CELEX: 32020M9827
Language: en
Date: 2020-12-07 00:00:00
Title: Commission Decision of 07/12/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9827 - INTERNATIONAL FLAVORS & FRAGRANCES / NUTRITION & BIOSCIENCES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                              Brussels, 07.12.2020
                                                              C(2020) 8915 final
                                                                                PUBLIC VERSION
                                                                In the published version of this decision,
                                                                some information has been omitted
                                                                pursuant to Article 17(2) of Council
                                                                Regulation (EC) No 139/2004 concerning
                                                                non-disclosure of business secrets and other
                                                                confidential information. The omissions are
                                                                shown thus […]. Where possible the
                                                                information omitted has been replaced by
                                                                ranges of figures or a general description.
                                                              International Flavors and Fragrances Inc.
                                                              521 West 57th Street
                                                              New York City, NY 10019
                                                              United States of America
Subject:            Case M.9827 - INTERNATIONAL FLAVORS & FRAGRANCES /
                    NUTRITION & BIOSCIENCES
                    Commission decision pursuant to Article 6(1)(b) of Council Regulation
                    No 139/20041 and Article 57 of the Agreement on the European Economic
                    Area2
Dear Sir or Madam,
(1)       On 30 October 2020, the European Commission received notification of a
          concentration pursuant to Article 4 of Council Regulation (EC) 139/2004 (‘the
          Merger Regulation’) which would result from a proposed transaction by which
          International Flavors & Fragrances Inc (‘IFF’, USA) intends to acquire control,
          within the meaning of Article 3(1)(b) of that Regulation, of the whole
          Nutrition & Biosciences business (‘N&B’, USA) owned by DuPont de Nemours,
1         Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between
          undertakings, OJ L 24, 29.1.2004, p. 1. 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’).
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---     Inc. (“DuPont”) by way of purchase of shares (‘the Transaction’).3 In this Decision,
    IFF and N&B are referred to as ‘the Parties’. The undertaking that would result from
    the Transaction is referred to as ‘the merged entity’.
1.  THE PARTIES
(2) IFF (the United States) is a public company based in New York, listed on the New
    York Stock Exchange, the Tel Aviv Stock Exchange and Euronext Paris. It is active
    worldwide in the development, production and supply of flavours and fragrances
    used in consumer goods industries, such as food and beverage, personal care, and
    home care industries.
(3) N&B, headquartered in Delaware (the United States), is a business unit of DuPont. It
    is active worldwide in the development, production and supply of food and
    industrial ingredients and additives, including (i) natural and plant-based specialty
    ingredients (e.g. proteins, emulsifiers, sweeteners), (ii) solutions for health and
    bioscience applications (e.g. probiotics, fibres, cultures, enzymes, microbial control),
    functional cellulosic polymers and seaweed derived excipients for pharma and
    dietary supplements.
2.  THE TRANSACTION
(4) The Transaction is to be achieved by means of the implementation of a separation
    and distribution agreement and a merger agreement, both signed on 15 December
    2019, by which IFF is to acquire 100% of the outstanding equity of a new company
    (SpinCo) to which DuPont will transfer its N&B business, in the so-called Reverse
    Morris Trust transaction.4 IFF will therefore acquire sole control of the N&B
    business.
(5) The Transaction would henceforth result in a concentration within the meaning of
    Article 3(1)(b) of the Merger Regulation.
3.  UNION DIMENSION
(6) The Parties have a combined aggregate world-wide turnover of more than
    EUR 5 000 million (IFF EUR 4 662 million; N&B EUR 5 667 million). The
    aggregate Union-wide turnover of each of the Parties is more than EUR 250 million
    (IFF EUR […]; N&B EUR […]) and neither of the Parties achieves more than two-
    thirds of their aggregate Union-wide turnover within one and the same Member
    State. Therefore, the notified concentration has a Union dimension within the
    meaning of Article 1(3) of the Merger Regulation.
3   Publication in the Official Journal of the European Union No C 380, 11.11.2020, p. 8.
4   Reverse Morris Trust is a corporate transaction that includes a divisive reorganisation (spin-off or a
    split-off) followed by an acquisitive reorganisation (merger) to allow a tax-free transfer of a
    subsidiary under USA law.
