CELEX: 32014M7132
Language: en
Date: 2014-07-30 00:00:00
Title: Commission Decision of 30/07/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7132 - INEOS / DOEFLEX) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 30.7.2014
                                        C(2014) 5563 final

                                        COMP Operations

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To the notifying party:

Dear Sir/Madam,

Subject:    Case M.7132 – INEOS / Doeflex
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 24 June 2014, the European Commission received a notification of a proposed concentration pursuant to Article 4 of  Council  Regulation
       (EC) No 139/2004 by which INEOS AG ("INEOS", Switzerland), hereinafter the Notifying Party, acquires sole control of  Doeflex  Compounding
       Limited ("Doeflex", the United Kingdom) by way of purchase of shares,[2] hereinafter the “Transaction”.

       THE PARTIES

    2) INEOS is a global manufacturer of petrochemicals, speciality  chemicals  and  oil  products  headquartered  in  Switzerland.  Among  other
       activities, INEOS produces and sells commodity Suspension Polyvinyl Chloride (“S-PVC”) and S-PVC compounds. INEOS is a  private  group  of
       companies controlled by Mr James Ratcliffe.

    3) Doeflex is a PVC compounder headquartered in the United Kingdom with a single manufacturing facility located in Swindon,  United  Kingdom.
       Doeflex is a privately owned company controlled by Mr William Trendell and Mr Glynn Berry.

       THE CONCENTRATION

    4) The Transaction consists of INEOS acquiring sole control of Doeflex. INEOS has incorporated a new wholly-owned company ("Newco") to  which
       it has transferred its entire S-PVC compounding business. The two current owners of  Doeflex  have  incorporated  a  wholly-owned  company
       ("SwindonCo"), which will be granted an option to acquire the business and assets of Doeflex. Upon  completion,  Newco  will  acquire  the
       entire issued share capital of SwindonCo in exchange for less than 20% of the shares in NewCo. Concurrently,  SwindonCo  will  assign  the
       option to acquire the business and assets of Doeflex to a wholly-owned subsidiary of NewCo, which will then exercise this option.

    5) As a result of the Transaction, INEOS will hold the majority of the voting rights (80%) at Newco's shareholder meetings and will  be  able
       to adopt alone any ordinary or special resolution, except for a limited number of reserved matters meant to protect minority shareholders.
       Similarly, INEOS will appoint the majority of the members of the Board of Directors and will be able to pass board resolutions  concerning
       the supervision and management of Newco (including the business plan and budget).

    6) Therefore, the Transaction constitutes an acquisition of sole control by INEOS of Doeflex within the meaning of  Article  3(1)(b)  of  the
       Merger Regulation.

       EU DIMENSION

    7) The Transaction does not meet either of the alternative jurisdictional thresholds under  Article  1  of  the  Merger  Regulation,  because
       Doeflex’s EU-wide turnover is less than EUR 100 million.[3] The Transaction therefore has  no  EU  dimension,  but  was  referred  to  the
       Commission pursuant to a referral request under Article 4(5) of the Merger Regulation.

       Market Definition

1 Horizontally related markets

1 S-PVC compounds

    8) The Parties activities overlap in the manufacture and supply of S-PVC compounds.

1 Product market definition

    9) S-PVC needs to be compounded (blended with other ingredients such as pigments  and  other  substances  in  order  to  confer  the  desired
       characteristics on the final product) before it can be directly used in any end application.  Depending  on  the  additives  used  in  the
       compounding process, S-PVC compounds can be used in a wide range of end applications such as plumbing  and  drainage,  window  frames  and
       sills, door frames, fascia siding, flooring, cables, etc.

   10) In past decisions,[4] the Commission considered PVC compounds to constitute a distinct product market separate from  commodity  S-PVC.  It
       also considered whether the market may be further divided into two distinct segments, that is to say dry blend and gelled  compounds,  but
       ultimately left the issue open.

