encompasses all
        types of sheets, and that it would not be appropriate to define separate markets for
        conventional and heavy duty sheets respectively as any cut-off would be arbitrary.
31  Replies to question 9 of Questionnaire Q3 – Competitors Corrugated Case Materials and replies to
    question 10 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases, as well as minutes of a
    conference call with a competitor on 03 August 2018, paragraph 4 and minutes of a conference call
    with a competitor on 31 July 2018, paragraph 8.
32 Replies to question 11 of Questionnaire Q3 – Competitors Corrugated Case Materials, as well as
    minutes of a conference call with a competitor on 03 August 2018, paragraph 4, minutes of a
    conference call with a competitor on 31 July 2018, paragraph 8, minutes of a conference call with a
    competitor on 06 August, paragraph 12 and minutes of a conference call with a competitor on 02
    August 2018, paragraph 6.
33 See M.7558, DS Smith/Duropack, paragraph 11; M.6512 – DS Smith/SCA Packaging, paragraphs 60-
    70; M.3935 – Jefferson Smurfit/Kappa, paragraph 22; M.8831 – Mondi/Powerflute, paragraphs 51-52.
34 Paragraphs 6.50 – 6.56 of the Form CO.
                                                      8
 ---pagebreak--- (45)   To that end, the Notifying Party claims that on the demand side, there is an
       innumerable variety of sheets available that form a continuum of solutions, from
       single through triple wall and with various combinations of fluting. There is no
       specific cut-off for "heavy duty"; a product's characteristics and performance are
       delivered via a combination of paper content, flute type and/or flute combination
       and sheet construction. In addition, the balance between the costs and strength of
       a sheet also influences a customer's choice for either "conventional" or "heavy
       duty" products.
(46)   On the supply side, all solutions – with some limited exceptions – can be
       produced using the same machines, and limited additional technology and
       investment is needed to be able to produce "heavy duty" sheets. More concretely,
       for the production of double or triple wall sheets, a corrugator with respectively
       two or three single-facers is required, and upgrading a double-wall corrugator to
       be able to produce triple wall sheets would cost EUR […].
The Commission's assessment
(47)   The market investigation in the present case confirms the Notifying Party’s claim
       that no specific cut-off for heavy duty sheets exists. Indeed, the majority of
       respondents is unaware of an industry standard used for distinguishing
       conventional and heavy-duty sheets, and only a minority indicates that its
       company itself distinguishes between conventional and heavy duty sheets.
       Between those that do indicate that a standard is applied in the industry, some
       refer to the number of walls being determinative, some to the weight and some to
       both, however no consistent replies were provided as to the exact design or
       weight rendering a sheet "heavy duty".35
(48)   Furthermore, on the demand-side, respondents indicated that sheet customers
       generally tend to provide the exact technical specifications of the product that
       they wish to procure, although some customers also indicate their requirements in
       terms of performance, and leave the designing to the supplier.36
(49)   As regards the supply-side, there appear to be a number of sheet producers that
       manufacture heavy duty sheets, although various sheet suppliers also indicated
       that they are not active as regards heavy duty sheets, and in particular with regard
       to triple wall sheets as special equipment is needed for this and adapting a
       conventional corrugator to accommodate triple wall sheets is difficult.37
(50)   In view of the above, the results of the market investigation point to a continuum
       of different sheet solutions, though there also appear to be limits, especially on
       the supply-side, to the substitutability of conventional and heavy duty sheets.
(51)   In any case, the exact scope of the product market definition can be left open as
       heavy duty sheets only represent around […]% of the Parties' production of sheets
       in 2017 and less than 15% of the total market for the manufacture and supply of
       sheets in France, Spain and Portugal, therefore the assessment does not hinge on
       whether heavy duty sheets are considered separately or not. For the purpose of
35 Replies to questions 13, 13.1, 14 and 14.1 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated
   Cases.
36 Replies to question 17 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
37 Replies to questions 15 and 16 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
                                                        9
 ---pagebreak---          this decision, the Commission has analysed the Transaction on the basis of the
         narrowest plausible markets, comprising on the one hand conventional sheets and
         on the other heavy duty sheets.
4.4.2. Geographic market definition
Commission's decision-making practice
(52)     The Commission has in previous decisions analysed the effects of transactions
         both at (i) national level, and (ii) with regard to a 300-400 km radius around the
         production sites concerned.38 The Commission has also considered that heavy
         duty sheets can be transported further than conventional sheets.39 The exact scope
         of the geographic market definition was consistently left open for sheets, both
         conventional and heavy duty sheets.40
The Notifying Party's view41
(53)     The Notifying Party submits that the market for both conventional and heavy duty
         sheets is at least national and that a local level assessment is arbitrary. According
         to the Notifying Party, sheets are supplied at distances significantly over 400 km
         and across borders. Also, transport costs are very low42 and, regardless of the fact
         that manufacturers will rationally try to maximise margins by supplying as close
         to their plant as possible, various DSS plants sell part of their sheets further than
         400 km away.43 In addition, the service expected by customers does not require a
         local presence.
The Commission's assessment
(54)     The results of the market investigation did not confirm the view of the Notifying
         Party, but rather point to the existence of 400 km radii within which the vast
         majority of customers sources sheets.
(55)     Almost all respondents indicated that the distance between a sheet supplier’s
         production facility and customer’s plant is (very) important, and a majority, both
         of suppliers and customers, indicated that sheets are sourced within a radius
38  See for example M.7558, DS Smith/Duropack, paragraph 12; M.2032, SCA Packaging/Metsä
    Corrugated, paragraphs 12-15; M.6512, DS Smith/SCA Packaging, paragraphs 60-70; M.3935,
    Jefferson Smurfit/Kappa, paragraph 22.
39  See M.1418, SCA Packaging/Rexam, paragraph 19.
40  See for example M.1418, SCA Packaging/Rexam, paragraph 20; M.3935, Jefferson Smurfit/Kappa,
    paragraph 23; M.6515, DS Smith/SCA Packaging, paragraph 76; M.7558, DS Smith/Duropack,
    paragraph 12.
41  Paragraphs 6.57-6.58 of the Form CO.
42  According to the Notifying Party, considering a transport distance of 400 km transportation costs
    represent around […]% of the costs of production for conventional sheets, and […]% for heavy duty
    sheets. Transport costs also represent only a low percentage of the available margin to be gained, so
    that this margin is still significant at distances over 400 km for corrugated sheets.
43  More specifically, over […]% (by volume) of DSS' corrugated sheet sales in France are made over 400
    km, and some plants sell even more over 400 km – for example DSS Kunheim sells over […]% of its
    sheet production over 400 km, and DSS Velin nearly […]%. In Spain and Portugal, over […]% of
    DSS's are sold over 400 km. As for Europac, nearly […]% of its corrugated sheet sales are made over
    400 km. See paragraph 6.58 of the Form CO.
                                                            10
 ---pagebreak---         around a production plant.44 When it comes to the concrete distance that is
        considered acceptable, a majority indicated a distance of 400 km or less, mainly
        for reasons of transport costs, delivery time and flexibility.45
(56)    It has to be noted that some respondents indicated that heavy duty sheets have a
        wider transport radius, as these are higher value products with slightly lower
        relative transport costs.46
(57)    In view of the above and for the purpose of this decision, the Commission
        considers the geographic scope to be local, comprising a radius of 400 km, and
        will assess the Transaction on the basis of such a radius.47 For heavy duty sheets
        specifically, it will take into account the fact that heavy duty sheets might have a
        wider transport radius.
 4.5. Manufacture and supply of corrugated cases
(58)    The conversion of sheets into corrugated cases ("cases") for sale to end-customers
        involves printing, slotting and/or die-cutting, folding and gluing and/or stitching.
        Cases are produced either by (i) converter plants, or sheet plants, which convert
        sheets supplied by sheet feeders or box plants into cases for sale to end-
        customers, or (ii) integrated plants (so-called box plants) that – as mentioned
        before - convert CCM into sheets and then convert the sheets into cases at the
        same production site.
4.5.1. Product market definition
Commission's decision-making practice
(59)    In previous decisions, the Commission has considered a separate product market
        for cases, with potential sub-segmentations for conventional, heavy duty and
        litho-laminated cases.48
44  Replies to questions 18, 19 and 20 of of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated
    Cases, as well as minutes of conference calls with competitors and sheet customers on 30 July 2018,
    31 July 2018, 2 August 2018, 3 August 2018, 6 August 2018, 9 August 2018 and 30 August 2018.
45  Replies to questions 20.1, 21 and 23 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated
    Cases.
46  Replies to questions 18.1, 19.1, 20.1, 20.2 and 21.2 of Questionnaire Q1 – CCM, Corrugated Sheets,
    Corrugated Cases.
47  Concretely, the local markets assessed in this decision comprise radii around the each of the Parties'
    plants rather than using each customer's plant as a centre for a local market analysis, as because of the
    high number of customers there is a lack of data necessary for such a demand-side analysis (i.e. an
    analysis on the basis of radii around each customer).
48  See for example M.7558, DS Smith/Duropack, paragraph 14; M. 6512, DS Smith/SCA Packaging,
    paragraph 94; M.1418, SCA Packaging/Rexam, paragraph 10; M.8831, Mondi/Powerflute, paragraphs
    51-52. For completeness, while DDS is active in the manufacture and sale of litho-laminated cases,
    Europac is not. As such, the Transaction does not result in a horizontal overlap in this regard. The
    Notifying Party has also confirmed that if a market for the production and sale of litho-laminated cases
    were to be considered, this would not give rise to a vertically affected market. For these reasons, litho-
    laminated cases will not be discussed further in this decision.
                                                         11
 ---pagebreak--- The Notifying Party's view49
(60)    The Notifying Party claims that it is not appropriate to segment conventional and
        heavy duty cases, and that there is a market comprising all types of cases.
(61)    The Notifying Party submits in that context that, from a demand-side perspective,
        there is a continuum of capabilities of case characteristics, which can be assessed
        against a wide range of criteria, including reliability in stacking, structural quality,
        resistance to pressure and tearing, resistance to puncture by a sharp object,
        moisture resistance, susceptibility to vibration etc., and whereby the type of sheet
        used, which is in itself a combination of paper content, flute type and/or flute
        combination and sheet construction, is just one factor which influences the
        performance of a given case, with the design of the case also having a significant
        impact.
(62)    From a supply-side point of view, the equipment and know-how also for the
        production of heavy duty cases is readily available. Although the conversion of
        triple wall may need some additional – but readily available and cheap –
        equipment, the conversion of double wall sheet into double wall case requires the
        same equipment and process of printing, slotting, die-cutting and gluing as is used
        for the conversion of conventional sheet into conventional case.
The Commission's assessment
(63)    As for sheets, the market investigation in the present case suggests that no
        generally accepted standard exists for distinguishing conventional and heavy duty
        cases in the industry. The majority of customers for cases that responded are
        unaware of an industry standard used for distinguishing conventional and heavy
        duty cases, and only a minority of the case suppliers that responded indicated that
        a standard is used.50 In addition, the majority of respondents, both case suppliers
        and customers, and also respondents that did indicate that a standard is used in the
        industry, indicated that they do not distinguish between conventional and heavy
        duty cases themselves.51 Of those companies who do distinguish, none indicated
        the same standard of distinction.52
(64)    As regards the demand-side, the market investigation indicated that customers
        generally provide their suppliers either with technical specifications such as
        design, weight and type of paper to be used, or with requirements in terms of
        performance such as resistance to humidity and printability, all depending on the
        customer concerned and on whether the product being sourced is new or has been
        sourced before.53 As to the possibility for customers to switch between
        conventional and heavy duty cases, the market investigation indicated that from
49 Paragraphs 6.65-6.69 of the Form CO.
50 Replies to questions 25 and 25.1 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases;
   replies to question 6 of Questionnaire Q2 – Customers corrugated cases.
51 Replies to question 26 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases; replies to
   question 7 of Questionnaire Q2 – Customers corrugated cases.
52 Replies to question 26.1 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
53 Replies to question 10 of Questionnaire Q2 – Customers corrugated cases.
                                                     12
 ---pagebreak---          an economic point of view switching from conventional to heavy duty cases
         would not be appropriate unless needed.54
(65)     As regards the supply-side, as for sheets, there appear to be several case suppliers
         that manufacture both conventional and heavy duty cases, although also here
         respondents indicated a need for special equipment.55
(66)     Hence, as for sheets, the market investigation appears to support to a certain
         extent the existence of a continuum of different case solutions, nevertheless also
         revealing limits to the substitutability, especially on the supply-side.
(67)     In any case, the exact scope of the product market definition can be left open as
         heavy duty cases only represent less than […]% of the Parties' production of cases
         and less than [5-10]% of the total market for the manufacture and supply of cases
         in 2017 in each of France, Spain and Portugal, so that the assessment would not
         significantly differ irrespective of whether heavy duty cases are considered part of
         the same market as conventional cases. For the purpose of this decision, the
         Commission has analysed the Transaction on the basis of the narrowest plausible
         markets, for conventional cases on the one hand, and heavy duty cases on the
         other.
4.5.2. Geographic market definition
Commission's decision-making practice
(68)     For conventional cases, the Commission previously considered the geographic
         market to (i) be national, or (ii) comprise a 200-300 km radius around the
         production facilities concerned. As regards heavy duty cases, the Commission has
         in the past considered the geographic market to be national in scope.
The Notifying Party's view56
(69)     The Notifying Party claims the geographic market for both conventional and
         heavy-duty cases to be at least national, and that any local level assessment is
         arbitrary. To that end, the Notifying Party submits that while production facilities
         aim to maximise their local sales to reduce the impact of transportation costs, they
         will also always look to make as many sales at as high a margin as possible and
         will thus also make marginal sales further afield.57 Additionally, transport costs
         are low, around […]% of the costs of production for conventional cases, and
         […]% for heavy duty cases.
54  Replies to question 8 of Questionnaire Q2 – Customers corrugated cases.
55  Replies to questions 27 and 28 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
56 Paragraphs 6.70-6.72 of the Form CO.
57 As such, […]% of DSS's case sales (by volume) in France are made over 300 km away, and some
    plants sell even more of their case production over 300 km – DSS Kunheim supplies […]% of its cases
    (by volume) over 300 km, and DSS St Just supplies nearly […]%. In Spain and Portugal, around
    […]% of DSS's case sales (by value) are made over 300 km away. For Europac, overall […]% of its
    sales are made more than 300 km away. See paragraph 6.72 of the Form CO.
                                                         13
 ---pagebreak---  The Commission's assessment
 (70)     The results of the market investigation did not confirm the view of the Notifying
          Party, but indicated that the relevant geographic scope of the market for cases
          comprises a radius of 300km.
 (71)     A large majority of case suppliers that responded to the market investigation
          indicated that they supply to customers within a certain radius, and a large
          majority of both customers and suppliers consider the distance between a
          supplier's production facility and customer's plant to be (very) important.58
 (72)     Furthermore, the vast majority of suppliers indicated that they supply cases within
          a radius of 300 km or less, and a large majority of customers that responded
          indicated that 80% of their supplies for cases is sourced within a radius of 300
          km, and even a considerable majority indicated that 90% of their supplies for
          cases is sourced within this radius.59
 (73)     Although some respondents indicated that heavy duty cases can be transported
          further, the market investigation results from suppliers are mixed with regard to
          the exact maximum distance that is acceptable.60 The majority of the case
          customers that responded indicated that the maximum distance they consider
          acceptable for the supply of heavy duty cases is between 300-500 km.61
 (74)     In view of the above and for the purpose of this decision, the Commission
          considers the geographic scope to be local, comprising a radius of 300 km, and
          will assess the Transaction on the basis of such a radius.62 For heavy duty cases
          specifically, it will take into account the fact that these might have a wider
          transport radius.
 5.    COMPETITIVE ASSESSMENT
5.1.      Horizontal non-coordinated effects
 5.1.1. Collection of recovered paper
 Introduction
 (75)     Both DSS and Europac are active on the market for the collection of recovered
          paper, achieving a market share of [5-10]% and [0-5]% respectively on an EEA-
 58  Replies to questions 33 and 34 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases;
     replies to question 12 of questionnaire Q2 – Customers Corrugated Cases, as well as minutes of
     conference calls with competitors on 31 July 2018, paragraph 8, 02 August 2018, paragraph 12 and 06
     August 2018, paragraph 13.
 59  Replies to questions 35 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases; replies to
     question 14 of questionnaire Q2 - Customers Corrugated Cases.
 60  Replies to questions 35 and 35.1 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
 61  Replies to question 13 of Questionnaire Q2 – Customers – Corrugated cases.
 62  As for corrugated sheets, the local markets assessed for corrugated cases in this decision comprise
     radii around the each of the Parties' plants rather than using each customer's plant as a centre for a
     local market analysis, as because of the high number of customers there is a lack of data necessary for
     such a demand-side analysis (i.e. an analysis on the basis of radii around each customer).
                                                          14
 ---pagebreak---          wide basis.63 64 Should the market be defined narrower, as national in scope, the
         Parties' activities overlap only to a very limited extent in Spain, where DSS does
         not collect recovered paper but has a trading office (with […] full-time
         employee).65 The market shares of the Parties and therefore the increment brought
         about by the Transaction would not significantly differ, even if the market for the
         collection of recovered paper were to be further sub-segmented on the basis of the
         different paper grades.66
The Notifying Party's view
(76)     The Notifying Party submits that in view of the low market shares and the very
         limited increment brought about by Europac, the Transaction is unlikely to raise
         competition concerns.67
The Commission's assessment
(77)     The Transaction does not give rise to affected markets even on the basis of the
         narrowest plausible product and geographic market definition.
(78)     Based on the limited combined market shares of the Parties, the limited increment
         brought about by Europac, as well as the lack of concerns expressed in the market
         investigation, the Commission considers that the Transaction does not raise
         serious doubts as to its compatibility with the internal market with regard to the
         collection of recovered paper even on the basis of the narrowest plausible product
         and geographic market definition.
5.1.2. Supply of recovered paper
Introduction
(79)     On an EEA-wide level, DSS achieves a market share of [5-10]% on the market
         for the supply of recovered paper, while Europac's activities are very limited,
         amounting to a market share of less than [0-5]% in 2017.68 69 Should the market
         be defined as national in scope, the Parties' activities overlap in Spain (combined
63  Paragraph 6.39 of the Form CO.
64  For the sake of completeness it should be mentioned that in the absence of reliable data on the total
    size of the EEA market, the Notifying Party has provided figures relating only to the countries covered
    by the data of the Confederation of European Paper Industries (CEPI). Given that while the Parties'
    market shares are based on sales data throughout the EEA but the total market size does not include all
    third party volumes traded in the EEA countries, the market shares of the Parties might be
    overestimated. (Footnote 45 of the Form CO.)
65  Paragraph 6.35 of the Form CO.
66  Paragraph 6.33 of the Form CO.
67  Paragraphs 6.39-6.41 of the Form CO.
68  Paragraph 6.39 of the Form CO.
69  For the sake of completeness it should be mentioned that in the absence of reliable data on the total
    size of the EEA market, the Notifying Party has used figures relating only to the countries covered by
    the data of the Confederation of European Paper Industries (CEPI). Given that while the Parties'
    market shares are based on sales data throughout the EEA but the total market size does not include all
    volumes traded in the EEA countries from third parties, the market shares of the Parties are
    overestimated. (Footnote 45 of the Form CO.)
                                                       15
 ---pagebreak---        market share of less than [0-5]%) and in Portugal (combined market share of [30-
       40]% with an increment of less than [0-5]% brought about by DSS).70
(80)   The market shares of the Parties would not significantly differ, even if the market
       for the supply of recovered paper were to be further sub-segmented on the basis
       of the different paper grades.71
The Notifying Party's view
(81)   The Notifying Party submits that in view of the limited combined market shares
       on an EEA-wide level, as well as the insignificant increment brought about by the
       Transaction, it is unlikely to lead to competition concerns. 72
The Commission's assessment
(82)   The Transaction leads to a horizontally affected market only if the market for the
       supply of recovered paper is considered as national in scope. However, while
       Europac has a market share of [30-40]% in Portugal, the increment brought about
       by DSS is de minimis (less than [0-5]%).73
(83)   The market investigation suggests that the Transaction would not negatively
       affect the competitiveness of the market for the supply of recovered paper.
(84)   As for the availability of recovered paper, a competitor of the Parties, itself
       sourcing recovered paper from the merchant market, explained that "[t]here is no
       difficulty in sourcing recycled paper today. More and more paper is recycled in a
       proper way. The reduction in exports to China furthermore leaves more
       availability for European paper mills."74 Indeed, the large majority of the
       respondents to the questionnaire indicated that the Transaction would not have an
       impact on the available volumes.75
(85)   Furthermore, the majority of the Parties' customers which replied to the
       questionnaire indicated that they would have sufficient alternative suppliers
       should the Parties stop supplying them or supply them at significantly worse
       conditions post-transaction.76
(86)   Although some unsubstantiated concerns were raised with regard to the impact of
       the Transaction on the respondent's sourcing of recovered paper in the market
       investigation,77 the majority of respondents indicated that the intensity of
       competition will either increase or remain the same, and the price level will either
       decrease or remain the same.78
70 Paragraph 6.37 of the Form CO.
71 Paragraph 6.33 of the Form CO.
72 Paragraphs 6.39-6.41 of the Form CO.
73 For the sake of completeness it should be mentioned that if the market for the supply of recovered
   paper were to be further sub-segmented on the basis of the different paper grades, these submarkets
   would be also affected in Portugal.
74 Minutes of a conference call with a competitor on 30 July 2018, paragraph 7.
75 Replies to question 42 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
76 Replies to question 40 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
77 Replies to question 41 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
78 Replies to question 42 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
                                                      16
 ---pagebreak---  ---pagebreak--- The Commission's assessment
(92)    The Commission notes that the Transaction does not lead to any horizontally
        affected markets, even on the basis of the narrowest plausible product and
        geographic market definitions set out in Section 4.3 above.
(93)    In the market investigation, the majority of the competitors and customers replied
        that the Transaction will not have a negative impact on the intensity of
        competition, the price level or the volumes available.82
(94)    Based on the limited combined market shares of the Parties and the market
        investigation results, the Commission considers that the Transaction does not
        raise serious doubts as to its compatibility with the internal market with regard to
        horizontal non-coordinated effects regarding the manufacture and supply of case
        materials under any plausible product and geographic market definition set out
        above.
5.1.4. Manufacture and supply of corrugated sheets
Introduction
(95)    The Parties' activities overlap in the manufacture and supply of sheets, and on a
        national level the Transaction gives rise to affected markets in relation to the
        potential sub-segments for conventional sheets in Spain and Portugal.83
(96)    On a local level, taking the 400km radii around each of the Party's production
        plants, the Transaction results in affected markets in the potential sub-segments
        for conventional sheets in France, Spain and Portugal, and heavy duty sheets in
        Spain.
              5.1.4.1.     Manufacture and supply of corrugated sheets – France
Introduction
(97)    In France, the Parties' activities overlap in relation to the manufacture and supply
        of sheets, but do not result in any affected markets on a national level. However,
        at local level the Transaction results in affected markets with regard to
        conventional sheets in Eastern France, in the local markets comprising the 400
        km radii around (i) DSS Kunheim and (ii) DSS Velin, as well as in South Eastern
        France in the local markets comprising 400 km radii around (iii) DSS Dauphine
        and (iv) Europac La Rochette.
The Notifying Party's view84
(98)    With regard to conventional sheets in France, the Notifying Party submits that the
        Transaction will not result in any competition concerns with regard to the market
        for conventional sheets, or any of its sub-segments, for the reasons below.
82  Replies to questions 25-27 of Questionnaire Q3 – Competitors Corrugated Case Materials, replies to
    questions 57-59 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
83 For completeness, as regards heavy duty sheets, the Parties' activities do not overlap in Portugal. In
    France and Spain, both Parties are active with regard to heavy duty sheets. However, the Transaction
    would not result in affected markets on a national level.
84 Paragraphs 6.79 et seq. of the Form CO.
                                                         18
 ---pagebreak--- (99)   First, the Parties' combined market shares, as well as the increment brought about
       by the Transaction, are limited even on a local basis, and there are several strong
       competitors remaining in the market. The radial size of 400 km is in any case
       arbitrary as transport costs are low and sheets travel further than this distance.
(100) Second, sheets are a relatively commoditised product, and customers can switch
       suppliers of sheets quickly and easily. Supply contracts are short, and sheet
       customers multi-source and are able to exert buyer power with regular tenders.
(101) Third, barriers to expansion are relatively low in terms of costs and time.
(102) Fourth, there is overall spare capacity in the market, and all competitors could
       quickly and easily increase output by adding overtime or increasing shifts. 85 In
       addition, operators of box plants that currently only produce sheets for internal
       use could easily start making merchant sales, either from existing capacity or as
       part of a new investment in sheet capacity.
The Commission's assessment
(103) On a national level, the Parties' combined market share does not result in any
       affected markets, neither with regard to conventional sheets nor in relation to
       heavy duty sheets.86 At the local level, based on radii of 400 km around the
       Parties' production facilities concerned (see Section 4.4.2), the Parties' activities
       result in affected markets in Eastern France and South Eastern France.
(104) The Notifying Party provided market share estimates for all the local markets
       where the Parties' combined market shares exceed 20%. The Commission
       conducted a market reconstruction based on the Parties', as well as their main
       competitors' external sales volume data in 2017.87 The results of the
       Commission's market reconstruction are also presented below.
85 Concretely, the Notifying Party submits that adding one or two hours of overtime to an existing shift
   could increase the output of a plant by […]% to […]%, and adding one weekend shift could add […]%
   to […]%.
86 Concretely, at national level, the Parties' combined market share is [5-10]% with an increment of [0-
   5]% for conventional sheets, and [0-5]% with an increment of less than [0-5]% for heavy duty sheets.
   See paragraph 6.60 of the Form CO.
87 Confidential third party submissions on 10, 17 and 27 September 2018.
                                                       19
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---        majority of production in Portugal is sold to customers located in Portugal, not
       Northern Spain. Indeed, the total volume of exports from Portugal, inter alia (but
       not only) to (the whole of) Spain, equals only [a relatively limited proportion]%
       of the Parties' production of sheets in Portugal. Excluding the Parties' production
       from their plants located in Portugal reduces the Parties' combined market share
       to only [5-10]%, with an increment of [0-5]%.
(121) Second, a number of competitor plants are located just outside of the 400 km
       radius, including production facilities of Saica and Smurfit Kappa, that could and
       do conduct sales of sheets to customers located within the radius of 400 km
       around Europac Dueñas. Indeed, expanding the 400 km radius by 50 km
       introduces 20 additional plants, reducing the market share of the Parties to [20-
       30]%.
(122) Third, the responses to the market investigation indicated that although some
       smaller local customers select their suppliers on the basis of bilateral negotiations,
       many customers multi-source and organise tenders, organised on a local (i.e.
       plant-by-plant), national or pan-European level also depending on their size and
       geographic footprint.94 In this context, none of the respondents indicated that they
       would lack sufficient alternative suppliers post-Transaction in Northern Spain.95
(123) Fourth, respondents to the market investigation considered that production can
       relatively easily and quickly be increased by 10% through overtime. This would
       reduce the Parties' market share, to [30-40]% within a 400 km radius (and [5-
       10]% within a 300 km radius).96
(124) Lastly, in the course of the market investigation no concerns were raised in
       relation to Northern Spain.
(125) Therefore, the Commission considers that the Transaction does not raise serious
       doubts as to its compatibility with the internal market with regard to the local
       markets for conventional sheets in Northern Spain.
Eastern Spain – Conventional corrugated sheets
(126) As regards the radii around DSS Andorra and Europac Alcolea, the Commission
       considers that in view of the moderate combined market shares (i.e. less than
       30%), in combination with the limited concerns that were raised by respondents
       during the market investigation and the presence of multiple competitors such as
       Grupo Petit, Saica, International Paper, Mora y Goma SA and Ondulados Carme
       SA, the Transaction is unlikely to raise serious doubts in relation to conventional
       sheets in the radii around DSS Andorra and Europac Alcolea.
(127) As regards the other affected radii in Eastern Spain, the Parties have moderate
       combined market shares of [30-40]-[30-40]% around the plants of DSS Dicesa,
       DSS Flak and Europac Torrelavit, with increments of [10-20]-[10-20]% brought
94 Minutes of conference calls with sheet customer on 30 July 2018, 31 July 2018, 2 August 2018, 3
   August 2018, 6 August 2018, 9 August 2018 and 30 August 2018.
95 Replies to question 63 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
96 These market shares are based on the market reconstruction data, not the Notifying Party's estimates.
                                                     23
 ---pagebreak---         about by Europac.97 The market reconstruction largely confirms these market
        share data.
(128) The Commission considers that the Transaction does not raise serious doubts with
        regard to conventional sheets in Eastern Spain for the reasons set out below.98
(129) First, there are a large number of competitors located just outside the 400 km
        radius. Indeed, expanding the radius to 500 km, adds more than 20 third party
        plants in total, including multiple plants of International Paper and Grupo Petit,
        bringing down the Parties' combined market share below 30%.99 These plants are
        able to sell to many customers located within the radii around the Parties plants in
        Eastern Spain.
(130) Second, 4 of the 8 sheet feeders operating in Spain are located more closely to
        DSS Dicesa and DSS Flak than Europac's Alcolea,100 which is a box plant.
(131) Third, the market investigation indicated that customers organise tenders to fulfil
        their demand and multi-source. The Commission notes that post-Transaction,
        multiple competitors will remain, such as Saica and Smurfit Kappa but also
        numerous smaller competitors. These competitors represent together a volume
        that is higher than the combined entity. As such, the customers' ability to organise
        tenders and multi-source will not be jeopardised.
(132) Fourth, the respondents to the market investigation considered that production
        can relatively easily and quickly be increased by 10% through overtime.101 This
        would reduce the Parties' combined market share in each of the radii concerned
        with two percentage points.
(133) Therefore, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with regard to the local
        markets for conventional sheets in Eastern Spain.
North Western Spain – Conventional corrugated sheets
(134) In North Western Spain, the Parties' combined market shares vary between [40-
        50]% around the plants of DSS La Coruña and DSS Pontevedra, with an
        increment of [10-20]% brought about by Europac. The Commission's market
        reconstruction shows a much higher combined market share of [50-60]% with an
        increment of [20-30]-[20-30]%.
97  For completeness, the market share of Europac is entirely generated by Europac Alcolea; Europac
    Torrelavit does not manufacture or sell any sheets. See Annex 13 of the Form CO.
98  As the plants of DSS Dicesa, DSS Flak and Europac Torrelavit are all located very near to one another
    and the competitive landscape is thus to a very large extent similar, the Commission will focus its
    assessment on DSS Dicesa and will not provide separate assessments for each of these plants, as the
    assessment on DSS Dicesa applies equally to DSS Flak and Europac Torrelavit.
99  For example, […]% of DSS Dicesa's sales are to customers located further away than 400km.
100 For completeness, as mentioned before Europac Torrelavit, though located nearby DSS Dicesa and
    DSS Flak, does not produce sheets. See Annex 13 of the Form CO.
101 Minutes of conference calls with sheet customer on 30 July 2018, 31 July 2018, 2 August 2018, 3
    August 2018, 6 August 2018, 9 August 2018 and 30 August 2018; Replies to question 69-71, 79 of
    Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
                                                         24
 ---pagebreak--- (135) Nevertheless, the Commission considers that the Transaction does not raise
        serious doubts with regard to conventional sheets in North Western Spain, for the
        reasons set out below.102
(136) Concretely, the local market shares most likely do not at all give a true
        representation of the competitive pressure exerted by Europac, and thus likely by
        the combined entity, in North Western Spain.
(137) First, Europac does not operate any plants in North Western Spain. The overlap
        for sheets results entirely from three of the four Europac plants located in
        Portugal (Europac Oporto, Europac Ovar and Europac Leiria) and Europac
        Dueñas located in Northern Spain.
(138) Second, Europac has in the past not exerted a significant competitive constraint in
        North Western Spain. It has only competed for very few tenders of sheet
        customers in North Western Spain, namely […] tenders during the last three
        years, […]. […]. As such, the Parties do not appear to be close competitors for
        customers located in North Western Spain.103
(139) Third, Europac's overall sales of conventional sheets to customers located in
        North Western Spain are very limited; they amounted to a total of […] msqm in
        2017. According to the Parties' estimates, this represents only around [a limited
        proportion]% of demand in North Western Spain.
(140) In addition, the market investigation indicated that customers organise tenders to
        fulfil their demand and multi-source. The Commission notes that post-
        Transaction, multiple competitors will remain, such as Zarrinha and Smurfit
        Kappa but also numerous smaller competitors. In view of the likely significant
        overestimation of the Parties' market position, the sales of these competitors most
        probably represent together a volume that is higher than the combined entity in
        North Western Spain. As such, the customers' ability to organise tenders and
        multi-source will not be jeopardised.
(141) Finally, respondents to the market investigation considered that a sheet supplier
        can relatively easily and quickly be increase its production by 10%, through
        overtime.104
(142) Therefore, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with regard to conventional
        sheets on the relevant local markets in North Western Spain.
(143) Irrespective of the above, the Commission notes that the remedies proposed by
        the Notifying Party, as described in Section 6 below, will in any case also
        significantly reduce the Parties' combined local market shares in North Western
        Spain, with more than 10 percentage points.
102 As DSS La Coruña and DSS Pontevedra are geographically very near one another, and the competitive
    landscape is to a very large extent similar, the Commission's assessment of North Western Spain as a
    whole applies equally to each of DSS La Coruña and DSS Pontevedra.
103 Supplementary submission of the Parties of 17 October 2018, paragraph 2.3.
104 Minutes of conference calls with sheet customer on 30 July 2018, 31 July 2018, 2 August 2018, 3
    August 2018, 6 August 2018, 9 August 2018 and 30 August 2018; Replies to question 69-71, 79 of
    Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases
                                                        25
 ---pagebreak--- Eastern Spain – Heavy duty corrugated sheets
(144) As regards heavy duty sheets in Eastern Spain, the Commission considers that in
         view of the moderate market shares (i.e. less than 30%), in combination with the
         limited concerns that were raised by respondents during the market investigation,
         and the presence of multiple competitors such as Smurfit Kappa, International
         Paper, Cartonajes Font, Grupo Rivas and Ondulados Carme SA, the Transaction
         does not raise serious doubts as to its compatibility with the internal market in
         relation to heavy duty sheet in Eastern Spain.105
Conclusion – Corrugated sheets in Spain
(145) In view of all the above, the Commission considers that the Transaction does not
         raise serious doubts as to its compatibility with the internal market with regard to
         the manufacture and supply of conventional or heavy duty sheets in Spain or any
         local market within Spain.
               5.1.4.3.   Manufacture and supply of corrugated sheets – Portugal
Introduction
(146) In Portugal, the Parties' activities overlap with regard to the manufacture and
         supply of sheets, and the Transaction leads to affected markets as regards the
         conventional sheet market in Portugal.
(147) In particular, the Transaction will result in an affected market for conventional
         sheets at national level, as well as at local level, in Northern Portugal in the local
         markets comprising the radii of 400 km around (i) DSS Esmoriz, (ii) Europac
         Guilhabreu, (iii) Europac Ovar and (iv) Europac Leiria, and in Southern Portugal
         in the local market comprising the radius of 400 km around Europac Rio de
         Mouro.