   11) From a demand-side perspective, the Commission found limited substitutability between dry blend and  gelled  compounds  in  the  past.  In
       particular, these two types of S-PVC compounds share only some end applications. Customers could not adapt their production process to use
       both types of compounds, without investing in new equipment.[5] From a supply-side perspective, the Commission also noted  that  suppliers
       of S-PVC compounds use different equipment for manufacturing dry blend and gelled compounds, as the  latter  type  of  compounds  requires
       special and more expensive equipment.[6]

   12) The Notifying Party argues that, from a supply-side perspective, a supplier can switch from one type of  compound  to  the  other  without
       incurring significant costs. This is because the production of gelled compounds only adds one additional, final  step  to  the  production
       process of dry blend compounds. Suppliers of dry blend compounds should simply invest in an extruder to start producing gelled  compounds,
       and some gelled production lines allow the dry blend compounds to be extracted before the production  moves  to  the  final  gelled  stage
       (otherwise modifications can be made to the production line to allow this extraction). Nevertheless, the Notifying  Party  considers  that
       the question can be left open for the purpose of this case, as no competition concerns would arise under any of these  alternative  market
       definitions.

   13) During the market investigation, customers explained that they cannot use dry blend and gelled compounds interchangeably and that it would
       not be possible for them to adjust their production process to accommodate both types of S-PVC compounds. Customers  also  indicated  that
       even in the event of a permanent 5-10% price increase (“SNNIP”), they would not switch from gelled compounds to  dry  blend  compounds  or
       vice-versa.

   14) Suppliers of S-PVC compounds acknowledged that the production process of dry blend and gelled compounds is essentially the  same  although
       each type of S-PVC compounds requires different equipment. Generally, manufactures' production patterns are bound to the  requirements  of
       their customer base, which makes switching between the two types of S-PVC compounds unlikely, even in the event of a SNNIP.

   15) For the purpose of this merger decision, the question of whether dry blend and gelled compounds belong in  the  same  product  market  can
       ultimately be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market irrespective of
       the precise product market definition.

2 Geographic market definition

   16) The Commission has previously found that the geographic scope of the market for S-PVC compounds is wider than national, while leaving open
       the question of whether the market encompasses North Western Europe (“NWE”),[7] Western Europe (“WE”) or the entire EEA.[8]

   17) The Notifying Party contends that the market is EEA-wide and makes several points to substantiate its argument.

        a. First, S-PVC compounds are non-hazardous products which are not subject to special handling requirements and are simple to  transport
           over large distances, with transport costs averaging around 4-5% of the sales price.

        b. […]

        c. Third, the Notifying Party estimates that there are large trade flows between Member States, with every Member State analysed by  the
           Notifying Party importing at least [20-30]% of its S-PVC compounds requirements.[9]

        d. Fourth, suppliers of S-PVC compounds are accustomed to providing post-sale technical support to customers in a  range  of  locations.
           Support is generally delivered through regular visits to the customer, whether the customer is in another country or more local.

   18) A majority of the customers having participated in the market investigation believed that the market was  wider  than  national,  although
       some emphasized the importance of local presence to ensure that certain services are provided in a timely manner.  Within  this  group  of
       customers, the NWE dimension is the most prevalent one. Moreover, Western European customers  seem  unwilling  to  purchase  from  Eastern
       Europe and vice-versa, which suggests that the market may be narrower than the whole EEA.

   19) Regarding a hypothetical narrower segmentation comprising the United Kingdom and Ireland (as opposed to continental Europe), a majority of
       customers confirmed that the market conditions in this area, such as prices, availability  of  supply  and  competitive  environment,  are
       comparable to those prevailing in continental Europe. While a majority of customers in this area purchase locally, they  explain  that  in
       principle there seem to be no particular hurdle preventing them from sourcing elsewhere, if required.

   20) Suppliers of S-PVC compounds unanimously considered the market for S-PVC compounds to be wider than national, with the EEA being the  most
       prevalent dimension. Moreover, suppliers of S-PVC compounds consistently stated that a SNNIP localized in a given area of the EEA would be
       enough to redirect sales to that area (including the United Kingdom and Ireland).

   21) Based on the results of the market investigation and in line with its precedents, the Commission considers that, for the purpose  of  this
       merger decision, the geographic scope of the market for S-PVC compounds is wider than  national.  The  question  of  whether  this  market
       encompasses NWE, WE or the entire EEA can ultimately be  left  open,  as  the  Transaction  does  not  raise  serious  doubts  as  to  its
       compatibility with the internal market irrespective of the precise market definition.

2 Vertically related markets

1 S-PVC and E-PVC

   22) INEOS, through its joint venture (the “PVC Joint Venture”) with Solvay SA (“Solvay”), will be active upstream from S-PVC compounds in  the
       production and supply of S-PVC and Emulsion Polyvinyl Chloride (“E-PVC”),[10] both inputs for producing S-PVC compounds.

1 Product market definition

   23) In previous decisions,[11] the Commission has concluded that S-PVC and E-PVC belong in separate product  markets.  The  market  for  S-PVC
       resins was further segmented into three separate product markets: extender, speciality and commodity S-PVC. This segmentation was  due  to
       the products having different properties, production processes,  pricing,  ranges  of  possible  applications  and  supply  structure.[12]
       Recently, the Commission reiterated that the market for commodity S-PVC constitutes a separate product market from specialty and  extender
       S-PVC.[13] The market for E-PVC resin was also further segmented into two separate product markets, that is to say paste and speciality E-
       PVC, due to limited demand and supply-side substitutability.[14]

   24) The Notifying Party does not contest the Commission’s practice in this regard.

   25) For the purpose of this merger decision, any outstanding market definition can ultimately be left open, as the Transaction does not  raise
       serious doubts as to its compatibility with the internal market irrespective of the precise market definition.

2 Geographic market definition

   26) In previous cases,[15] the Commission has considered that the geographic market for S-PVC could be  as  wide  as  the  EEA.  However,  the
       Commission has recently concluded that the market for commodity S-PVC is narrower than the whole EEA and as  wide  as  NWE  or,  at  best,
       NWE+.[16] With regard to E-PVC, the Commission considered that the geographic market could be EEA-wide or even global.[17]

   27) The Notifying Party submits that the market for S-PVC (and its sub-segments) is EEA-wide, whereas the  market  for  E-PVC  (and  its  sub-
       segments) is global.

   28) For the purpose of this merger decision, any outstanding market definition can ultimately be left open, as the Transaction does not  raise
       serious doubts as to its compatibility with the internal market irrespective of the precise market definition.

2 Plasticizers

   29) INEOS is active upstream from S-PVC compounds in the production and supply of plasticisers and secondary plasticisers, both of  which  are
       inputs for producing S-PVC compounds. In particular, INEOS produces three types of plasticizers, i.e.  terephthalates,  trimellitates  and
       aliphatics.

1 Product market definition

   30) In previous decisions,[18] the Commission has considered the market for plasticisers, but did not  focus  on  the  types  of  plasticisers
       produced by INEOS. In those decisions, the Commission defined a separate market  for  di-benzoate  plasticisers,  which  is  a  subset  of
       benzoate plasticisers.

   31) The Notifying Party submits that there is a high degree of demand-side substitutability between different classes of  plasticisers.  While
       it acknowledges that, as a general matter, substitutability may be more likely within a particular plasticizer  class  (e.g.  aliphatics),
       there is also significant substitutability across classes.

   32) For the purpose of this merger decision, the question of whether  each  plasticiser  class  constitutes  a  separate  product  market  can
       ultimately be left open, as the Transaction does not raise serious doubts as to its compatibility with the internal market irrespective of
       the precise market definition.

2 Geographic market definition

   33) In previous cases,[19] the Commission has found that the market for plasticisers is EEA-wide.

   34) The Notifying Party does not contest the Commission’s practice in this regard.

   35) For the purpose of this merger decision, the precise geographic scope of the market for plasticizers can ultimately be left open,  as  the
       Transaction does not raise serious doubts as to its compatibility with the internal market irrespective of the precise market definition.

3 Secondary plasticizers

   36) INEOS is also active in the production and supply of chlorinated paraffins, which are used as secondary plasticizers in  S-PVC  compounds.
       INEOS is currently in the process of contributing these activities to the PVC Joint Venture.

1 Product market definition

   37) The Commission has never analysed the market for secondary plasticizers in the context of merger proceedings. The Notifying Party  submits
       that there is a high degree of demand-side substitutability between different secondary plasticizers. As a consequence, it argues that the
       market should include chlorinated paraffins, ESBO and ELO.

   38) For the purpose of this merger decision, the question of whether each secondary plasticiser class constitutes a  separate  product  market
       can ultimately be left open, as the Transaction does  not  raise  serious  doubts  as  to  its  compatibility  with  the  internal  market
       irrespective of the precise market definition.

2 Geographic market definition

   39) The Notifying Party submits that the market for secondary plasticisers is global, because (i) they are readily transportable and there are
       no significant barriers to trade; (ii) there are substantial global trade flows;  and  (iii)  INEOS  faces  substantial  competition  from
       producers of secondary plasticisers located outside of the EEA (that is to say in India, the Middle East, USA and SE Asia).