The Notifying Party's view106
(148) The Notifying Party considers that the Transaction does not raise competition
         concerns with regard to the market for conventional sheets in Portugal, nor any
         potential sub-segments, for the following reasons.107
(149) First, according to the Notifying Party, the 2017 market shares are not entirely
         representative since the market for the manufacture and supply of sheets has
         changed substantially during 2018. In particular, Saica opened a new sheet feeder
         in March 2018 in Marinha Grande. This investment has already had an impact on
         the market, […].
105 For completeness, it should be noted that during the market investigation concerns were raised
    regarding heavy duty sheets in Eastern Spain (in a 400 km radius around DSS Dicesa plant). However,
    the Commission considers that the Transaction does not raise serious doubts for the following reasons:
    (i) the market for the manufacture and supply of heavy duty sheet is a niche market with limited
    volumes (5% of the total sheet market in Spain); (ii) combined market shares are moderate in a 400 km
    radius from DSS Dicesa plant; (iii) there are a large number of competitors located just outside the 400
    km radius; and (iv) the market investigation suggested that heavy duty sheet travels further than
    conventional sheet.
106 Paragraphs 6.79 – 6.85 of the Form CO, and Supplementary Submission of 17 October 2018.
107 Paragraph 6.80 of the Form CO.
                                                         26
 ---pagebreak--- (150) With Saica having made a large investment, the Notifying Party expects Saica to
      maximise its sales to third parties to recover its fixed costs. The Notifying Party
      estimates that this sheet feeder, that is currently still ramping up, will have a
      capacity of […] msqm of which […] msqm would be available for sale on the
      merchant market - which amounts to […] of the total merchant sheet market in
      Portugal. Already by the end of 2018, the Notifying Party expects this sheet
      feeder to be selling an additional […] msqm of conventional sheets on the market
      in Portugal. This alone would, based on the Notifying Party's estimates of all
      competitors' sales on the merchant market in Portugal, reduce the Parties'
      combined market share from [40-50]% to [30-40]%.
(151) Second, post-Transaction, a large number of competitors would remain in
      Portugal for these customers to source from, including Zarrinha, Saica, Smurfit
      Kappa, ECC and Sebastiao Martins. Further to this, the radial size of 400 km is in
      any case arbitrary as transport costs are low and sheets travel further than this
      distance.
(152) Third, sheets are a relatively commoditised product, and customers can switch
      suppliers of sheets quickly and easily.
(153) Fourth, customers multi-source and are able to exert countervailing buyer power
      with regular tenders and requests for price reductions.
(154) Fifth, barriers to expansion are relatively low in terms of costs and time.
(155) Sixth, as regards capacity the Notifying Party submits that on the one hand there
      is overall spare capacity in the market, and on the other hand that all competitors
      could quickly and easily increase output by adding overtime or increasing shifts.
(156) As such, the Parties estimate that the spare capacity of Saica's Marinha Grande
      sheet feeder together with that of another sheet feeder located in Portugal, of
      ECC's Feiria, is alone larger than the total current volumes of conventional sheets
      sold by the Parties. Concretely, the Notifying Party estimates this total spare
      capacity to be around […] msqm, whereas the Parties' sales of conventional
      sheets in 2017 amounted to […] msqm. This scenario does not even take into
      account the spare capacity that the Notifying Party believes exists in all
      Portuguese box plants.
(157) In respect of the capacity arguments made, on 17 October 2018, the Notifying
      Party provided an additional submission which sets out its market share estimates
      based on the assumption that each competitor increases its production of
      conventional sheets by 10%, explaining that in such a scenario the combined
      market share in Portugal decreases [5-10] percentage points if no sales are
      attributed to Saica's Marinha Grande sheet feeder, and [5-10] percentage points if
      Saica were to sell only [5-10]% of its total production capacity in Marinha
      Grande to third parties.
(158) Finally, the Notifying Party submits that there are significant imports into
      Portugal with potential imports in particular from Spain also exerting competitive
                                                27
 ---pagebreak---  ---pagebreak---  ---pagebreak---         increased vertical integration (i.e. for sheets to be used for the production of
        Saica's own cases).113 The resulting impact of that investment on the market is
        therefore significantly different from the understanding and estimations by the
        Notifying Party.
(167) In addition, the Parties allege that at least five strong competitors with significant
        spare capacities (i.e. Zarrinha, Smurfit Kappa, Saica, ECC and Sebastiao Martins)
        would remain in the relevant markets.
(168) The market investigation showed however that the possibility to increase
        production, also at these sites, may be limited. Indeed, the majority of the
        respondents, as well as of the major competitors in Portugal, considered that it is
        difficult to increase production by more than 10%. Whilst it is possible to increase
        production by 10% by working overtime, in order to increase production by more
        than 10% a weekend shift or extra shift during weekdays may be needed. For
        further production increases, new equipment may be required according to some
        respondents.114 Presuming that all major competitors would increase their
        production by 10%, this would however only have a limited impact on the Parties'
        combined market share. Based on the Commission's market reconstruction, the
        Parties' combined market share would reduce from [40-50]% to [40-50]% were
        each competitor to increase its production by [10-20]%. The Commission also
        computed the Parties' combined market share based on the presumption that all
        competitors would increase their production by 10% and that Saica would sell 7%
        of its total Marinha Grande production capacity to the merchant market. In such
        case, the combined market share of the Parties would not decrease to [30-40]% as
        estimated by the Notifying Party, but only to [40-50]%.
(169) In addition, several concerns were raised during the course of the market
        investigation, by customers as well as competitors. In particular, a majority
        indicated that the intensity of competition would decrease in Portugal post-
        Transaction, with several respondents pointing to the Transaction creating a
        duopolistic market structure in Portugal. In this regard, the Commission notes that
        the combined entity together with its biggest competitor Zarrinha would represent
        according to the Notifying Party's estimates [60-70]%, and according to the
        Commission's market reconstruction up to [60-70]%115, of the market for sales of
        sheets to customers in Portugal.
(170) The arguments of the Notifying Party that customers multi-source and can switch
        suppliers quickly, and that competitors can increase capacity easily, are not
        sufficient to counter the significant position of the merged entity. The results of
        the Commission's market reconstruction show that all smaller competitors
        together represent a volume that is much lower than DSS alone, even if they were
        to increase their production by 10%. Further, no structural capacity expansions
        are foreseen by sheets suppliers in Portugal.116
113 Minutes of conference calls with Saica on 31 July and 18 October 2018, and submissions of 10
    September and 10, 11 15 and 16 October.
114 Replies to questions 69-71 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
115 And up to [70-80]% within certain radii in Portugal.
116 Replies to question 78 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
                                                        30
 ---pagebreak--- (171) The market investigation also did not confirm the Notifying Party's argument that
         box plant operators that produce sheets for internal use could easily start making
         merchant sales, since cases are more complex products, with more added value.117
         As such, they are more profitable than sheets. This is apparent also from the
         margin data provided by the Parties for sheets in Portugal.
(172) In view of the above, the Commission considers that the Transaction raises
         serious doubts as to its compatibility with the internal market with regard to the
         local relevant markets for conventional sheets in Northern and Southern Portugal.
5.1.5. Manufacture and supply of corrugated cases
(173) As regards the manufacture and supply of cases, the Parties activities overlap, and
         on a national level the Transaction gives rise to affected markets in relation to the
         potential sub-segment for conventional cases in France and Portugal and the
         potential sub-segment for heavy duty cases in France.118 There is no overlap
         between the Parties' activities with regard to litho-laminated cases, as Europac is
         not active in this segment.119
(174) On a local level, taking a 300 km radius around each of the Parties' production
         plants, the Transaction results in affected markets with regard to the potential sub-
         segments for both conventional and heavy duty cases in France, Spain and
         Portugal.
               5.1.5.1.    Manufacture and supply of corrugated cases - France
(175) The Parties' activities overlap with regard to the manufacture and supply of cases
         in France. On a national level the Transaction leads to affected markets as regards
         the potential sub-markets for each of conventional and heavy duty cases.
(176) At the local level, as regards conventional cases, the Transaction results in 5
         affected markets in Northern France,120 1 affected market in Eastern France,121 3
         affected markets in South Eastern France,122 6 affected markets in Western
         France,123 2 affected markets in South Western France124 and 2 affected markets
         in Central France.125 With regard to heavy duty cases, the Transaction leads to 3
117 Annex 14 of the Form CO; Minutes of a conference call with a competitor. In addition, it should be
    noted that of those production facilities of the Parties producing both corrugated sheets and cases, the
    sales of sheets represent less than […]% of sales.
118 Although both Parties are active in the market for cases in Croatia, Denmark and Lithuania, Europac
    does not have any production facilities and only sells […] msqm of conventional cases in these
    countries. DSS has a share over [20-30]% in these countries and the increment from Europac is [0-
    5]%, [0-5]% and [0-5]% respectively.
119 Paragraph 6.74 of the Form CO.
120 Namely in the 300 km radii around (i) DSS Contoire, (ii) DSS St Just, (iii) DSS Vervins, (iv) Europac
    Gasny and (v) Europac Rouen.
121 Namely in the 300 km radius around (i) DSS Velin.
122 Namely in the 300 km radii around (i) DSS Cera (Meyzieu), (ii) DSS Rives and (iii) Europac La
    Rochette.
123 Namely in the 300 km radii around (i) DSS Atlantique, (ii) DSS Bretagne, (iii) DSS Normandie, (iv)
    DSS Normandie (Cabourg), (v) DSS Thouarce and (vi) Europac Durtal.
124 Namely in the 300 km radii around (i) DSS Rochechouart and (ii) DSS Sud-Ouest.
125 Namely in the 300 km radii around (i) DSS Larousse (Tigy) and (ii) DSS Mehun.
                                                          31
 ---pagebreak---         affected markets in Northern France,126 2 affected markets in Western France127
        and 2 affected markets in Central France.128
The Notifying Party's view
(177) The Notifying Party submits that the Transaction does not raise competition
        concerns with regard to cases or any of its sub-segments in France for the
        following reasons.
(178) First, the combined market shares, as well as the increment brought about by
        Europac are limited on a national level and there are strong competitors remaining
        present on the market such as Smurfit Kappa, Saica, International Paper,
        Rossmann and VPK.
(179) Second, barriers to expansion are low as evidenced by recent investments, by
        competitors of the Parties in their French plants.
(180) Third, the Notifying Party considers that there is currently spare capacity and
        competitors could easily and quickly increase output by, for example, increasing
        the number of production shifts or by adding overtime.
(181) Finally, it argues that case customers are able to exert countervailing buyer
        power, as a result of tendering and ad-hoc requests for price reductions. […].129
(182) The Notifying Party further submits that no competition concerns arise from the
        Transaction even if the market for corrugated cases, as well as its sub-segments,
        were to be defined as local in scope. In its local market analysis,130 the Notifying
        Party bases itself on local market conditions, by considering the market structure,
        pricing, available third party capacity, closeness of the Parties and potential
        constraints from outside the local market.131
The Commission's assessment
(183) At national level, the Parties' combined market share is [20-30]% with regard to
        each of conventional and heavy duty corrugated cases. The increment brought
        about by Europac is limited, not exceeding [0-5]%.
126 Namely in the 300 km radii around (i) DSS St Just, (ii) DSS Vervins and (iii) Europac Rouen.
127 Namely in the 300 km radii around (i) DSS Normandie (Cabourg), and (ii) Europac Durtal.
128 Namely in the 300 km radii around (i) DSS Larousse (Tigy) and (ii) DSS Mehun.
129 Paragraph 6.91 of the Form CO.
130 Annexes 3 and 4 of the Form CO.
131 The Notifying Party's view will further be described when necessary for the assessment of a specific
    local market.
                                                       32
 ---pagebreak---  ---pagebreak---  ---pagebreak---         competitors,134 the Transaction is unlikely to raise serious doubts as to its
        compatibility with the internal market with regard to conventional cases in
        Northern, Eastern, South Eastern, South Western and Central France and with
        regard to heavy duty cases in Central France. These regions and local markets are
        therefore not further discussed in the present decision.
Western France – Conventional corrugated cases
(187) The Parties achieve a relatively high market share – varying between [30-40]-[40-
        50]%135 – in all six local markets in Western France, when defined as a 300 km
        radius around each of their six production plants in Western France. The
        increment brought about by the Transaction varies between [5-10]-[10-20]%.
The Notifying Party's view
(188) The Notifying Party submits that no significant impediment of effective
        competition arises in relation to the supply of conventional cases in any of the
        local markets.
(189) First, the Notifying Party argues that there are many strong competitors
        remaining in all local areas, providing a range of alternative suppliers, as well as a
        sufficient competitive constraint on the merged entity.
(190) Second, the Notifying Party argues that competitor plants can easily and cheaply
        increase production in response to a hypothetical rise in the price of cases.
(191) Third, the Notifying Party submits that the radial size of 300 km is arbitrary as
        conventional cases travel further than this distance and as it excludes competitors’
        plants just outside of the radius, which may exert important competitive constraint
        on the Parties.
(192) Finally, it argues that the Parties are not particularly close competitors in these
        local markets.136
(193) With regard to Brittany in particular, the Notifying Party submitted additional
        arguments in its Supplementary submission on 17 October 2018.
(194) First, it reinforces its argument that analysing the market on the basis of radii of
        200km or 300km around DSS Bretagne – based on Commission's precedents –
        does not provide an accurate picture of the Brittany region.
(195) Second, the Notifying Party submits that there are a number of strong competitors
        in the radius around DSS Bretagne and considers that Europac is very rarely one
        of the geographically closest suppliers to the customers of DSS Bretagne. It
        further argues that in substantially all cases, the competitor plants closest to the
134 These are i.a. Smurfit Kappa, Saica, VPK, International Paper, Rossmann in Northern, Eastern, South
    Eastern, South Western and in Central France with regard to conventional cases and Allard-Vallois,
    CPL Cartonnerie de Pays de Loire, Cartonnages de Maine and Rossmann in Central France with
    regard to heavy duty cases.
135 Based on the market reconstruction on the basis of the Parties' and their competitors third party sales in
    2017.
136 Section 3 of Annex 3 of the Form CO.
                                                        35
 ---pagebreak---          customer produce sufficient conventional cases to cover the amounts the customer
         currently purchases from DSS Bretagne. It is therefore not plausible that
         customers in the region would not be able to secure at least three independent
         competitive bids post-Transaction.
(196) Third, the Notifying Party claims that the Parties rarely compete with another in
         this local market.
(197) Finally, the Notifying Party argues that customer orders in this local market tend
         to be relatively modestly-sized, therefore even small competitors can compete for
         the vast majority of conventional case opportunities in the local area, ensuring a
         sufficient number of alternative suppliers.
The Commission's assessment
(198) The Commission considers that the Transaction raises serious doubts as to its
         compatibility with the internal market with regard to the manufacture and supply
         of conventional cases in Western France, and in particular in Brittany, 137 for the
         following reasons.
(199) First, the Commission notes that the Parties' combined market shares are
         relatively high in all local markets, varying between [30-40]-[40-50]%. The
         Parties achieve the highest combined market share in Brittany, in the local market
         around DSS Bretagne.
(200) Second, in the market investigation, customers raised various concerns with
         regard to the conventional cases market in Western France, pointing out that
         further supply-side concentration resulting from the Transaction would reduce
         the number of alternative suppliers and lead to price increases.
(201) In particular in Brittany, 78% of the customers responding to the questionnaire
         indicated that they expect a price increase as a result of the Transaction, 67%
         replied that the Transaction would have a negative impact on their company and
         the market in general, and that the intensity of competition will decrease due to
         the Transaction. Furthermore, 44% of the respondents in the region expressed that
         they would not have sufficient alternative suppliers should the Parties stop
         supplying them or supply them at significantly worse conditions.138
(202) Third, although various other competing suppliers are active in Western France,
         DSS and its largest competitor, Smurfit Kappa, already before the Transaction –
         and without taking into account the Caradec plant139 -– appear to control more
         than half of the merchant market in all local areas with a combined market share
         between [50-60] and [70-80]%. Therefore, the Transaction would increase the
         combined market share of the two largest suppliers to [60-70]-[80-90]%.
(203) In this regard, the Commission notes that although the Notifying Party submitted,
         at least with regard to the customers of the DSS Bretagne plant,140 that there are
137 The region of Brittany is best captured by the local market analysis around the DSS Bretagne plant.
138 Replies to questions 18 and 34-38 of Questionnaire Q2 – Customers Corrugated Cases.
139 As explained in paragraph 5, the acquisition of the Caradec plant by Smurfit Kappa is conditional upon
    this Transaction.
140 Annex 1 of the Supplementary submission of 17 October 2018.
                                                         36
 ---pagebreak---          indeed multiple third party plants present in the region and located closer than the
         Europac Durtal plant to the customers analysed, this analysis is not determinative.
         This is beacuse these smaller competitors – representing altogether a lower
         production volume than Europac Durtal alone – would not be able to replace the
         competitive constraint exerted by Europac pre-transaction. This remains the case
         even if customer orders tend to be small as claimed by the Notifying Party.141
(204) Fourth, the market investigation did not confirm the Notifying Party's claim that
         production can be easily increased in the region. Indeed, no structural capacity
         expansion is foreseen by the competitors in the region, 142 and a capacity
         expansion of more than 10% is seen as difficult.143 The majority of market
         participants responding to the market questionnaires also do not expect any new
         suppliers entering the case market in France.144
(205) In any event, even a hypothetical 10% increase in third party merchant sales by
         all competitors of the Parties would only result in a limited decrease of the
         combined market shares of the Parties (varying between [30-40]-[40-50]% in the
         six local markets).