   40) For the purpose of this merger decision, the precise geographic scope of the market for secondary  plasticisers  can  ultimately  be  left
       open, as the Transaction does not raise serious doubts as to its compatibility with the internal market irrespective of the precise market
       definition.

       Competitive Assessment

1 The framework of the assessment

   41) The Commission has recently examined another concentration affecting related markets, namely the establishment of the  PVC  Joint  Venture
       between INEOS and Solvay.[20] The PVC Joint Venture was approved by the Commission decision of 8 May 2014 subject to commitments. However,
       that concentration has not yet been implemented as the parties’ commitments in that case included an upfront buyer clause  which  provides
       that the completion of that concentration is conditional upon divestment of certain production assets. The divestment of those  production
       assets has not yet taken place.

   42) In line with previous Commission decisions,[21] in the present case the Notifying Party submitted its notification based  on  the  working
       assumption that the PVC Joint Venture has already been implemented.[22]

   43) Therefore, the Transaction is assessed taking into account the PVC Joint Venture. Consequently, the starting  point  of  the  Commission's
       assessment is a market structure where the PVC Joint Venture is active upstream of S-PVC compounds.

   44) Against this background, the Transaction gives rise to one horizontally affected market, i.e. dry blend compounds, and also to a number of
       vertically affected markets: commodity and extender S-PVC as inputs for S-PVC compounds (and its sub-segments);  speciality  S-PVC  as  an
       input for dry blend compounds; E-PVC and speciality E-PVC as inputs for dry blend compounds;  and  paste  E-PVC  as  an  input  for  S-PVC
       compounds (and its sub-segments).

   45) The Transaction also gives rise to vertically affected markets in relation to plasticisers and  secondary  plasticisers:  plasticisers  as
       input for dry blend compounds; and, if a very conservative market definition is retained,[23] chlorinated paraffins as an input for  S-PVC
       compounds (and its sub-segments).

2 Horizontally affected markets

1 Dry blend compounds

   46) As noted above, the Transaction only gives rise to one horizontally affected  market,  namely  dry  blend  compounds,  regardless  of  the
       geographic market definition ultimately retained (that is to say NWE, WE or EEA). In this market, the  merged  entity’s  market  share  by
       volume in 2013 would amount to [20-30]% with an increment of [0-5]% in the EEA, [20-30]% with an increment of [0-5]% in  WE  and  [30-40]%
       with an increment of [0-5]% in NWE. INEOS is already the market leader pre-transaction and the structural  change  brought  about  by  the
       Transaction in this market is not significant.

   47) From a historical perspective, INEOS’s production and market share has increased in the 2010-2012 period, despite a notable  fall  in  the
       total size of the market since 2010. However, INEOS lost between [0-5] and [5-10] percentage points by volume in  2013.  Doeflex’s  market
       data shows that, over the 2010-2013 period, it has reduced its production of dry blend compounds […],  continuously  losing  market  share
       since 2011. This suggests that Doeflex’s ability to pose a competitive constraint over INEOS has been limited, at least since 2011.

   48) Post-transaction, the merged entity will continue to face competitive constraints from a number of  market  players  including  Solvay[24]
       ([10-20]% in the EEA, [5-10]% in WE and [10-20]% at NWE-level), Begra ([0-5]% in the EEA, [0-5]% in WE and [0-5]% in NWE), Kem One ([0-5]%
       in the EEA and WE [0-5]% in NWE), Polymer Chemie ([0-5]% in the EEA and WE and [0-5]% in NWE) and TPV ([0-5]% in  the  EEA  and  WE).  The
       market for dry blend compounds is also fragmented with more than [50-60]% of EEA,  WE  and  NWE  sales  volumes  accounted  for  by  small
       suppliers in 2013. Those players have increased their market share relative to 2012, particularly in NWE, where they gained  approximately
       [20-30] percentage points by volume on an aggregate basis.

   49) The Notifying Party argues that the Transaction does not give rise to competition concerns for a number of reasons.

   50) First, INEOS estimates that there is significant spare capacity in the market, which can be quickly and cheaply deployed.[25]  It  further
       adds that there is also scope for expanding capacity by running plants at weekends (instead of only five  days  a  week).[26]  INEOS  also
       stresses that suppliers would also have incentives to expand capacity, because historically they have shown interest in responding to  new
       opportunities and have increased their production at periods, when demand and order size increased.

   51) Second, customers pursue multi-sourcing strategies and can switch easily between suppliers of S-PVC compounds.[27] Long term contracts are
       uncommon in this industry and orders tend to be won on a month-by-month basis. Switching costs are low for commoditised end  applications.
       However, the Notifying Party acknowledges that some customers (e.g. manufacturers of medical devices) need regulatory approvals before any
       such switching can take place. In those cases, switching can take 6-12 months or longer and the costs associated with any  such  switching
       are arguably higher than those faced by other customer groups.

   52) Third, this market is characterised by low entry barriers and entry can take place on a small scale.[28] According to  INEOS,  many  small
       suppliers have been successful in entering this market within the past  15  years,  which  would  be  confirmed  by  the  high  degree  of
       fragmentation reflected in the market share data still today. Moreover, the Notifying  Party  argues  that  even  customers  do  not  face
       technical barriers and can start in-house production, once they acquire the necessary - potentially  second-hand  -  equipment.  Based  on
       INEOS’ estimates, most S-PVC compounding (around 81%) is carried out by S-PVC converters.

   53) Fourth, INEOS and Doeflex are not close competitors.[29] INEOS does not compete with Doeflex more closely  than  it  competes  with  other
       compounds suppliers. INEOS and Doeflex are also not particularly close competitors for any product type or customer group. Moreover, there
       is limited competition between the Parties with respect to customers who purchase medical grade  S-PVC  compounds,  that  is  to  say  the
       customer group facing greater hurdles for switching to another supplier of S-PVC compounds.

   54) A majority of the participants in the market investigation confirmed the Notifying Party’s claim that the market is characterised by short-
       term contracts with generally no volume commitments and that multi-sourcing strategies are also common in the sector. On  balance,  market
       participants considered switching to be achievable in a relatively short time frame and with limited investment for most applications.  In
       a case of a price increase, a majority of customers would simply switch volumes to another supplier of dry blend compounds. This  is  also
       corroborated by the suppliers, which responded to the market investigation.

   55) The Notifying Party’s claim regarding the existence of overcapacity has also been supported by the replies to  the  market  investigation.
       The substantial overcapacity in the market for S-PVC compounds is explained by the overall level of demand, which  has  fallen  since  the
       financial crisis, while production levels have not.

   56) Conversely, the replies to the market investigation did not entirely support the Notifying Party’s argument that a  price  increase  would
       trigger switching to in-house production. On the one hand, customers generally pointed to too high investment costs or to the lack of know-
       how to produce S-PVC compounds of the required quality as barriers to this type of switching. On the  other,  some  larger  customers  may
       indeed be able to move a certain proportion of their needs to in-house productions and appear to have done  so  recently.  In  particular,
       INEOS identified a number of customers which have recently made this switch, such as AEI, DHM,  GAP/Homeline,  Selecta,  Kalsi,  Eurocell,
       Extruflex, Kestrel, HL Plastics, and BT Bau.[30]

   57) Finally, market participants did not single out INEOS and Doeflex as each other’s close competitor. While INEOS, Doeflex and Dugdale  seem
       to be important supply options for customers located in the United Kingdom and Ireland due to their proximity to customers in  that  area,
       many other players such as Vinyl Compounds, Colorite, Kem One and Benvic are regarded as close competitors. The market investigation  also
       indicated that, INEOS tends to focus on big production campaigns  for  large  customers,  whereas  Doeflex  essentially  supplies  smaller
       customers, making Doeflex much closer to Dugdale rather than INEOS from this perspective.

   58) In view of the Notifying Party' submissions and the replies to the market investigation, the Commission  considers  that  the  Transaction
       does not give rise to serious doubts as to its compatibility with the internal market with regard to the market for dry blend compounds.

3 Vertically affected markets

   59) As noted in Paragraph (43), the starting point of the Commission's assessment is a market structure where the PVC Joint Venture is  active
       upstream of S-PVC compounds. Therefore, where relevant, the PVC Joint Venture’s market shares will be taken into account instead of INEOS’
       ones.