(206) Fifth and as to the Parties’ criticism of the applicable radii-based market
         definition, the market investigation did not support the Notifying Party's view that
         customers can source cases from more than 300km (see Section 4.5.2). In any
         event, adding an additional 100km to the radii would still result in the Parties
         achieving significant combined market shares in the six local areas ([20-30]-[40-
         50]%).
(207) Sixth, due to the highly concentrated supply-side level of the market and the
         relatively small size of the majority of customers, it is unlikely that buyer power
         emanating from tenders and multi-sourcing can sufficiently counterbalance price
         increases induced by the merged entity.
(208) Finally, the Notifying Party asserts that the Europac Durtal plant has not in the
         past exerted a significant competitive constraint on the DSS plants in the Brittany
         region […]. However, this is not indicative with regard to its (potential)
         competitive strength in the future, […].145
(209) Whilst no customer has indicated that its demand is currently supplied by both
         DSS Bretagne and Europac Durtal,146 the market investigation results indicate
         that Europac Durtal exerts a competitive constraint on DSS in Brittany. In this
         regard, the Commission has investigated whether customers located in Brittany147
         have seen Europac Durtal in past tenders or would consider it as a viable option to
         supply from it. The competitive interaction between DSS and the Europac Durtal
141 Supplementary submission of 17 October 2018, paragraph 4.6.
142 Replies to question 94 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugatd Cases.
143 Replies to question 85 of Questionnaire Q1 - CCM, Corrugated Sheets, Corrugatd Cases.
144 Replies to question 29 to Questionnaire Q2 – Cutomers Corrugated cases and replies to question 92 of
    Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
145 Indeed, several customers source currently from both the DSS Bretagne and the Europac Caradec for
    the same plant (replies to question 2 of Questionnaire Q4 – Case Customers in Western France).
146 Replies to question 2 of Questionnaire Q4 – Case Customers in Western France.
147 As defined as the administrative region of Brittany (Bretagne), comprised of four "départements",
    namely Côtes-d'Armor (22), Finistère (29), Ille-et-Vilaine (35) and Morbihan (56).
                                                        37
 ---pagebreak---         plant in Brittany is confirmed by the fact that the customers responding to the
        market investigation indicated for the majority (77%)148 of their plants located in
        Brittany that Europac Durtal is a current supplier, past supplier, past tender
        participant or alternative supplier.149
(210) Therefore, the Commission considers that the Transaction raises serious doubts as
        to its compatibility with the internal market with regard to the manufacture and
        supply of conventional cases in Western France, and in particular in Brittany.
Western France – Heavy duty corrugated cases
(211) The Parties also produce heavy duty cases in Western France, leading to two
        affected local markets, when defined as radii of 300 km around DSS Normandie
        (Cabourg) and the Europac Durtal plant.
(212) The Commission however considers that the Transaction does not raise serious
        doubts with regard to heavy duty cases in Western France for the following
        reasons.
(213) First, the increment is limited ([5-10]-[5-10]%), brought about by the Europac
        Rouen plant in Western France, with a production of […] msqm (representing
        less than […]% of its total production).
(214) Second, the market investigation confirmed that heavy duty cases travel farther
        than conventional cases (see Section 4.5.2). Indeed, the majority of the customers
        replying to the questionnaire indicated that the maximum distance they consider
        acceptable for the supply of heavy duty cases is between 300-500km.150 Such
        further expansion of the geographic scope of the market decreases the Parties'
        combined market shares and/or the increment in the affected local areas.
(215) With regard to the local market around DSS Normandie (Cabourg), the Parties'
        combined market share drops to [30-40]% (with an increment of [5-10]%) in a
        radius of 400km. With regard to the radius around Europac Durtal, the combined
        market share decreases to [20-30]% in a radius of 400 km, with an increment of
        [0-5]%, and to [20-30]% in a radius of 500km, with an increment of [0-5]%.
(216) Third, and as detailed in Section 4.5.1, the market investigation suggests that a
        sliding scale of substitution exists between the different case products and thus no
        sharp delineation can be made for heavy duty cases. In view of the significantly
        lower market shares of the Parties in the same geographic area with regard to
        conventional cases, which to some extent are substitutable with certain heavy
        duty products, it can be concluded that the market share of the Parties on the
        strictly defined heavy duty segment overestimates their market power.
(217) Finally, no concerns were raised in the market investigation with regard to heavy
        duty cases in Western France.
148 This is true even on a "département" level, 64% in Côtes-d'Armor, 75% in Finistère, 76% in Ille-et-
    Vilaine and 88% in Morbihan.
149 Replies to question 3 of Questionnaire Q4 – Case Customers in Western France.
150 Replies to question 13 of Questionnaire Q2 – Customers – Corrugated cases.
                                                      38
 ---pagebreak--- (218) Therefore, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with regard to heavy duty
        cases in Western France.
Northern France – Heavy duty corrugated cases
(219) While the Parties' combined market shares are moderate with regard to
        conventional cases in Northern France, they achieve high market shares with
        regard to heavy duty cases, varying between [40-50]-[70-80]% in the three
        affected markets.
(220) The Commission however considers that the Transaction does not raise serious
        doubts with regard to heavy duty cases in Northern France for the following
        reasons.
(221) First, the increment brought about by Europac is limited, [0-5]-[5-10]% in each
        local market. Indeed, the only Europac plant producing heavy duty cases in
        Northern France is Europac Rouen, with a production of […] msqm (representing
        less than […]% of its total production).
(222) Second, the market investigation confirmed that heavy duty cases travel farther
        than conventional cases (see Section 4.5.2). Indeed, the majority of the customers
        replying to the questionnaire indicated that the maximum distance they consider
        acceptable for the supply of heavy duty cases is between 300-500km.151 Such
        further expansion of the geographic scope of the market decreases the Parties'
        combined market shares and/or the increment in all three affected local areas.
(223) With regard to the local market around DSS St Just, the Parties' combined market
        share drops to [50-60]% (with an increment of [0-5]%) in a radius of 400km, and
        to [20-30]% (with an increment of [0-5]%) in a radius of 500km. With regard to
        the radius around DSS Vervins, the combined market share decreases to [30-40]%
        in a radius of 400 km (with an increment of [0-5]%), and to [20-30]% in a radius
        of 500km (with an increment of only [0-5]%). Finally, as regards the local market
        around Europac Rouen, while the combined market share increases to [60-70]%
        with a 400km radius, the increment brought about by Europac is very limited,
        only [0-5]%. As for a radius of 500km, the Parties' combined market share
        decreases to [40-50]%, with an increment of only [0-5]%.
(224) Third, and as detailed in Section 4.5.1, the market investigation suggests that a
        sliding scale of substitution exists between the different case products and thus no
        sharp delineation can be made for heavy duty cases. In view of the significantly
        lower market shares of the Parties in the same geographic area with regard to
        conventional cases, which to some extent are substitutable with certain heavy
        duty products, it can be concluded that the market share of the Parties on the
        strictly defined heavy duty segment overestimates their competitive power.
(225) Finally, no concerns were raised in the market investigation with regard to heavy
        duty cases in Northern France.
151 Replies to question 13 of Questionnaire Q2 – Customers – Corrugated cases.
                                                      39
 ---pagebreak--- (226) Therefore, the Commission considers that the Transaction does not raise serious
         doubts as to its compatibility with the internal market with regard to heavy duty
         cases in Northern France.
Conclusion - France
(227) Given the strong position of the merged entity, the high concentration levels of
         the market, as well as customer concerns, the Commission considers that the
         Transaction raises serious doubts as to its compatibility with the internal market
         with regard to the manufacture and supply of conventional cases in Western
         France and in particular in the Brittany region. However, the Transaction does not
         raise serious doubts in other regions of France for either conventional or heavy
         duty cases.
              5.1.5.2.    Manufacture and supply of corrugated cases – Spain
(228) In Spain, the Parties' activities overlap with regard to the manufacture and supply
         of cases, although the Transaction does not result in any affected markets on a
         national level.152 Nevertheless, at the local level the Transaction results in
         affected markets with regard to conventional cases in Western Spain, in the 300
         km radii around (i) DSS La Coruña, (ii) DSS Pontevedra and (iii) Europac
         Cartonajes Asturiana, and with regard to heavy duty cases in North Western
         Spain and Eastern Spain, in the 300 km radii around (iv) DSS Tecnicarton Vigo
         and (v) DSS Tecnicarton Almussafes (Valencia) respectively.
The Notifying Party's view153
(229) The Notifying Party submits that the Transaction does not raise competition
         concerns with regard to cases, or any of its sub-segments, in Spain for the
         following reasons.
(230) First, the Parties' combined market shares, as well as the increment brought about
         by the Transaction, are limited and strong competitors will remain on the market
         in Spain, in additional to regional and local players, so that customers will
         continue to have a range of alternative suppliers. Also, in any direction there are
         always third party plants in between DSS Pontevedra and Europac's plants, so that
         the Parties are geographically not particularly close competitors in this radius.
(231) Second, the Notifying Party considers that there is overall spare capacity, and
         competitors could easily and quickly increase their production in response to a
         hypothetical rise in prices of cases, inter alia through overtime, increasing the
         number of shifts or adding a weekend shift.
(232) Third, customers multi-source, and are able to exert buyer power through regular
         tenders and requests for price reductions.
(233) Fourth, barriers to expansion are relatively low in terms of costs and time.
152 For completeness, the Parties' combined market share in Spain for conventional corrugated cases is [5-
    10]%, with an increment of [0-5]%, and for heavy duty corrugated cases [5-10]%, with an increment
    of [0-5]%.
153 Paragraphs 3.180 to 3.201 of Annex 3 to Form CO.
                                                      40
 ---pagebreak---  ---pagebreak--- (240) First, the market share of [30-40]% is also due to the inclusion of the Parties'
       production facilities in Portugal, which all produce conventional case. As all
       exports from Portugal, inter alia to Spain, equal only roughly […]% of the
       Parties' total production of cases in Portugal, the Parties' combined market share
       does not give a true representation of the competitive pressure exercised by the
       Parties on each other in respect of customers located in Western Spain.
(241) Second, as regards the 300 km radius, it should be noted that (i) DSS Pontevedra
       made […]% of its sales to customers located outside of this radius, and that (ii)
       there is a number of third party plants located just outside the 300 km radius,
       including production facilities operated by Saica and Hinojosa, which could and
       potentially do supply cases within the radius.
(242) Third, the market investigation indicated that customers organise tenders to fulfil
       their demand and multi-source. The Commission notes that post-Transaction,
       multiple competitors will remain, such as Saica and Smurfit Kappa but also
       numerous smaller competitors. These competitors represent together a volume
       that is higher than the combined entity. As such, the customers' ability to organise
       tenders and multi-source will not be jeopardised.
(243) Fourth, the respondents to the market investigation considered that production
       can relatively quickly be increased by 10%, through overtime. 154 Such a
       hypothetical increase in production by all competitors would reduce the Parties'
       combined market share with two percentage points.
(244) In view of the above, the Commission considers that the Transaction does not
       raise serious doubts as regards its compatibility with the internal market with
       regard to conventional cases in Western Spain.
North Western Spain – Heavy duty corrugated cases
(245) In the 300 km radius around DSS Tecnicarton Vigo, the Parties' combined market
       share is [30-40]%, with an increment brought about by the Transaction of [5-
       10]%.
(246) The Commission considers nevertheless that the Transaction does not raise
       competition concerns with regard to heavy duty cases in the 300 km radius
       around DSS Tecnicarton Vigo, for the reasons set out below.
(247) First, DSS' market share is limited ([5-10]%), and equals a production of heavy
       duty cases of only […] msqm. Of this […] msqm, part is generated by DSS's
       production facility in Portugal, DSS Tecnicarton Agueda. In addition, Europac's
       market share is fully generated by its production facilities in Portugal; Europac
       does not have any production facilities of heavy duty cases in North Western
       Spain.
(248) Second, and as detailed in Section 4.5.1, the market investigation suggests that a
       sliding scale of substitution exists between the different case products and thus no
       sharp delineation can be made for heavy duty cases. Therefore, it can be
154 Minutes of conference calls with sheet customers on 30 July 2018, 31 July 2018, 2 August 2018, 3
    August 2018, 6 August 2018, 9 August 2018 and 30 August 2018; Replies to questions 69-71, 79 of
    Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases
                                                     42
 ---pagebreak---         concluded that the combined market share of the Parties on the strictly defined
        heavy duty segment would overestimate their market power.
(249) Third, the market investigation confirmed that heavy duty cases travel further
        than conventional cases (see Section 4.5.2). Indeed, the majority of the customers
        replying to the questionnaire indicated that the maximum distance they consider
        acceptable for the supply of heavy duty cases is between 300-500 km.155 Such
        further expansion of the geographic scope of the market decreases the Parties'
        combined market shares and/or the increment in the affected local areas – to [10-
        20]% with a [5-10]% increment at 500 km, as there is a number of additional
        competitor plants (including Zarrinha, Embalpacos, Jose Neves and Cartocerm
        Lda.) located outside of the 300 km radius but within 500 km of Tecnicarton
        Vigo.
(250) Fourth, DSS Tecnicarton Vigo and Europac are not each other's closest
        competitors because unlike Europac, Tecnicarton Vigo is not focused on
        corrugated packaging but rather on designing and producing tailor-made multi-
        material solutions for its customers, using materials such as plastic, metal, foam
        and paper with corrugated packaging only being produced incidentally, as
        evidenced by the fact that the two facilities together produce only […] msqm.
(251) Finally, no concerns were raised in the market investigation with regard to heavy
        duty cases in North Western Spain.
(252) In view of the above, the Commission considers that the Transaction does not
        raise serious doubts as regards its compatibility with the internal market with
        regard to heavy duty cases in North Western Spain.
Eastern Spain – Heavy duty corrugated cases
(253) The Commission considers that in view of the moderate market share (less than
        30%) and the limited increment (less than 5%), and the fact that no customers
        expressed concerns during the market investigation as regards heavy duty cases in
        Eastern Spain, the Transaction does not raise serious doubts as to it compatibility
        with the internal market with regard to heavy duty cases in Eastern Spain.
              5.1.5.3.    Manufacture and supply of corrugated cases – Portugal
(254) In Portugal, the Parties' activities overlap with regard to the manufacture and
        supply of cases, and the Transaction leads to affected markets as regards each of
        conventional and heavy duty cases.
(255) Concretely, the Transaction results in an affected market at national level, for
        conventional cases, as well as affected markets at local level, for conventional
        cases in Northern Portugal in the 300 km radii around (i) DSS Esmoriz, (ii) DSS
        Tecnicarton Agueda, (iii) Europac Guilhabreu, (iv) Europac Leiria, and (v)
        Europac Ovar and in Southern Portugal in the 300 km radius around Europac Rio
        de Mouro, and for heavy duty cases in Northern Portugal, in the 300 km radii
        around (i) Europac Guilhabreu, (ii) Europac Ovar and (iii) DSS Tecnicarton
        Agueda.
155 Replies to question 13 of Questionnaire Q2 – Customers – Corrugated cases.
                                                      43
 ---pagebreak---  ---pagebreak---  ---pagebreak---         […]% of their production to Portugal.157 For that reason, the Parties' combined
        market share may not give a true representation of their position in Northern
        Portugal.
(267) Second, although some complaints were raised in the course of the market
        investigation, pointing to the fact that a large portion of the market would be in
        the hands of the combined entity together with Saica,158 the Commission notes
        that post-Transaction multiple competitors will remain, such as Zarrinha ([10-
        20]%) and Smurfit Kappa ([5-10]%), and also Sebastiao Martins, in addition to
        numerous smaller competitors. These competitors together represent a volume
        that is substantially higher than the combined entity. As such, the customers'
        ability to organise tenders and multi-source will not be jeopardised.
(268) Third, the market investigation showed that production can relatively quickly be
        increased by 10%, through overtime.159 Such a hypothetical increase in
        production of 10% by all competitors would reduce the Parties' combined market
        share by two percentage points.
(269) In view of the above, the Commission considers that the Transaction will not raise
        serious doubts as to it compatibility with the internal market with regard to
        conventional cases in Northern Portugal.
(270) Irrespective of the above, the Commission notes that the remedies proposed by
        the Notifying Party, as described in Section 6 below, will in any case reduce the
        Parties' moderate combined market share also with regard to conventional cases.
        Since Europac Ovar is active with regard to the production and supply of
        conventional cases as well, the remedy would decrease the Parties' combined
        market share to below 30%.
Northern Portugal – Heavy duty corrugated cases
(271) In Northern Portugal, in the radii around DSS Tecnicarton Agueda, Europac
        Guilhabreu and Europac Ovar, the Parties' combined market share for heavy duty
        cases is [30-40]%, with an increment of [5-10]% brought about by DSS.
(272) The Commission considers nevertheless that the Transaction does not raise
        competition concerns with regard to heavy duty cases in these radii for the
        following reasons.
(273) First, DSS' market share is limited ([5-10]%), and equals a production of heavy
        duty cases of only […] msqm. Of this […] msqm, part of which is generated by
        one of DSS's production facilities in North Western Spain, DSS Tecnicarton
        Vigo.
157 Replies to question 6 of RFI 8 submitted on 29 October 2018.
158 Replies to questions 80-84 and 96-99 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated
    Cases.
159 Minutes of conference calls with sheet customers on 30 July 2018, 31 July 2018, 2 August 2018, 3
    August 2018, 6 August 2018, 9 August 2018 and 30 August 2018; Replies to questions 69-71, 79 of
    Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
                                                       46
 ---pagebreak---  (274) Second, post-Transaction multiple competitors will remain, such as Zarrinha ([10-
          20]%), Embalpacos ([10-20]%), Jose Neves ([10-20]%) and Cartocer, Lda ([5-
          10]%), in addition to numerous smaller competitors.
 (275) Third, and as detailed in Section 4.5.1, the market investigation suggests that a
          sliding scale of substitution exists between the different case products and thus no
          sharp delineation can be made for heavy duty cases. Therefore, the combined
          market share of the Parties on the strictly defined heavy duty segment could
          slightly overestimate their competitive power.
 (276) Fourth, the market investigation confirmed that heavy duty cases travel further
          than conventional cases (see Section 4.5.2). Indeed, the majority of the customers
          that responded indicated that the maximum distance they consider acceptable for
          the supply of heavy duty cases is between 300-500 km.160 Such further expansion
          of the geographic scope of the market decreases the Parties' combined market
          shares and/or the increment in the affected local areas – to [20-30]% with a [0-
          5]% increment at 400 km,161 as there is a number of additional competitor plants
          within this larger radius (including Embalajes Camo, Gecoinsa and Trelaco's
          Loeches) located outside of the 300 km radius.
 (277) Fifth, DSS and Europac are not each other's closest competitors because unlike
          Europac, Tecnicarton Agueda is not focused on corrugated packaging but rather
          on designing and producing tailor-made multi-material solutions for its
          customers, using materials such as plastic, metal, foam and paper with corrugated
          packaging only being produced incidentally, as evidenced by the fact that DSS
          Tecnicarton Agueda together with DSS Tecnicarton Vigo produce only […]
          msqm.
 (278) Finally, no concerns were raised in the market investigation with regard to heavy
          duty cases in Portugal.
 (279) In view of the above, the Commission considers that the Transaction does not
          raise serious doubts as regards its compatibility with the internal market with
          regard to heavy duty cases in Northern Portugal.
5.2.          Horizontal coordinated effects
 (280) The Commission considers that based on the limited combined market shares of
          the Parties, the Transaction is unlikely to lead to coordinated effects on the
          narrowest plausible markets for collection and supply of recovered paper, as well
          as for the manufacture and supply of corrugated case materials as set out in
          Sections 4.1-4.3. Therefore, these markets will not be further discussed in this
          section of the present decision.
 (281) As for the markets for sheets and cases in France, Spain and Portugal, the
          Commission considers that the Transaction does not raise serious doubts as to its
          compatibility with the internal market with regard to coordinated effects
 160 Replies to question 13 of Questionnaire Q2 – Customers – Corrugated cases.
 161 If a 500 km radius would be considered, the Parties' combined market share would [20-30]% with an
     [10-20]% increment brought about by Europac.
                                                       47
 ---pagebreak---          irrespective of the exact product and geographic market definition retained, for
         the following reasons.
 (282) First, the sourcing of these products is organised via tenders, and therefore the
         suppliers are not aware of the pricing strategy of their competitors. The lack of
         transparency is further reinforced by the fact that prices are negotiated bilaterally
         between suppliers and customers. Indeed, the Notifying Party is often not able to
         correctly assess its competitors' third party sales or capacity.
 (283) The Commission therefore takes the view that the market is not sufficiently
         transparent to allow the coordinating firms to monitor to a sufficient degree
         whether other firms are deviating and thus know when to retaliate.
 (284) Second, coordination is also unlikely as different players are active in the
         different geographic markets, making it difficult to reach a common
         understanding on term of coordination.
 (285) Third, suppliers differ significantly in terms of markets shares, capacity and level
         of vertical integration.
 (286) Finally, short-term contracts and fluctuating demand, and - as for cases - the
         variety of different box designs add to the complexity of these markets.
5.3.          Vertical non-coordinated effects
 (287) Due to the vertically integrated nature of both Parties, the Transaction leads to
         various vertical overlaps between their activities throughout the whole value
         chain.
 5.3.1. Collection (upstream) and supply of recovered paper (downstream)
 The Notifying Party's view
 (288) The Notifying Party considers that in view of the limited combined market shares
         of the Parties, as well as the small increment, the Transaction is unlikely to lead to
         competition concerns on the upstream and downstream markets.162
 The Commission's assessment
 (289) The Commission notes that the Transaction leads to vertically affected markets
         only if the markets are defined as national in scope as the Parties' combined
         market share on the downstream market for the supply of recovered paper in
         Portugal is [30-40]% (see section 5.1.2).163
 (290) In any event however, the Commission considers that also on markets defined as
         national in scope, the Transaction does not raise competition concerns for the
         following reasons.
 162 Paragraphs 6.39-6.41 of the Form CO.
 163 For the sake of completeness it should be mentioned that if the markets for the collection and supply of
     recovered paper were to be further sub-segmented on the basis of the different paper grades, these
     submarkets would be also affected in Portugal.
                                                        48
 ---pagebreak--- (291) The Transaction is unlikely to lead to input foreclosure given the moderate
        combined market share of the Parties on the upstream market. Downstream
        competitors can easily source recovered paper from other alternative suppliers.
        Indeed, on an EEA-wide level the Parties' combined market share is [5-10]%. On
        a national level the only overlap is in Spain where the combined market share
        would be [0-5]%. Europac has a [30-40]% market share in Portugal where DSS is
        not active in the collection of recovered paper.164
(292) Similarly, the merged entity is unlikely to have the ability or the incentive to
        engage in customer foreclosure, given its moderate market share on the
        downstream market for the supply of recovered paper ([5-10]% in the EEA, less
        than [0-5]% in Spain and [30-40]% in Portugal) and the very limited increment
        brought about by the Transaction (not exceeding [0-5]%).
(293) Therefore, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with regard to the vertical
        link between the Parties' activities on the markets of collection and supply of
        recovered paper, irrespective of the exact product and geographic market
        definition upheld.
5.3.2. Supply of recovered paper (upstream) and manufacture and supply of CCM
        (downstream)
The Notifying Party's view
(294) The Notifying Party considers that in view of the limited combined market shares
        of the Parties, as well as the small increment, the Transaction is unlikely to lead to
        competition concerns on the upstream and downstream markets.165
The Commission's assessment
(295) The Commission notes that given that recovered paper is only an input product
        for recycled CCM, whereas kraftliner and virgin wood fibre fluting should not be
        taken into account when analysing the Transaction's potential impact due to the
        vertical link between the Parties' activities on the upstream and downstream
        markets. Furthermore, given the at least EEA-wide scope of the downstream
        market confirmed by the market investigation (see Section 4.3.2), the appropriate
        geographic scope of the vertical analysis should be at least EEA-wide. Therefore,
        the Transaction does not lead to vertically affected markets in this regard.
(296) The Commission considers that irrespective of the exact market definition, the
        Transaction does not raise competition concerns for the following reasons.
(297) The Transaction is unlikely to lead to input foreclosure as the combined market
        share of the Parties is moderate on the upstream market, therefore downstream
        competitors can easily source recovered paper from other alternative suppliers.
        Indeed, on an EEA-wide level the Parties' combined market share is [5-10]%.
(298) Similarly, the merged entity is unlikely to have the ability or the incentive to
        engage in customer foreclosure, given its moderate market share on the
164 Notifying Party's reply to question 4 of RFI5 on 11 October 2018.
165 Paragraphs 6.39-6.41 and 6.49 of the Form CO.
                                                        49
 ---pagebreak---          downstream market for the manufacture and supply of recycled CCM ([5-10]%)
         and the limited increment brought about by the Transaction ([0-5]%).
(299) Therefore, the Commission considers that the Transaction does not raise serious
         doubts as to its compatibility with the internal market with regard to the vertical
         link between the Parties' activities on the markets of the supply of recovered
         paper and the manufacture and supply of recycled CCM.
5.3.3. Manufacture and supply of CCM (upstream) and corrugated sheets (downstream)
The Notifying Party's view
(300) The Notifying Party submits that the Transaction does not lead to input or
         customer foreclosure concerns based on the merged entity's limited upstream
         market presence, as well as its moderate demand for CCM products.166
The Commission's assessment
(301) The Commission notes that the Transaction leads to vertically affected markets
         only if national or local sheet markets are considered. However, the upstream
         market for the manufacture and supply of CCM is EEA-wide.
(302) The Commission considers that the merged entity will not have the ability or
         incentive to engage in input foreclosure for the following reasons.
(303) First, the fact that the Parties' upstream market shares do not exceed 10% with
         regard to any of the CCM products suggest that the merged entity will not have a
         significant degree of market power in relation to any CCM product. Without a
         significant degree of market power in relation to any CCM product, the merged
         entity is unlikely to have a significant influence on the conditions of competition
         in relation to CCM products in a manner that could lead to input foreclosure
         concerns.
(304) Second, although some customers raised concerns in the market investigation
         with regard to the Transaction's potential negative impact on the sourcing of
         CCM, and in particular kraftliners,167 this view was not widely shared by market
         participants.
(305) The majority of the Parties' CCM customers responding to the questionnaire
         indicated that they would be able to find alternative suppliers should the Parties
         stop supplying them or supply them at significantly worse conditions post-
         transaction.168 Furthermore, the majority indicated that the Transaction will have
         no impact on their company in sourcing these products.169
166 Paragraphs 6.105-6.113 of the Form CO.
167 Minutes of a conference call with a competitor on 30 July 2018, paragraphs 29-30; replies to questions
    47 and 56-59 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases and replies to
    question 24 of Questionnaire Q3 – Competitors Corrugated Case Materials.
168 Replies to question 47 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases and replies
    to question 14.2 of Questionnaire Q3 – Competitors Corrugated Case Materials.
169 Replies to question 56 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases and replies to
    question 24 of Questionnaire Q3 – Competitors Corrugated Case Materials.
                                                       50
 ---pagebreak--- (306) The majority of the competitors and customers replied that the Transaction will
         not have a negative impact on the intensity of competition, the price level or the
         volumes available.170
(307) Third, the market investigation confirmed that third party capacity expected in the
         market in the next 5 years (in form of capacity expansions) would be able to
         counterbalance the effect of a potential internalisation strategy of the merged
         entity.171
(308) Indeed, competitors indicated with regard to all CCM products produced by the
         Parties (kraftliner, testliner, HP recycled fluting and standard recycled fluting)
         that they either expect the demand and the supply to be balanced in the future or
         predict oversupply.172 Similarly, the majority of customers describe the present
         situation as and expects for the future a balance between the demand and supply
         with regard to these products,173 and predicts no sourcing difficulties in the
         future.174
(309) Fourth, although the Parties are already vertically integrated, they use only a
         proportion of their CCM production internally, and they supply their downstream
         competitors with CCM products.175
(310) Finally, the Commission notes that – similarly to the Parties – some downstream
         competitors are vertically integrated, manufacturing themselves CCM, therefore
         any input foreclosure strategy would have limited effect on them.
(311) The Commission considers that the Transaction does not lead to customer
         foreclosure concerns either.
(312) First, the merged entity will not have a significant degree of market power on the
         downstream market; the Parties' combined demand on the merchant market
         represents [10-20]% of the total EEA demand for CCM.176 This figure does not
         significantly differ should one look at the demand for individual CCM
         products.177 Therefore, upstream competitors of the Parties have sufficient
         economic alternatives to sell their output across the EEA.
170 Replies to questions 25-27 of Questionnaire Q3 – Competitors Corrugated Case Materials, replies to
    questions 57-59 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
171 Replies to question 19 of Questionnaire Q3 – Competitors Corrugated Case Materials and replies to
    question 51 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
172 Replies to question 21 of Questionnaire Q3 – Competitors Corrugated Case Materials.
173 Replies to questions 52-53 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases.
174 Replies to question 55 of Questionnaire Q1 – CCM, Corrugated Sheets, Corrugated Cases and replies
    to question 23 of Questionnaire Q3 – Competitors Corrugated Case Materials.
175 In 2017, DSS used […]% of its kraftliner, […]% of its testliner and […]% of its standard recycled
    fluting production internally. Europac used […]% of its kraftliner, […]% of its testliner, […]% of its
    HP recycled fluting and […]% of its standard recycled fluting production.
176 Paragraph 6.105 of the Form CO.
177 The Parties' combined demand represents [20-30]% of the total kraftliner demand, [5-10]% of the total
    testliner demand, [10-20]% of the total semi-chemical fluting demand (and similarly of the total NSCF
    and SCF demand) and [10-20]% of total recycled fluting demand (and similarly of the total HP
    recycled and standard recycled fluting demand). (Reply to question 1 of RFI8 submitted on 29 October
    2018).
                                                       51
 ---pagebreak--- (313) Second, although both Parties are already vertically integrated, they do source
        CCM products from third parties, either because they do not produce the specific
        product themselves (e.g. neither of the Parties produce virgin wood fibre flutings)
        or because of cost efficiency. This strategy is unlikely to change post-transaction.
(314) Finally and consistent with the above, no concerns were raised in the market
        investigation with regard to customer foreclosure.
(315) Therefore, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market with regard to the vertical
        link between the Parties' activities on the markets of the manufacture and supply
        of CCM and the manufacture and supply of sheets irrespective of the exact
        product and geographic market definition upheld.
5.3.4. Manufacture and supply of corrugated sheets (upstream) and corrugated cases
        (downstream)
(316) The Commission notes that the local scope of the upstream and downstream
        markets differs based on the market investigation results; while the local scope of
        the upstream sheet markets is 400 km, that of the downstream case markets is
        300km.178 Therefore, it is not possible to clearly identify the vertically affected
        local markets, given that more than one downstream market can fall under a
        specific upstream market. In order to be able to assess the potential impact of the
        Transaction due to the vertical link between the Parties' activities in the
        manufacture and supply of sheets and cases, the Commission uses the local
        market shares in the local markets around the production plants of the Parties as
        presented in Sections 5.1.4 and 5.1.5 as proxies because the Commission
        considers that they are representative for the competitive landscape in the affected
        markets.
               5.3.4.1.    France
(317) On a national level, the Transaction does not lead to vertically affected markets,
        however, with regard to local level, it leads to affected markets in the local
        markets around (i) DSS Kunheim, (ii) DSS Velin, (iii) DSS Dauphine, (iv)
        Europac La Rochette, (v) DSS Atlantique, (vi) DSS Bretagne, (vii) DSS
        Normandie, (viii) DSS Vervins, (ix) DSS Normandie (Cabourg), (x) DSS
        Thouarce and (xi) Europac Durtal for conventional sheets and cases; as well as in
        the local markets around (xii) DSS St Just, (xiii) DSS Vervins, (xiv) Europac
        Rouen, (xv) DSS Normandie (Cabourg), (xvi) Europac Durtal and (xvii) DSS
        Larousse (Tigy) for heavy duty sheets and cases.
The Commission's assessment
(318) The Commission takes the view that the Transaction does not lead to input
        foreclosure concerns for the following reasons.
(319) First, based on the Parties' market shares179 and in particular, the very limited
        increment on the upstream markets (not exceeding [0-5]% on the affected
178 This is larger for heavy duty sheets and cases as explained in Sections 4.4.2 and 4.5.2.
179 Varying between [30-40]-[40-50]%, depending on the affected local market concerned.
                                                         52
 ---pagebreak---          markets), it is unlikely that the merged entity will have, as a result of the
         Transaction, a significant degree of market power on the upstream market and
         therefore the ability to significantly influence the conditions of competition in the
         upstream market and thus possibly the prices and supply conditions in the
         downstream market (see Section 5.1.4.1).
(320) Second, the Commission notes with regard to the incentive of the merged entity to
         engage in input foreclosure that although the Parties are already vertically
         integrated, they do not use all of their sheet production internally, and they supply
         – although to a limited extent - their downstream competitors with sheets.180 This
         indicates that it is economically profitable for vertically integrated undertakings to
         supply their downstream competitors. There is no indication that this would
         change due to the Transaction.
(321) Finally, the Commission notes that – similarly to the Parties – some downstream
         competitors such as Smurfit Kappa, Saica, VPK or International Paper are
         vertically integrated, manufacturing themselves sheets, therefore any input
         foreclosure strategy would have a limited effect on them.
(322) The Commission considers that the Transaction does not lead to customer
         foreclosure concerns either, because the Parties – already pre-transaction –
         internalise to a great extent their sheet demand, and therefore account for only [5-
         10]% of the total merchant demand for sheets in France.181
(323) Therefore, the Commission considers that the Transaction does not raise serious
         doubts as to its compatibility with the internal market with regard to the vertical
         link between the Parties' activities on the markets of the manufacture and supply
         of sheets (upstream) and cases (downstream) in France irrespective of the exact
         product and geographic market definition.
               5.3.4.2.   Spain
(324) On a national level the Transaction does not lead to vertically affected markets,
         however, with regard to local level, it leads to affected markets in the local
         markets around (i) Europac Dueñas, (ii) DSS Dicesa (Sant Pere de Riudebitlles),
         (iii) DSS Flak (Olerdola), (iv) Europac Torrelavit, (v) DSS La Coruña and (vi)
         DSS Pontevedra with regard to conventional sheets and cases, as well in the local
         market around (vii) DSS Tecnicarton Vigo with regard to heavy duty sheets and
         cases.
The Commission's assessment
(325) The Commission takes the view that the Transaction does not lead to input
         foreclosure concerns for the following reasons.
(326) First, as explained in detail in Section 5.1.4.2, the Commission takes the view that
         it is unlikely that the merged entity will have, as a result of the Transaction, a
180 DSS uses around […]%, Europac […]% of its sheets production in France internally (reply to question
    4 of RFI8 submitted on 29 October 2018).
181 Reply to question 3 of RFI8 submitted on 29 October 2018.
                                                     53
 ---pagebreak---          significant degree of market power on the upstream market182 and therefore the
         ability to significantly influence the conditions of competition in the upstream
         market and thus possibly the prices and supply conditions in the downstream
         market (see Section 5.1.5.2).