1 S-PVC / S-PVC compounds

   60) The PVC Joint Venture will have a market share of [30-40]% in NWE and [30-40]% in NWE+ in the market for  commodity  S-PVC  and  a  market
       share of [30-40]% in NWE and WE and [30-40]% in the EEA in the market for extender S-PVC.[31] For specialty S-PVC, the PVC Joint Venture’s
       market share will be relatively small, with [10-20]% in NWE, [10-20]% in WE and [10-20]% in the EEA. However, a vertically affected market
       could arise by virtue of the merged entity’s market share in the market for dry blend compounds in NWE, which amounts to [30-40]%.

   61) Therefore, the Transaction would give rise to a number of vertically affected markets as between commodity and extender  S-PVC  and  S-PVC
       compounds (and its sub-segments), as well as speciality S-PVC and dry blend compounds.

   62) However, the Commission considers that the Transaction does not give rise to any input or customer foreclosure concerns.

   63) In terms of input foreclosure, the Transaction does not affect the upstream structure of supply and, therefore, is unlikely to affect  the
       ability of rival compounders to find alternative sources of commodity S-PVC. There are alternative suppliers accounting  for  around  [60-
       70]% of the market for commodity S-PVC in NWE and NWE+, almost [60-70]% of the market for extender S-PVC in NWE and the EEA and almost [90-
       100]% in the market for speciality S-PVC in NWE and the EEA.

   64) Moreover, even assuming that INEOS would have incentives to engage in input foreclosure, it would lack the  ability  to  do  so.  This  is
       because the PVC Joint Venture - jointly controlled by INEOS and Solvay on a 50-50 basis - will have the incentive to maximise its sales in
       pursuit of its own profitability. Thus, under such a scenario INEOS’s and Solvay’s incentives would not be aligned.  In  other  words,  it
       appears unlikely that Solvay would agree to foreclose third party compounders in favour of supplying only INEOS’s downstream activities.

65) In terms of customer foreclosure, as pointed out by the Notifying Party, Doeflex is only a modest purchaser of commodity  and  speciality  S-
   PVC, with less than [0-5]% of the demand in NWE and NWE+ for commodity S-PVC and less than [0-5]% of the demand in NWE, WE and in the EEA  for
   specialty S-PVC. [Extender S-PVC is only occasionally used as an additive in S-PVC compounds].. Therefore, a hypothetical customer foreclosure
   by INEOS would not deprive other suppliers of commodity, extender and speciality S-PVC of sufficient economic alternatives in  the  downstream
   market to sell their output.[32]

   66) Finally, INEOS was already active in the markets at issue pre-Transaction and, to the best of  the  Commission’s  knowledge,  it  did  not
       engage in input or customer foreclosure. The magnitude of the Transaction does not appear to be sufficiently material to justify a  change
       in INEOS’s strategy.

   67) In light of the above, the Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the
       internal market with regard to the markets for S-PVC and S-PVC compounds.

2 E-PVC / S-PVC compounds

   68) The PVC Joint Venture will have a market share of [20-30]% in the EEA in the overall market for E-PVC and a market share  of  [10-20]%  in
       the EEA in the market for speciality S-PVC. However, a vertically affected market could arise by virtue  of  the  merged  entity’s  market
       share in the market for dry blend compounds in NWE, which amounts to [30-40]%. As regards paste E-PVC,  the  PVC  Joint  Venture’s  market
       share will be [30-40]% in NWE and, consequently, this would give rise to other affected markets in relation S-PVC compounds (and its  sub-
       segments).

   69) Therefore, the Transaction would give rise to a number of vertically affected markets as between overall E-PVC and  speciality  E-PVC  and
       dry blend compounds, as well as paste E-PVC and S-PVC compounds (and its sub-segments).

   70) However, the Commission considers that the Transaction does not give rise to any input or customer foreclosure concerns.

   71) In terms of input foreclosure, the Transaction does not affect the upstream structure of supply and, therefore, is unlikely to affect  the
       ability of rival compounders to find alternative sources of commodity S-PVC. There are alternative suppliers accounting  for  around  [70-
       80]% of the market for E-PVC in the EEA, more than [60-70]% of the market for paste E-PVC in the EEA and around [80-90]% in the market for
       speciality E-PVC in the EEA.

   72) Moreover, even assuming that INEOS would have incentives to engage in input foreclosure, it would lack the  ability  to  do  so.  This  is
       because the PVC Joint Venture - jointly controlled by INEOS and Solvay on a 50-50 basis - will have the incentive to maximise its sales in
       pursuit of its own profitability. Thus, under such a scenario INEOS’s and Solvay’s incentives would not be aligned.  In  other  words,  it
       appears unlikely that Solvay would agree to foreclose third party compounders in favour of supplying only INEOS’s downstream activities.