(327) Second, the Commission notes with regard to the incentive of the merged entity to
         engage in input foreclosure that although the Parties are already vertically
         integrated, they do not use all of their sheet production internally, and they supply
         – although to a limited extent - their downstream competitors with sheets.183 This
         indicates that it is economically profitable for vertically integrated undertakings to
         supply their downstream competitors. There is no indication that this would
         change due to the Transaction.
(328)     Finally, the Commission notes that – similarly to the Parties – some downstream
         competitors are vertically integrated, manufacturing themselves sheets, therefore
         any input foreclosure strategy would have limited effect on them.
(329) The Commission considers that the Transaction does not lead to customer
         foreclosure concerns either, because the Parties – already pre-transaction –
         internalise to a great extent their sheet demand, and therefore account for only [0-
         5]% of the total merchant demand for sheets in Spain.184
(330) Therefore, the Commission considers that the Transaction does not raise serious
         doubts as to its compatibility with the internal market with regard to the vertical
         link between the Parties' activities on the markets of the manufacture and supply
         of sheets (upstream) and cases (downstream) in Spain irrespective of the exact
         product and geographic market definition.
              5.3.4.3.    Portugal
(331) The Transaction leads to vertically affected markets on a national level with
         regard to conventional sheets and cases. Furthermore, it leads to affected markets
         in the local markets around (i) DSS Esmoriz, (ii) Europac Guilhabreu, (iii)
         Europac Ovar, (iv) Europac Leiria, (v) Europac Rio de Mouro and (vi) DSS
         Tecnicarton Agueda with regard to conventional sheets and cases, as well in the
         local markets around (vii) Europac Guilhabreu, (viii) Europac Ovar and (ix) DSS
         Tecnicarton Agueda with regard to heavy duty sheets and cases.
The Notifying Party's view
(332) The Notifying Party argues that post-transaction DSS will not have the ability to
         foreclose rival case suppliers for the following reasons.
(333) First, in a hypothetical event of the merged entity no longer supplying its
         downstream competitors, they could still access over 50% of the conventional
         sheet market. The Notifying Party points out that with regard to heavy duty
182 The combined market shares of the Parties is [20-30]% on a national conventional sheet market (with
    an increment of [10-20]%) and vary between [20-30]-[50-60]% on the affected local markets (both
    conventional and heavy duty sheet), with and increment of [5-10]-[20-30]%.
183 DSS uses around […]%, Europac […]% of its sheets production in Spain internally (reply to question
    4 of RFI8 submitted on 29 October 2018).
184 Reply to question 3 of RFI8 submitted on 29 October 2018.
                                                      54
 ---pagebreak---         sheets, the Transaction does not alter the merged entity's ability to foreclose as the
        Transaction does not result in any increment.
(334) Second, Saica's recently opened sheet feeder facility has already had significant
        success in winning new business and it could alone defeat any attempted
        foreclosure strategy by the merged entity.
(335) Third, the majority of the Parties' key competitors in Portugal are already
        vertically integrated.
(336) Fourth, the Notifying Party argues that imports are present on the Portuguese
        market and can be easily increased.185
(337) Furthermore, the Notifying Party submits that the Transaction will not provide
        DSS with the ability to foreclose rival sheet suppliers as (i) the Transaction results
        in a downstream increment of only [5-10]% for conventional and [0-5]% for
        heavy duty cases on a national level and (ii) because the Parties' activities in the
        downstream affected markets account for only a small fraction of demand for
        sheets as the Parties currently self-supply to a great extent.186
The Commission's assessment
(338) The Commission takes the view that the Transaction is likely to lead to input
        foreclosure with regard to conventional sheets for the following reasons.
(339) First, as discussed in detail in Section 5.1.4.3, the upstream market is rather
        concentrated. The Parties combined market shares are high, [40-50]% on a
        national level (with an increment of [10-20]%) and varying between [50-60]%
        and [50-60]% on a local level (with an increment of [10-20]-[20-30]%).
(340) Second, Saica's future position on the market appears to be overestimated by the
        Notifying Party and as such is not sufficient to counterbalance the merged entity's
        potential foreclosure strategy.
(341) Third, the Commission notes that imports (and exports) are taken into account in
        the national market shares which already shows high concentration and thus it is
        unlikely that upstream competitors – located in or outside Portugal - could
        successfully offset the negative impact of a potential input foreclosure strategy.
(342) Therefore, the Commission considers that such concentration confers a significant
        degree of market power to the merged entity on the upstream market, and
        consequently an ability to engage in input foreclosure.
(343) Furthermore, as for the incentive of the merged entity to engage in input
        foreclosure, the Commission takes the view that given that cases are more
        complex and thus more profitable products (as also apparent from the margin data
        provided by the Parties), the merged entity would have an incentive to limit its
        sheets sales to its competitors, in order to gain profits from expanding its
        downstream sales.
185 Paragraph 6.117 of the Form CO.
186 Paragraph 6.115 of the Form CO.
                                                 55
 ---pagebreak--- (344) The Commission takes however note that the effects of a potential input
        foreclosure remedy would be lessened by the fact that some of the Parties'
        downstream competitors are themselves vertically integrated. However, smaller
        non-integrated downstream competitors still represent around 20% of the
        downstream market.
(345) The Commission on the other hand considers that the Transaction does not lead to
        customer foreclosure concerns, because the Parties – already pre-transaction –
        internalise the overwhelming majority, and for Europac all - of their sheet
        demand, and therefore account for only [0-5]% of the total merchant demand for
        sheets in Portugal.187
(346) Therefore, the Commission considers that the Transaction raises serious doubts as
        to its compatibility with the internal market with regard to the vertical link
        between the Parties' activities on the markets of the manufacture and supply of
        conventional sheets and cases in the relevant local markets in Portugal.
     5.4.    Conclusion on competitive assessment
(347) The Commission considers that the Transaction raises serious doubts as to its
        compatibility with the internal market with regard to
        (a)      horizontal non-coordinated effects in the market of manufacture and
                 supply of conventional sheets in Portugal and its local markets;
        (b)      horizontal non-coordinated effects in the market of manufacture and
                 supply of conventional cases in Western France, and in particular in
                 Brittany; and
        (c)      vertical non-coordinated effects regarding the Parties' activities in the
                 markets of manufacture and supply of conventional sheets and cases in
                 Portugal.
6.      PROPOSED REMEDIES
(348) In order to render the concentration compatible with the internal market, the
        undertakings concerned have modified the notified concentration by entering into
        the following commitments (the "Commitments"), which are annexed to this
        decision and form an integral part thereof.188
(349) As per the Commitments, the Notifying Party has proposed to divest:
        (i) the "DSS Normandie plants", comprising a box plant ("DSS Normandie") and
        a sheet plant (“DSS Normandie (Cabourg)”) for the manufacture and supply of
        conventional cases in Western France and in particular in Brittany, and
187 Reply to question 3 of RFI8 submitted on 29 October 2018.
188 The Notifying Party submitted commitments first on 22 October 2018, then modified it on 25 October
    2018 and 5 November 2018. Given that these modifications were not of major significance, the
    Commission only analyses the Commitments in their final form.
                                                     56
 ---pagebreak---         (ii) Europac’s Ovar box plant for the manufacture and supply of conventional
        sheets in Portugal.
(350) Specifically, the Notifying Party commits to divest:
     6.1.    For DSS Normandie plants189
        (a)     all tangible assets owned by DSS and necessary for the production,
                servicing and sale of all products and product lines manufactured in the
                DSS Normandie plants;
        (b)     a non-exclusive, non-transferrable, royalty-free, perpetual licence for the
                benefit of the business currently carried on by the DSS Normandie plants,
                for any intangible asset that is necessary for the development, production,
                servicing and sale of the products currently manufactured at the DSS
                Normandie plants;
        (c)     all licences, permits and authorisations necessary to produce the products
                manufactured at the DSS Normandie plants to the extent transferrable
                under applicable law;
        (d)     all external customer contracts relating to the products manufactured at the
                DSS Normandie plants – with the exception of five contracts as listed in
                Annex 2 of the Commitments –, and all other external contracts,
                agreements, leases and commitments necessary for the business of the
                DSS Normandie plants;
        (e)     all customer accounts, orders and credit records or portions thereof
                relating to the products manufactured at the DSS Normandie plants, other
                than those relating to the customers listed in Annex 2 of the
                Commitments;
        (f)     the Personnel listed in Annex 3 of the Commitments, to the extent still
                employed on the Effective Date;
        (g)     all Key Personnel listed in Annex 3 of the Commitments, to the extent still
                employed on the Effective Date;
                –         […].
     6.2.    For Europac Ovar
        (a)     all tangible assets owned by Europac and necessary for the production,
                servicing and sale of all products and product lines manufactured in
                Europac Ovar;
        (b)     a non-exclusive, non-transferrable, royalty-free, perpetual licence for any
                intangible asset that is necessary for the development, production,
                servicing and sale of the products currently manufactured at Europac
                Ovar;
189 Paragraphs 1-7 of the Schedule of the Commitments.
                                                    57
 ---pagebreak---         (c)     all licences, permits and authorisations necessary to produce the products
                manufactured at the Europac Ovar to the extent transferrable under
                applicable law;
        (d)     all external customer contracts relating to the products manufactured at
                Europac Ovar and all other external contracts, agreements, leases and
                commitments necessary for the business of Europac Ovar;
        (e)     all customer accounts, orders and credit records or portions thereof
                relating to the products manufactured at Europac Ovar;
        (f)     the Personnel listed in Annex 5 of the Commitments, to the extent still
                employed on the Effective Date;
        (g)     all Key Personnel listed in Annex 5 of the Commitments, to the extent still
                employed on the Effective Date;
                –         […].
(351) 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 and, if
        necessary, a divestiture trustee.
(352) The Parties consider that these remedies would eliminate any serious doubts
        which may be identified by the Commission in relation to (i) the supply of
        conventional sheets in Portugal and (ii) the supply of conventional cases in the
        300km radius around DSS Bretagne (Brittany). In particular, the Parties are of the
        view that:
        (a)     the proposed remedies would effectively remove the overlap between the
                Parties in the areas of concern identified by the Commission;
        (b)     the plants are high-quality and competitive plants with substantial
                revenues and strong EBITDA, and ideally suited and well-positioned to
                compete effectively with the Parties’ plants in the areas of concern; and
        (c)     the proposed remedies offer a purchaser significant potential to expand
                production with substantial spare capacity and scope for additional
                capacity. It includes the necessary assets and personnel to ensure the
                plants’ viability and competitiveness on a lasting basis.190
190 Paragraph 2.2 of the Form RM.
                                                  58
 ---pagebreak--- 7.       ASSESSMENT OF THE PROPOSED REMEDIES
      7.1.   DSS Normandie plants – manufacture and supply of corrugated cases in
             Brittany (Western France)
             7.1.1.     Suitability of the Commitments to remove serious doubts
(353) The overlap between the Parties' activities in Western France stems from the
         Europac Durtal plant, which in 2017 sold […] msqm conventional cases to third
         parties.191 The DSS Normandie plants in turn had third party sales of […]
         msqm.192 Therefore, the Commission considers the Commitments would
         effectively remove close to the full overlap between the Parties with regard to
         conventional cases in Western France.193
(354) Furthermore, DSS Normandie is 50km closer to DSS Bretagne than Europac
         Durtal, suggesting that it is particularly well placed to serve customers across
         Western France, including Brittany.
(355) The market test has also confirmed the suitability of the Commitments, as the
         majority of the market test participants indicated that they consider that the
         Commitments would remove the competition concerns in respect of the
         manufacture and supply of cases in the local relevant markets in Western
         France.194
             7.1.2.     Viability of the Divestment Business
(356) The DSS Normandie plants are profitable, in the last financial year of 2017/2018,
         they have achieved a turnover of EUR […] with an EBITDA of EUR […].195
(357) The majority of the respondents in the market test also indicated that the
         Purchaser of the DSS Normandie plants can effectively compete in Western
         France on a lasting basis with regard to cases.196
(358) Therefore, the Commission considers that the DSS Normandie plants constitute a
         viable business should they be acquired by a suitable Purchaser.
             7.1.3.     Purchaser criteria and buyers
(359) In response to the comments made in the market test that the Purchaser of the
         DSS Normandie plants should have proven expertise in the paper industry,197 the
191 Annex 13.2 of the Form CO.
192 DSS Normandie sold […] msqm, while DSS Normandie (Cabourg) […] msqm conventional cases to
    third parties (Annex 13.2 of the Form CO). It should be further noted that DSS Normandie had
    intragroup sales of […] msqm in 2017 (Annex 13.2 of the Form CO).
193 Although the Commission does not consider that the Transaction raises serious doubts as to its
    compatibility with the internal market with regard to corrugated sheets in Western France, for the sake
    of completeness, the Commission notes that Europac Durtal, as well as the DSS Normandie plants also
    produce and sell conventional sheets ([…] msqm and […] msqm, respectively).
194 Replies to question 5 of Questionnaire Q4 – Case Customers in Western France and to question 4 of
    Questionnaire Q5 – Case Competitors in Western France.
195 Paragraph 2.33 of the Form RM.
196 Replies to question 7 of Questionnaire Q4 – Case Customers in Western France and to question 7 of
    Questionnaire Q5 – Case Competitors in Western France.
                                                        59
 ---pagebreak---         Commitments198 require the suitable Purchaser to have existing activities in the
        paper industry, including (but not limited to) activities in the production of
        corrugated case materials and/or sheets and/or cases. The Commission considers
        that if acquired by a Purchaser fulfilling this requirement, the DSS Normandie
        plants will be able to remain a viable and active competitive force in competition
        with the merged entity and other competitors.
(360) Based on the market test results,199 the Commission considers that the DSS
        Normandie plants are perceived as an attractive business, which is further
        confirmed by the fact that a competitor of the Parties has expressed preliminary
        interest in acquiring the DSS Normandie plants.200
             7.1.4.     Conclusion
(361) For the reasons outlined above, the Commitments entered into by the Notifying
        Party are sufficient to eliminate the serious doubts as to the compatibility of the
        Transaction with the internal market with regard to the manufacture and supply of
        cases in Western France and in particular in Brittany as a result of horizontal non-
        coordinated effects.
     7.2.    Europac Ovar
             7.2.1.     Suitability of the Commitments to remove serious doubts
(362) Europac had external sales in 2017 of […] msqm of sheets. It is by far Europac's
        production facility with the most sheet sales in Portugal. All other Europac plants
        with sales in Portugal (i.e. Europac Leiria, Europac Lisboa and Europac
        Guilhabreu) account for only […] msqm of sheet sales in total. As such, the
        increment arising from the Transaction would be largely eliminated, to roughly
        [0-5]% of sales.
(363) In addition, Europac Ovar is well located to compete for customers across
        Portugal,201 and only 9 km away from DSS Esmoriz.202 Also, Europac
        continuously implemented improvements on the existing equipment, also in 2018.
(364) The results of the market test indicated that the divestment of Europac Ovar to a
        suitable purchaser is sufficient to remove the competition concerns raised by the
        Transaction. Indeed, whilst some market test participants refrained from taking a
        position on this point, of those that did, a majority indicated that they consider
        that the Commitments would remove the competition concerns in respect of the
        manufacture and supply of sheets in the relevant local markets in Portugal.
197 Replies to questions 13-16 of Questionnaire Q4 – Case Customers in Western France and to questions
    12-15 of Questionnaire Q5 – Case Competitors in Western France.
198 As modified on 5 November 2018.
199 Replies to question 11 of Questionnaire Q4 – Case Customers in Western France and to question 10 of
    Questionnaire Q5 – Case Competitors in Western France.
200 Replies to question 18 of Questionnaire Q5 – Case Competitors Western France.
201 […].
202 Paragraphs 2.7 – 2.18 of the Form RM.
                                                      60
 ---pagebreak---              7.2.2.    Viability of the Divestment Business
(365) Europac Ovar are profitable, with a turnover of EUR […] with an EBITDA of
        EUR […].203
(366) A majority of respondents considered that Europac Ovar would be viable so that a
        suitable purchaser could effectively compete on a lasting basis as regards the
        manufacture and supply of sheets in Portugal provided that Europac Ovar's
        customers would be transferred along with it according to several respondents.
        The terms of the Commitments address this point raised by several respondents.
        Indeed, the Parties commit to use their best efforts to transfer or assign the
        applicable aspects of all customer contracts along with Europac Ovar.204
             7.2.3.    Purchaser criteria and buyers
(367) Furthermore, a majority of respondents indicated that Europac Ovar would be an
        attractive business opportunity, for a purchaser that is an established industrial
        player.205 Indeed, the market test indicated that a purchaser complying with the
        relevant criteria of financial stability and expertise would be in a position to be an
        effective force able to compete against the combined entity post-Transaction,
        provided that it has previous experience in the industry. As such, the
        Commitments206 require the Purchaser to be approved to have existing activities
        in the paper industry, including (but not limited to) activities in the production of
        corrugated case materials and/or sheets and/or cases. The Commission considers
        that if acquired by a Purchaser fulfilling this requirement, Europac Ovar will be
        able to remain a viable and active competitive force in competition with the
        merged entity and other competitors.
             7.2.4.    Conclusion
(368) For the reasons outlined above, the commitments entered into by the undertakings
        concerned are sufficient to eliminate the serious doubts as to the compatibility of
        the transaction with the internal market in relation to the manufacture and supply
        of sheets in Portugal, as well as with regard to the vertical link between the
        Parties' activities on the markets of the manufacture and supply of conventional
        sheets and cases in Portugal.
(369) The commitments in section B of the Annex constitute conditions attached to this
        decision, as only through full compliance therewith can the structural changes in
        the relevant markets be achieved. The other commitments set out in the Annex
        constitute obligations, as they concern the implementing steps which are
        necessary to achieve the modifications sought in a manner compatible with the
        internal market.
203 Paragraph 2.18 of the Form RM.
204 Paragraph 5.18(vii) of the Form RM.
205 Replies to questions 1, 3, 6-8 of Questionnaire Q6 – Market Test Portugal.
206 As modified on 5 November 2018.
                                                        61
 ---pagebreak--- 8.    CONCLUSION
(370) For the above reasons, the Commission has decided not to oppose the notified
      operation as modified by the commitments and to declare it compatible with the
      internal market and with the functioning of the EEA Agreement, subject to full
      compliance with the conditions in section B of the commitments annexed to the
      present decision and with the obligations contained in the other sections of the
      said commitments. This decision is adopted in application of Article 6(1)(b) in
      conjunction with Article 6(2) of the Merger Regulation and Article 57 of the EEA
      Agreement.
                                                   For the Commission
                                                   (Signed)
                                                   Margrethe VESTAGER
                                                   Member of the Commission
                                             62
 ---pagebreak---                                                                                5 November 2018
                           Case M. 8915 – DS Smith / Europac
                COMMITMENTS TO THE EUROPEAN COMMISSION
Pursuant to Article 6(2) of Council Regulation (EC) No 139/2004 (the “Merger Regulation”), DS
Smith Plc (“DSS” or the “Notifying Party”) hereby enters into the following Commitments (the
“Commitments”) vis-à-vis the European Commission (the “Commission”) with a view to
rendering the acquisition of the entire issued shareholding of Papeles y Cartones de Europa,
S.A. (“Europac”, and together with DSS, the “Parties”) by DS Smith Plc (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”).
                                 224248/10222 EC 555616647 13 CMR 050419:1353
 ---pagebreak---                                                2
   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").
   Assets: the assets that contribute to the current operation or are necessary to ensure
   the viability and competitiveness of the Divestment Businesses as indicated in Section
   B, paragraph 6(i), 6(ii) and 6(iii) and described in more detail in the Schedule.
   Closing: the transfer of the legal title to the Divestment Businesses to the Purchaser(s).
   Closing Period: the period of […]from the approval of the Purchaser(s) 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.
   Conflict of Interest: any conflict of interest that impairs the Trustee's objectivity and
   independence in discharging its duties under the Commitments.
   Divestment Businesses: the businesses as defined in Section B and in the Schedule
   which the Notifying Party commits to divest.
   Divestiture Trustee: one or more natural or legal person(s) who is/are approved by the
   Commission and appointed by DSS and who has/have received from DSS the exclusive
   Trustee Mandate to sell the Divestment Businesses to one or more Purchaser(s) at no
   minimum price.
   DSS: DS Smith Plc, incorporated under the laws of England and Wales, with its
   registered office at 350 Euston Road, London NW1 3AX and registered with the
   Commercial/Company Register at Companies House under number 1377658.
   DSS Normandie: DSS’s box plant located at Avenue de la Gare, 50160 Torigni-sur-
   Vire, France.
   DSS Normandie (Cabourg): DSS’s sheet plant located at ZAC de Cabourg Village 47,
   14390 Cabourg, France.
   DSS Normandie plants: DSS Normandie and DSS Normandie (Cabourg).
   Effective Date: the date of adoption of the Decision.
   Europac Ovar: Europac’s box plant located at Zona Industrial de Ovar, Apartado 92,
   3881-902, Ovar, Portugal.
                                          EC 555616647
 ---pagebreak---                                               3
   First Divestiture Period: the period of […]from the Effective Date.
   Hold Separate Manager: the person or persons appointed by DSS for the Divestment
   Businesses to manage the day-to-day business under the supervision of the Monitoring
   Trustee.
   Key Personnel: all personnel necessary to maintain the viability and competitiveness of
   the Divestment Businesses, 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 DSS, and who has/have the duty to monitor DSS’s
   compliance with the conditions and obligations attached to the Decision.
   […]
   Parties: DSS (the Notifying Party) and Europac (the undertaking that is the target of the
   Concentration).
   Personnel: all staff currently employed by the Divestment Businesses, including staff
   seconded to the Divestment Businesses, shared personnel as well as the additional
   personnel listed in the Schedule.
   Purchaser(s): the entity or entities approved by the Commission as acquirer(s) of the
   Divestment Business(es) in accordance with the criteria set out in Section D.
   Purchaser(s) Criteria: the criteria laid down in paragraph 16 of these Commitments
   that the Purchaser(s) must fulfil in order to be approved by the Commission.
   Schedule: the schedule to these Commitments describing in more detail the
   Divestment Businesses.
   Trustee(s): the Monitoring Trustee and/or the Divestiture Trustee as the case may be.
   Trustee Divestiture Period: the period of […] from the end of the First Divestiture
   Period.
   SECTION B. THE           COMMITMENT           TO   DIVEST   AND    THE    DIVESTMENT
   BUSINESSES
   Commitment to divest
2. In order to maintain effective competition, DSS commits to divest, or procure the
   divestiture of the Divestment Businesses by the end of the Trustee Divestiture Period as
   a going concern to a purchaser or purchasers 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, DSS commits to find a purchaser or
   purchasers and to enter into a final binding sale and purchase agreement(s) for the sale
   of the Divestment Businesses within the First Divestiture Period. If DSS has not
   entered into such an agreement(s) at the end of the First Divestiture Period, DSS shall
                                         EC 555616647
 ---pagebreak---                                               4
   grant the Divestiture Trustee an exclusive mandate to sell the Divestment Businesses in
   accordance with the procedure described in paragraph 29 in the Trustee Divestiture
   Period.
3. DSS shall be deemed to have complied with this commitment if:
   (i)      by the end of the Trustee Divestiture Period, DSS or the Divestiture Trustee has
            entered into one or more final binding sale and purchase agreement(s) and the
            Commission approves the proposed purchaser(s) and the terms of sale as
            being consistent with the Commitments in accordance with the procedure
            described in paragraph 17; and
   (ii)     the Closing of the sale of the Divestment Businesses to the Purchaser(s) takes
            place within the Closing Period.
4. In order to maintain the structural effect of the Commitments, the Notifying Party shall,
   for a period of 10 years after Closing, not acquire, whether directly or indirectly, the
   possibility of exercising influence (as defined in paragraph 42 of the Remedies Notice,
   footnote 3) over the whole or part of the Divestment Businesses, 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 43 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
   Businesses is no longer necessary to render the proposed concentration compatible
   with the internal market.
   Structure and definition of the Divestment Businesses
5. The Divestment Businesses consist of:
   (i)      Europac Ovar, as described in further detail in the Schedule; and
   (ii)     the DSS Normandie plants, as described in further detail in the Schedule.
6. The legal and functional structure of the Divestment Businesses as operated to date is
   described in the Schedule. The Divestment Businesses, as described in more detail in
   the Schedule, include all assets and staff that contribute to the current operation or are
   necessary to ensure the viability and competitiveness of the Divestment Businesses, in
   particular:
   (i)      all tangible and intangible assets (including intellectual property rights);
   (ii)     all licences, permits and authorisations issued by any governmental
            organisation for the benefit of the Divestment Businesses;
   (iii)    all contracts, leases, commitments and customer orders of the Divestment
            Businesses; all customer, credit and other records of the Divestment
            Businesses; and
   (iv)     the Personnel.
                                         EC 555616647
 ---pagebreak---                                               5
7. In addition, the Divestment Businesses include the benefit, at the option of the
   Purchaser(s), for a transitional period of 6 months (extendable by an additional 6
   months at the option of the relevant Purchaser) after Closing and on terms and
   conditions equivalent to those at present afforded to the Divestment Businesses, of all
   current arrangements under which DSS or Europac (whichever is the current parent
   company of the relevant Divestment Business), or its Affiliated Undertakings supply
   products or services to the Divestment Businesses, as detailed in the Schedule. 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 relevant
   business unit providing the product/service operations.
   SECTION C.        RELATED COMMITMENTS
   Preservation of viability, marketability and competitiveness
8. From the Effective Date until Closing, the Notifying Party shall preserve or procure the
   preservation of the economic viability, marketability and competitiveness of the
   Divestment Businesses, in accordance with good business practice, and shall minimise
   as far as possible any risk of loss of competitive potential of the Divestment Businesses.
   In particular DSS undertakes:
   (i)      not to carry out any action that might have a significant adverse impact on the
            value, management or competitiveness of the Divestment Businesses or that
            might alter the nature and scope of activity, or the industrial or commercial
            strategy or the investment policy of the Divestment Businesses;
   (ii)     to make available, or procure to make available, sufficient resources for the
            development of the Divestment Businesses, on the basis and continuation of
            the existing business plans;
   (iii)    to take all reasonable steps, or procure that all reasonable steps are being
            taken, including appropriate incentive schemes (based on industry practice), to
            encourage all Key Personnel to remain with the Divestment Businesses, and
            not to solicit or move any Personnel to DSS’s remaining businesses. Where,
            nevertheless, individual members of the Key Personnel exceptionally leave the
            Divestment Businesses, DSS shall provide a reasoned proposal to replace the
            person or persons concerned to the Commission and the Monitoring Trustee.
            DSS must be able to demonstrate to the Commission that the replacement is
            well suited to carry out the functions exercised by those individual members of
            the Key Personnel. The replacement shall take place under the supervision of
            the Monitoring Trustee, who shall report to the Commission.
   Hold-separate obligations
9. The Notifying Party commits to keep the Divestment Businesses separate from the
   businesses it is retaining and to ensure that unless explicitly permitted under these
   Commitments: (i) management and staff of the businesses retained by DSS have no
   involvement in the Divestment Businesses; (ii) the Key Personnel and Personnel of the
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    Divestment Businesses have no involvement in any business retained by DSS and do
    not report to any individual outside the Divestment Businesses.
10. Until Closing, DSS shall assist the Monitoring Trustee in ensuring that the Divestment
    Businesses are managed as distinct and saleable entities separate from the businesses
    which DSS is retaining. Immediately after the Effective Date, DSS shall appoint one or
    more Hold Separate Manager(s), who shall be part of the Key Personnel. The Hold
    Separate Manager(s) shall manage the Divestment Businesses independently and in
    the best interest of the business with a view to ensuring their continued economic
    viability, marketability and competitiveness and their independence from the businesses
    retained by DSS. The Hold Separate Manager shall closely cooperate with and report
    to the Monitoring Trustee and, if applicable, the Divestiture Trustee. Any replacement of
    the Hold Separate Manager shall be subject to the procedure laid down in paragraph
    8(iii) of these Commitments. The Commission may, after having heard DSS, require
    DSS to replace the Hold Separate Manager.
    Ring-fencing
11. DSS shall implement, or procure to implement, to the extent possible, all necessary
    measures to ensure that it does not, after the Effective Date, obtain any Confidential
    Information relating to the Divestment Businesses and that any such Confidential
    Information obtained by DSS before the Effective Date will be eliminated and not be
    used by DSS. This includes measures vis-à-vis DSS appointees on the supervisory
    board and/or board of directors of the Divestment Businesses. In particular, the
    participation of the Divestment Businesses in any central information technology
    network shall be severed to the extent possible, without compromising the viability of
    the Divestment Businesses. DSS may obtain or keep information relating to the
    Divestment Businesses which is reasonably necessary for the divestiture of the
    Divestment Businesses or the disclosure of which to DSS is required by law.
    Non-solicitation clause
12. The Parties undertake, subject to customary limitations, not to solicit, and to procure
    that Affiliated Undertakings do not solicit, the Key Personnel transferred with the
    Divestment Businesses for a period of […] after Closing.
    Due diligence
13. In order to enable potential purchasers to carry out a reasonable due diligence of the
    Divestment Businesses, DSS shall, subject to customary confidentiality assurances and
    dependent on the stage of the divestiture process:
    (i)       provide to potential purchasers sufficient information as regards the Divestment
              Businesses; and
    (ii)      provide to potential purchasers sufficient information relating to the Personnel
              and allow them reasonable access to the Personnel.
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    Reporting
14. DSS shall submit written reports in English on potential purchasers of the Divestment
    Businesses and developments in the negotiations with such potential purchasers to the
    Commission and the Monitoring Trustee no later than 10 days after the end of every
    month following the Effective Date (or otherwise at the Commission’s request). DSS
    shall submit a list of all potential purchasers who have expressed interest in acquiring
    one or both of the Divestment Businesses to the Commission at each and every stage
    of the divestiture process, as well as a copy of all the offers made by potential
    purchasers within five days of their receipt.
15. DSS shall inform the Commission and the Monitoring Trustee on the preparation of the
    data room documentation and the due diligence procedure and shall submit a copy of
    any information memorandum to the Commission and the Monitoring Trustee before
    sending the memorandum out to potential purchasers.
    SECTION D.         THE PURCHASER(S)
16. In order to be approved by the Commission, the Purchaser(s) must fulfil the following
    criteria:
    (i)       The Purchaser(s) 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).
    (ii)      The Purchaser(s) shall have the financial resources, proven expertise and
              incentive to maintain and develop the Divestment Business(es) as a viable and
              active competitive force in competition with the Parties and other competitors;
    (iii)     The Purchaser(s) shall have existing activities in the paper industry, including
              (but not limited to) activities in the production of corrugated case materials
              and/or corrugated sheet and/or corrugated case; and
    (iv)      The acquisition of the Divestment Business(es) by the Purchaser(s) 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(s) must reasonably be expected to obtain all necessary approvals
              from the relevant regulatory authorities for the acquisition of the Divestment
              Business(es).
17. The final binding sale and purchase agreement(s) (as well as ancillary agreements)
    relating to the divestment of the Divestment Businesses shall be conditional on the
    Commission’s approval. When DSS has reached an agreement with a purchaser, it
    shall submit a fully documented and reasoned proposal, including a copy of the final
    agreement(s), within one week to the Commission and the Monitoring Trustee. DSS
    must be able to demonstrate to the Commission that the purchaser(s) fulfil(s) the
    Purchaser(s) Criteria and that the Divestment Businesses are being sold in a manner
    consistent with the Commission's Decision and the Commitments. For the approval, the
    Commission shall verify that the purchaser(s) fulfil(s) the Purchaser(s) Criteria and that
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    the Divestment Businesses are 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 Businesses without
    one or more Assets or parts of the Personnel, or by substituting one or more Assets or
    parts of the Personnel with one or more different assets or different personnel, if this
    does not affect the viability and competitiveness of the Divestment Businesses after the
    sale, taking account of the proposed purchaser(s).
    SECTION E.         TRUSTEE
    I.       Appointment procedure
18. DSS shall appoint a Monitoring Trustee to carry out the functions specified in these
    Commitments for a Monitoring Trustee. DSS commits not to close the Concentration
    before the appointment of a Monitoring Trustee.
19. If DSS has not entered into a binding sale and purchase agreement(s) regarding the
    Divestment Businesses […] before the end of the First Divestiture Period or if the
    Commission has rejected a purchaser(s) proposed by DSS at that time or thereafter,
    DSS shall appoint a Divestiture Trustee. The appointment of the Divestiture Trustee
    shall take effect upon the commencement of the Trustee Divestiture Period.
20. 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.
21. The Trustee shall be remunerated by the Notifying Party in a way that does not impede
    the independent and effective fulfilment of its mandate. In particular, where the
    remuneration package of a Divestiture Trustee includes a success premium linked to
    the final sale value of the Divestment Businesses, such success premium may only be
    earned if the divestiture takes place within the Trustee Divestiture Period.
    Proposal by DSS
22. No later than two weeks after the Effective Date, DSS shall submit the name or names
    of at least three natural or legal persons whom DSS would propose to appoint as the
    Monitoring Trustee to the Commission for approval. No later than […] before the end of
    the First Divestiture Period or on request by the Commission, DSS shall submit a list of
    one or more persons whom DSS proposes to appoint as Divestiture Trustee to the
    Commission for approval. The proposal shall contain sufficient information for the
    Commission to verify that the person or persons proposed as Trustee fulfil the
    requirements set out in paragraph 20 and shall include:
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    (i)       the full terms of the proposed mandate, which shall include all provisions
              necessary to enable the Trustee to fulfil its duties under these Commitments;
    (ii)      the outline of a work plan which describes how the Trustee intends to carry out
              its assigned tasks; and
    (iii)     an indication of whether the proposed Trustee is to act as both Monitoring
              Trustee and Divestiture Trustee or whether different trustees are proposed for
              the two functions.
    Approval or rejection by the Commission
23. 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, DSS 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,
    DSS 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 DSS
24. If all the proposed Trustees are rejected, DSS 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 23 of these Commitments.
    Trustee nominated by the Commission
25. If all further proposed Trustees are rejected by the Commission, the Commission shall
    nominate a Trustee, whom DSS shall appoint, or cause to be appointed, in accordance
    with a trustee mandate approved by the Commission.