   73) In terms of customer foreclosure, as pointed out by the Notifying Party, E-PVC is only very occasionally used  as  an  additive  in  S-PVC
       compounds. Therefore, a hypothetical customer foreclosure by INEOS would not deprive other suppliers of commodity, extender and speciality
       S-PVC of sufficient economic alternatives in the downstream market to sell their output.

   74) Finally, INEOS was already active in the markets at issue pre-Transaction and, to the best of  the  Commission’s  knowledge,  it  did  not
       engage in input or customer foreclosure. The magnitude of the Transaction does not appear to be sufficiently material to justify a  change
       in INEOS’s strategy.

   75) In light of the above, the Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the
       internal market with regard to the markets for E-PVC and S-PVC compounds.

3 Plasticisers and secondary plasticisers / S-PVC compounds

   76) At EEA level, INEOS has a market share of [10-20]% by volume in the market for aliphatics, [20-30]% in the market for trimellitates and [0-
       5]% in the market for terephtalates. However, vertically affected markets could arise by virtue of the merged entity’s market share in the
       market for dry blend compounds in NWE, which amounts to [30-40]%. As  regards  secondary  plasticisers,  if  a  very  conservative  market
       definition is retained, INEOS’ market share would amount to [50-60]% in the EEA market for chlorinated paraffins.

   77) Therefore, the Transaction would give rise to a number of vertically affected markets as between plasticisers  (aliphatics,  terephtalates
       and trimellitates) and dry blend compound, as well as chlorinated paraffins and S-PVC compounds (and its sub-segments).

   78) However, the Commission considers that the Transaction does not give rise to any input or customer foreclosure concerns.

   79) In terms of input foreclosure, the Transaction does not affect the upstream structure of supply and, therefore, is unlikely to affect  the
       ability of rival compounders to find alternative sources of plasticisers and  secondary  plasticisers.  There  are  alternative  suppliers
       accounting for at least [70-80]% of the EEA market for plasticisers (aliphatics, terephtalates and trimellitates) and around  [40-50]%  of
       the EEA market for chlorinated paraffins.

   80) Regarding chlorinated paraffins, INEOS stresses that its market share overestimates  its  position,  because  chlorinated  paraffins  have
       multiple uses.[33] If other uses were excluded, INEOS’s market position would decrease significantly down to [5-10]% of a hypothetical EEA-
       wide market. Moreover, there are multiple alternative suppliers of chlorinated paraffins such as Caffaro, Leuna  Tenside,  Altair  Chimica
       and Fortischem, as well as multiple suppliers of other secondary plasticizers like  Arkema,  Akcros  Chemicals  and  Emery  Oleochemicals.
       According to INEOS’s estimates, these players are more than able to satisfy merchant market demand.

   81) In terms of customer foreclosure, as pointed out by the Notifying Party, Doeflex is only a small purchaser of plasticisers  and  secondary
       plasticisers. With regard to plasticisers, Doeflex accounts for less than [0-5]% of the merchant market demand in the EEA.[34] With regard
       to secondary plasticisers, its purchases of chlorinated paraffins and ESBO account for less than [0-5]% of the merchant market demand  for
       secondary plasticisers in the EEA and only around [0-5]% of the merchant market demand for chlorinated paraffins in the EEA. Therefore,  a
       hypothetical customer foreclosure by INEOS would not deprive other suppliers of commodity, extender and  speciality  S-PVC  of  sufficient
       economic alternatives in the downstream market to sell their output.

   82) Finally, INEOS was already active in the markets at issue pre-Transaction and, to the best of  the  Commission’s  knowledge,  it  did  not
       engage in input or customer foreclosure. The magnitude of the Transaction does not appear to be sufficiently material to justify a  change
       in INEOS’s strategy.

   83) In light of the above, the Commission considers that the Transaction does not give rise to serious doubts as to its compatibility with the
       internal market with regard to the markets for plasticisers and secondary plasticisers and S-PVC compounds.

       CONCLUSION

   84) For the above reasons, the European Commission has decided not to oppose the notified operation and to  declare  it  compatible  with  the
       internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

                                        For the Commission

                                        (signed)
                                        Ferdinando NELLI FEROCI
                                        Member of the Commission

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[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]   Publication in the Official Journal of the European Union No C 207, 3.07.2014, p. 47.