    II.       Functions of the Trustee
26. 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 DSS, 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
27. 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 Businesses with a view to ensuring their
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      continued economic viability, marketability and competitiveness and monitor
      compliance by DSS 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 Businesses, and the keeping
               separate of the Divestment Businesses from the business retained by
               DSS the Parties, in accordance with paragraphs 8 and 9 of these
               Commitments;
      (b)      supervise the management of the Divestment Businesses as distinct
               and saleable entities, in accordance with paragraph 10 of these
               Commitments;
      (c)      with respect to Confidential Information:
                      determine all necessary measures to ensure that DSS does not
                       after the Effective Date obtain any Confidential Information
                       relating to the Divestment Businesses,
                      in particular strive for the severing of the Divestment
                       Businesses’ participation in a central information technology
                       network to the extent possible, without compromising the
                       viability of the Divestment Businesses,
                      make sure that any Confidential Information relating to the
                       Divestment Businesses obtained by DSS before the Effective
                       Date is eliminated in accordance with normal document
                       destruction protocols and will not be used by DSS; and
                      decide whether such information may be disclosed to or kept by
                       DSS as the disclosure is reasonably necessary to allow DSS to
                       carry out the divestiture or as the disclosure is required by law;
      (d)      monitor the splitting of assets and the allocation of Personnel between
               the Divestment Businesses and DSS or Affiliated Undertakings;
(iii) propose to DSS such measures as the Monitoring Trustee considers necessary
      to ensure DSS’s compliance with the conditions and obligations attached to the
      Decision, in particular the maintenance of the full economic viability,
      marketability or competitiveness of the Divestment Businesses, the holding
      separate of the Divestment Businesses and the non-disclosure of competitively
      sensitive information;
(iv)  review and assess potential purchasers as well as the progress of the
      divestiture process and verify that, dependent on the stage of the divestiture
      process:
      (a)      potential purchasers receive sufficient and correct information relating to
               the Divestment Businesses and the Personnel in particular by
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                        reviewing, if available, the data room documentation, the information
                        memorandum and the due diligence process, and
              (b)       potential purchasers are granted reasonable access to the Personnel;
    (v)       act as a contact point for any requests by third parties, in particular potential
              purchasers, in relation to the Commitments;
    (vi)      provide to the Commission, sending DSS 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 Businesses 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 DSS a non-confidential
              copy at the same time, if it concludes on reasonable grounds that DSS is 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 DSS
              a non-confidential copy at the same time, a reasoned opinion as to the
              suitability and independence of the proposed purchaser(s) and the viability of
              the Divestment Businesses after the Sale and as to whether the Divestment
              Businesses are sold in a manner consistent with the conditions and obligations
              attached to the Decision, in particular, if relevant, whether the Sale of the
              Divestment Businesses without one or more Assets or not all of the Personnel
              affects the viability of the Divestment Businesses after the sale, taking account
              of the proposed purchaser(s); and
    (ix)      assume the other functions assigned to the Monitoring Trustee under the
              conditions and obligations attached to the Decision.
28. If the Monitoring and Divestiture Trustee are not the same legal or natural persons, the
    Monitoring Trustee and the Divestiture Trustee shall cooperate closely with each other
    during and for the purpose of the preparation of the Trustee Divestiture Period in order
    to facilitate each other's tasks.
    Duties and obligations of the Divestiture Trustee
29. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no minimum
    price the Divestment Businesses to a purchaser or purchasers, provided that the
    Commission has approved both the purchaser or purchasers and the final binding sale
    and purchase agreement(s) (and ancillary agreements) as in line with the Commission's
    Decision and the Commitments in accordance with paragraphs 16 and 17 of these
    Commitments. The Divestiture Trustee shall include in the sale and purchase
    agreement(s) (as well as in any ancillary agreements) such terms and conditions as it
    considers appropriate for an expedient sale in the Trustee Divestiture Period. In
    particular, the Divestiture Trustee may include in the sale and purchase agreement(s)
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    such customary representations and warranties and indemnities as are reasonably
    required to effect the sale. The Divestiture Trustee shall protect the legitimate financial
    interests of DSS, subject to DSS’s unconditional obligation to divest at no minimum
    price in the Trustee Divestiture Period.
30. In the Trustee Divestiture Period (or otherwise at the Commission’s request), the
    Divestiture Trustee shall provide the Commission with a comprehensive monthly report
    written in English on the progress of the divestiture process. Such reports shall be
    submitted within 15 days after the end of every month with a simultaneous copy to the
    Monitoring Trustee and a non-confidential copy to DSS.
    III.      Duties and obligations of the Parties
31. DSS shall provide and shall cause its advisors to provide the Trustee with all such co-
    operation, assistance and information as the Trustee may reasonably require to perform
    its tasks. The Trustee shall have full and complete access to any of DSS’s or the
    Divestment Businesses’ books, records, documents, management or other personnel,
    facilities, sites and technical information necessary for fulfilling its duties under the
    Commitments and DSS and the Divestment Businesses shall provide the Trustee upon
    request with copies of any document. DSS and the Divestment Businesses 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.
32. DSS shall provide the Monitoring Trustee with all managerial and administrative support
    that it may reasonably request on behalf of the management of the Divestment
    Businesses. This shall include all administrative support functions relating to the
    Divestment Businesses which are currently carried out at headquarters level. DSS shall
    provide and shall cause its advisors to provide the Monitoring Trustee, on request, with
    the information submitted to potential purchasers, in particular give the Monitoring
    Trustee access to the data room documentation and all other information granted to
    potential purchasers in the due diligence procedure. DSS shall inform the Monitoring
    Trustee on possible purchasers, submit lists of potential purchasers at each stage of the
    selection process, including the offers made by potential purchasers at those stages,
    and keep the Monitoring Trustee informed of all developments in the divestiture
    process.
33. DSS shall grant or procure Affiliated Undertakings to grant comprehensive powers of
    attorney, duly executed, to the Divestiture Trustee to effect the sale (including ancillary
    agreements), the Closing and all actions and declarations which the Divestiture Trustee
    considers necessary or appropriate to achieve the sale and the Closing, including the
    appointment of advisors to assist with the sale process. Upon request of the Divestiture
    Trustee, DSS shall cause the documents required for effecting the sale and the Closing
    to be duly executed.
34. DSS 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 DSS for, any liabilities arising out of the
    performance of the Trustee’s duties under the Commitments, except to the extent that
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    such liabilities result from the wilful default, recklessness, gross negligence or bad faith
    of the Trustee, its employees, agents or advisors.
35. At the expense of DSS, the Trustee may appoint advisors (in particular for corporate
    finance or legal advice), subject to DSS’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 DSS refuse to approve the advisors proposed by the Trustee
    the Commission may approve the appointment of such advisors instead, after having
    heard DSS. Only the Trustee shall be entitled to issue instructions to the advisors.
    Paragraph 34 of these Commitments shall apply mutatis mutandis. In the Trustee
    Divestiture Period, the Divestiture Trustee may use advisors who served DSS during the
    Divestiture Period if the Divestiture Trustee considers this to be in the best interest of an
    expedient sale.
36. DSS agrees that the Commission may share Confidential Information proprietary to
    DSS 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.
37. 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.
38. 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
39. 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:
    (i)      the Commission may, after hearing the Trustee and DSS, require DSS to
             replace the Trustee; or
    (ii)     DSS may, with the prior approval of the Commission, replace the Trustee.
40. If the Trustee is removed according to paragraph 39 of these Commitments, the Trustee
    may be required to continue in its function until a new Trustee is in place to whom the
    Trustee has effected a full hand over of all relevant information. The new Trustee shall
    be appointed in accordance with the procedure referred to in paragraphs 18 to 25 of
    these Commitments.
41. Unless removed according to paragraph 39 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
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        the Monitoring Trustee if it subsequently appears that the relevant remedies might not
        have been fully and properly implemented.
        SECTION F.       THE REVIEW CLAUSE
42.     The Commission may extend the time periods foreseen in the Commitments in
        response to a request from DSS or, in appropriate cases, on its own initiative. Where
        DSS 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 the Notifying Party be entitled to request an
        extension within the last month of any period.
43.     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.
        SECTION G.       ENTRY INTO FORCE
44.     The Commitments shall take effect upon the date of adoption of the Decision.
……………………………………………………………………..
duly authorised for and on behalf of
DS Smith Plc
5 November 2018
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                                         SCHEDULE
1. The Divestment Businesses comprise DSS Normandie, DSS Normandie (Cabourg)
   (together the “DSS Normandie plants”) and Europac Ovar,
   DSS Normandie
2. In accordance with paragraph 5 of these Commitments, DSS Normandie includes, but is
   not limited to:
   (i)      the following main tangible assets: save as stated below, all tangible assets
            owned by DSS and necessary for the production, servicing and sale of all
            products and product lines manufactured at DSS Normandie, specifically
            including:
            (a)       the plant located at the above address, including […];
            (b)       all manufacturing and sales assets including […]:
   (ii)     the following main intangible assets: save as stated below, a non-exclusive,
            non-transferrable, royalty-free, perpetual licence (without the right to sub-
            licence) for the benefit of the business currently carried on by DSS Normandie,
            for any intangible asset that is necessary for the development, production,
            servicing and sale of the products currently manufactured at DSS Normandie.
            Nothing in this licence shall restrict the ability of the Purchaser to transfer or
            sub-licence the benefit of this licence as a result of: (a) an intra-group transfer;
            or (b) a subsequent sale of DSS Normandie;
   (iii)    the following main licences, permits and authorisations: all licences,
            permits and authorisations necessary to produce the products manufactured at
            DSS Normandie to the extent transferrable under applicable law. DSS shall use
            its best efforts to assign the applicable aspects of such relevant licences,
            permits and authorisations to the Purchaser;
   (iv)     the following main contracts, agreements, leases, commitments and
            understandings: all external customer contracts relating to the products
            manufactured at DSS Normandie, other than contracts, agreements or
            understandings relating to the customers listed in Annex 2, and all other
            external contracts, agreements, leases and commitments necessary for the
            business of DSS Normandie. […];
   (v)      the following customer, credit and other records: all customer accounts,
            orders and credit records or portions thereof relating to the products
            manufactured at DSS Normandie, other than those relating to the customers
            listed in Annex 2;
   (vi)     the following Personnel: the Personnel listed in Annex 3, to the extent still
            employed on the Effective Date;
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   (vii)    the following Key Personnel: all Key Personnel listed in Annex 3, to the extent
            still employed on the Effective Date; and
   (viii)   […]
3. DSS Normandie shall not include:
   (i)      […]
            The names of these personnel are therefore not included in the Personnel or
            Key Personnel of DSS Normandie listed in Annex 3 and all hardware and
            equipment used primarily by those personnel (including office and IT
            equipment) shall not be transferred;
   (ii)     […];
   (iii)    all DSS proprietary […] software and associated assets, including, […];
   (iv)     the ownership of, or right to use, any IP rights currently used by DSS
            Normandie that are not necessary for either the operation of or the viability of
            DSS Normandie’s business;
   (v)      any brands or logos currently held, as owner or licensee, by DSS;
   (vi)     any rights to websites or domain names;
   (vii)    books and records required to be retained pursuant to any law provided that the
            Purchaser shall on request receive a copy of the same;
   (viii)   […]; or
   (ix)     contracts or understandings in relation to customers listed in Annex 2.
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 DSS Normandie and necessary for the
   continued viability and competitiveness of DSS Normandie, that asset or adequate
   substitute will be offered to potential purchasers.
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   DSS Normandie (Cabourg)
5. In accordance with paragraph 5 of these Commitments, DSS Normandie (Cabourg)
   includes, but is not limited to:
   (i)     the following main tangible assets: save as stated below, all tangible assets
           owned by DSS and necessary for the production, servicing and sale of all
           products and product lines manufactured at DSS Normandie (Cabourg),
           specifically including:
           (a)      the plant located at the above address, including […];
           (b)      all manufacturing and sales assets including […]:
   (ii)    the following main intangible assets: save as stated below, a non-exclusive,
           non-transferrable, royalty-free, perpetual licence (without the right to sub-
           licence) for the benefit of the business currently carried on by DSS Normandie
           (Cabourg) for any intangible asset that is necessary for the development,
           production, servicing and sale of the products currently manufactured at DSS
           Normandie (Cabourg). Nothing in this licence shall restrict the ability of the
           Purchaser to transfer or sub-licence the benefit of this licence as a result of: (a)
           an intra-group transfer; or (b) a subsequent sale of DSS Normandie (Cabourg);
   (iii)   the following main licences, permits and authorisations: all licences,
           permits and authorisations necessary to produce the products manufactured at
           DSS Normandie (Cabourg) to the extent transferrable under applicable law.
           DSS shall use its best efforts to assign the applicable aspects of such relevant
           licences, permits and authorisations to the Purchaser;
   (iv)    the following main contracts, agreements, leases, commitments and
           understandings: all external customer contracts relating to the products
           manufactured at DSS Normandie (Cabourg) and all other external contracts,
           agreements, leases and commitments necessary for the business of DSS
           Normandie (Cabourg). […];
   (v)     the following customer, credit and other records: all customer accounts,
           orders and credit records or portions thereof relating to the products
           manufactured at DSS Normandie (Cabourg);
   (vi)    the following Personnel: the Personnel listed in Annex 3, to the extent still
           employed on the Effective Date;
   (vii)   the following Key Personnel: all Key Personnel listed in Annex 3, to the extent
           still employed on the Effective Date; and
   (viii)  […]
6. DSS Normandie (Cabourg) shall not include:
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   (i)      the ownership of, or right to use, any IP rights currently used by DSS
            Normandie (Cabourg) that are not necessary for either the operation of or the
            viability of DSS Normandie (Cabourg)’s business;
   (ii)     any brands or logos currently held, as owner or licensee, by DSS;
   (iii)    any rights to websites or domain names; or
   (iv)     books and records required to be retained pursuant to any law provided that the
            Purchaser shall on request receive a copy of the same.
7. If there is any asset or personnel which is not covered by paragraph 5 of this Schedule
   but which is both used (exclusively or not) in DSS Normandie (Cabourg) and necessary
   for the continued viability and competitiveness of DSS Normandie (Cabourg), that asset
   or adequate substitute will be offered to potential purchasers.
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   Europac Ovar
8. In accordance with paragraph 5 of these Commitments, Europac Ovar includes, but is
   not limited to:
   (i)      the following main tangible assets: save as stated below, all tangible assets
            owned by Europac and necessary for the production, servicing and sale of all
            products and product lines manufactured at Europac Ovar, specifically
            including:
            (a)      the plant located at the above address, including […];
            (b)      the lease of the warehouse located at Rua de Cabo Verde, Zona
                     Industrial de Ovar, Ovar;
            (c)      all manufacturing and sales assets including […]:
   (ii)     the following main intangible assets: save as stated below, a non-exclusive,
            non-transferrable, royalty-free, perpetual licence (without the right to sub-
            licence) for the benefit of the business currently carried on by Europac Ovar, for
            any intangible asset that is necessary for the development, production,
            servicing and sale of the products currently manufactured at Europac Ovar.
            Nothing in this licence shall restrict the ability of the Purchaser to transfer or
            sub-licence the benefit of this licence as a result of: (a) an intra-group transfer;
            or (b) a subsequent sale of Europac Ovar;
   (iii)    the following main licences, permits and authorisations: all licences,
            permits and authorisations necessary to produce the products manufactured at
            Europac Ovar to the extent transferrable under applicable law. DSS shall use
            its best efforts to assign the applicable aspects of such relevant licences,
            permits and authorisations to the Purchaser;
   (iv)     the following main contracts, agreements, leases, commitments and
            understandings: all external customer contracts relating to the products
            manufactured at Europac Ovar and all other external contracts, agreements,
            leases and commitments necessary for the business of Europac Ovar. […];
   (v)      the following customer, credit and other records: all customer accounts,
            orders and credit records or portions thereof relating to the products
            manufactured at Europac Ovar;
   (vi)     the following Personnel: the Personnel listed in Annex 5, to the extent still
            employed on the Effective Date;
   (vii)    the following Key Personnel: all Key Personnel listed in Annex 5, to the extent
            still employed on the Effective Date; and
   (viii)   […].
9. Europac Ovar shall not include:
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    (i)      The following personnel which do not form part of the business of Europac Ovar
             but which are currently located at the Europac Ovar site: […]
             The names of these personnel are therefore not included in the Personnel or
             Key Personnel of Europac Ovar listed in Annex 5 and all hardware and
             equipment used primarily by those personnel (including office and IT
             equipment) shall not be transferred;
    (ii)     the ownership of, or right to use, any IP rights currently used by Europac Ovar
             that are not necessary for either the operation of or the viability of Europac
             Ovar’s business;
    (iii)    any brands or logos currently held, as owner or licensee, by Europac;
    (iv)     any rights to websites or domain names; or
    (v)      books and records required to be retained pursuant to any law provided that the
             Purchaser shall on request receive a copy of the same.
10. If there is any asset or personnel which is not covered by paragraph 8 of this Schedule
    but which is both used (exclusively or not) in Europac Ovar and necessary for the
    continued viability and competitiveness of Europac Ovar, that asset or adequate
    substitute will be offered to potential purchasers.
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                             LIST OF ANNEXES
Annex 1 DSS Normandie plants
Annex 2 Excluded customers
Annex 3 DSS Normandie plants personnel
Annex 4 Europac Ovar
Annex 5 Europac Ovar personnel
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                                 ANNEX 1
                            DSS Normandie Plants
1.  DSS Normandie
[…]
2.  DSS Normandie (Cabourg)
[…]
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                     ANNEX 2
DSS Normandie – Excluded centrally managed customers
                    Customer
                        […]
                        […]
                        […]
                        […]
                        […]
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                                 ANNEX 3
                    DSS Normandie Plants – Personnel
             Details of Personnel employed at DSS Normandie
           Job description                             Number
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
[…]                                                      […]
Total Headcount                                          […]
           Details of Key Personnel employed at DSS Normandie
             Function                                  Name
[…]                                                     […]
[…]                                                     […]
[…]                                                     […]
[…]                                                     […]
[…]                                                     […]
[…]                                                     […]
[…]                                                     […]
                                 EC 555616647
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         Details of Personnel employed at DSS Normandie (Cabourg)
           Job description                              Number
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
Total Headcount                                            […]
       Details of Key Personnel employed at DSS Normandie (Cabourg)
                Function                                 Name
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
[…]                                                        […]
                                  EC 555616647
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  ANNEX 4
Europac Ovar
     […]
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                       ANNEX 5
               Europac Ovar – Personnel
    Details of Personnel employed at Europac Ovar
Job description                               Number
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
       […]                                      […]
Total Headcount                                 […]
  Details of Key Personnel employed at Europac Ovar
  Function                                    Name
      […]                                      […]
      […]                                      […]
      […]                                      […]
      […]                                      […]
      […]                                      […]
                       EC 555616647
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[…]              […]
[…]              […]
    EC 555616647