[3]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

[4]   Case M.6218 INEOS / Tessenderlo Group S-PVC Assets, para. 73; and Case M.4734 INEOS / Kerling para. 41.
[5]   Case COMP/M.4734 INEOS/Kerling, para. 40.
[6]   Case COMP/M.4734 INEOS/Kerling, para. 40.
[7]   NWE consists of Belgium, Denmark, France, Germany, Ireland, Luxemburg, Netherlands, Norway, Sweden and the United Kingdom.
[8]   Case M.6218 INEOS / Tessenderlo Group S-PVC Assets, para. 73; and Case M.4734 INEOS / Kerling, paras. 163-165.
[9]   On a regional basis, in NWE the Notifying Party estimates the import from other NWE countries account for  [30-40]%  of  total  NWE  sales,
      with further [10-20]% consisting of imports from elsewhere in the EEA. In the EEA as a whole around [40-50]% of all sales comes from import
      from other Member States.
[10]  The Notifying Party explains that extender S-PVC and E-PVC are only occasionally used as an additive in S-PVC compounds.
[11]  Case M.6905 INEOS / Solvay / JV, para. 190; Case M.6681 SVP / Kloeckner Holdings, para. 37; Case M.6563 Mexichem  SIH  /  Wavin,  para  14;
      M.6218 INEOS/Tessenderlo Group S-PVC, para 15; and Case M.4734 INEOS / Kerling, para 19.
[12]  Case M.6563 Mexichem SIH / Wavin para. 21; Case M.6218 INEOS / Tessenderlo Group S-PVC Assets,  paras.  16-19;  and  Case  M.4734  INEOS  /
      Kerling, para. 20.
[13]  Case M.6905 INEOS / Solvay / JV, para. 196 and ff.
[14]  Case M.6905 INEOS / Solvay / JV, paras. 526-531; and Case M.4734 INEOS / Kerling, para. 19.
[15]  Case M.6681 SVP / Kloeckner Holdings, para. 37; and Case M.6563 Mexichem SIH / Wavin, para 37.
[16]  Case M.6905 INEOS / Solvay / JV, para. 405. NWE+ consists of NWE plus Austria, Finland, Italy, Switzerland.
[17]  Case M.6905 INEOS / Solvay / JV, paras. 540-544; Case M.6681 SVP / Kloeckner Holdings, para 33.
[18]  Case M.5153 Arsenal / DSP, para. 134 and ff.; and Case M.5785 Sun Capital / DSM, paras. 48 and ff.
[19]  Case M.5153 Arsenal / DSP, para. 164-170; and Case M.5785 Sun Capital / DSM, paras. 89-91.
[20]  Case M.6905 INEOS / Solvay / JV.
[21]  Case M.6203 Western Digital Ireland / Viviti Technologies, paras. 18 and ff.
[22]  Therefore, where relevant, market conditions are those that are expected to exist post-implementation of the  proposed  PVC  Joint  Venture
      (including the related divestments) rather than those that currently exist.
[23]  As noted above, the Notifying Party argues that  the  relevant  product  market  should  include  all  secondary  plasticizers,  while  the
      geographic relevant market should be global.
[24]  In June 2014, Solvay divested its compounding activities to OpenGate Capital, i.e. Kem One’s current owner. As a consequence, in  the  next
      future Kem One’s and Solvay’s compounding business will be operated by the same group.
[25]  Form CO, Paragraphs 6.38 et seq.
[26]  INEOS conservatively estimates that the current level of spare capacity - excluding INEOS and Doeflex amounts - to at  least  [200  000-300
      000] tonnes, i.e. over [10-20]% of the total S-PVC compounds market by volume.
[27]  Form CO, Paragraphs 6.41 et seq.
[28]  Form CO, Paragraph 6.44 et seq.
[29]  Form CO, Paragraph 6.51 et seq.
[30]  Form CO, Paragraph 8.18.
[31]  These market shares take into the on-going divestments in relation to the PVC Joint Venture.
[32]  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations between  undertakings,
      Paragraph 61.
[33]  Form CO, Paragraph 6.89(ii)(a).
[34]  More in detail, Doeflex’s purchases in 2013 amounted to around [0-5]% of terephthalate demand in the EEA and 0.06% of  trimellitate  demand
      in the EEA. […].

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                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE

 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.