                                                      2
 ---pagebreak--- 4.      RELEVANT MARKETS
(7)     The Parties’ activities overlap horizontally in the supply of cultures and plant-based
        proteins. There are also a limited number of vertical links between the Parties’
        activities in relation to locust bean gum, microcrystalline cellulose (MCC) and
        emulsifiers. In addition, the Transaction entails the conglomerate integration of two
        largely complementary product portfolios with significant individual market
        positions involving, in particular, the supply by N&B of functional ingredients such
        as soy-based proteins, locust bean gum, MCC, enzymes and probiotics for dietary
        supplements.5
4.1.    Cultures
(8)     Cultures are living microorganisms, such as bacteria, yeast or mould used in food
        and beverage manufacturing, animal and plant health, and animal feed. They provide
        a beneficial impact when used in a production process or included in a final product.
        Cultures ferment sugars and hence lower the pH value to protect the food, e.g., to
        extend shelf life and inhibit specific contaminating flora. Food manufacturing
        Cultures are used as bacterial starters or adjuncts and as protective Cultures in the
        production process of a variety of products in the food and beverage industry -
        including meat and dairy - to achieve greater production efficiency and specific
        product characteristics (such as flavour, texture, consistency, colour, taste), and to
        preserve perishable foods.
(9)     The Parties’ activities only overlap in the manufacturing and supply of Dairy
        Cultures and Cultures for Meat, as well as in a number of sub-segments. N&B also
        has limited sales of Cultures for Plant-based food.
4.1.1. Relevant Product Markets
4.1.1.1. The Commission’s decisional practice
(10)    The Commission has not previously defined a market for Cultures. In a previous
        case, the Commission considered a market for dairy cultures in the area of ‘Cultures
        for food production’, but ultimately left the exact market definition open.6
4.1.1.2. The Parties’ views
(11)    The Parties submit that the product market definition with respect to Cultures can be
        left open, as the Transaction does not give rise to competition concerns irrespective
        of the exact market definition. In any event, the Parties argue that in any case no
        distinction should be made between Cultures for Meat and Dairy Cultures. The
5       The Transaction gives rise to other de minimis horizontal overlaps and/or vertical links regarding the
        following product categories: antioxidants, dietary fibres & prebiotics, cosmetic ingredients, essential
        oils, functional system ingredients, sweeteners, food inclusions, flavours, colours, fragrances,
        essential nutrients and phosphates. The Parties’ combined market shares in these areas are far below
        20% and increments are very limited. As regards the vertical links, the supply market shares are also
        far below 30%, and purchases represent less than 1% of total demand. Moreover, post-Transaction
        there will remain several alternative sources of supply. It can therefore be reasonably excluded that
        the Transaction may entail an impact on competition in the supply of these products.
6       Commission decision of 18 July 2005 in Case M.3845 – PAI/Chr. Hansen, paragraphs 10, 12 and 23.
                                                          3
 ---pagebreak---      Parties add that no further distinctions should be defined for Dairy Cultures and
     Cultures for Meat based, respectively, on type of culture or on type of end product.7
(12) More precisely, the Parties argue with respect to Dairy Cultures that a segmentation
     between Cultures for Cheese and Fresh Dairy Cultures would not be appropriate.
     First, the Parties claim that there is considerable supply-side substitutability since
     both Cultures for Cheese and Fresh Dairy Cultures are typically produced on the
     same production lines using the same equipment,. Second, the Parties argue that
     while demand-side substitutability between different types of Dairy Cultures is
     limited,8 all Dairy Cultures are interchangeable from a supply-side. According to the
     Parties, with the exception of surface and ripening Cultures, the technology and
     know-how used for the production of all types of Cultures are very similar and Dairy
     Culture producers therefore generally offer all variations. The Parties further submit
     that similar bacterial strains are regularly used for the different types of Dairy
     Cultures.9
(13) The Parties further explain that if Dairy Cultures were to be further segmented,
     a distinction could be made between acidifying Cultures and other Cultures such as
     protective Cultures in Fresh Dairy Cultures and Cultures for Cheese, adjuncts in
     cheese, surface, and ripening Cultures in cheese, or probiotic Cultures in Fresh Dairy
     Cultures. Following such a segmentation, the Parties would only overlap in
     acidifying Cultures.10
(14) Finally, the Parties submit that in any case and in view of the very small market
     share increment the exact market definition with respect to Dairy Cultures can be left
     open.11
(15) With respect to Cultures for Meat, the Parties submit that the definition of the
     relevant product market can also be left open. According to the Parties, a possible
     distinction could be drawn between acidifying Cultures, surface Cultures and
     protective Cultures. However, the Parties argue that while demand-side
     substitutability between these different types of Cultures for Meat is limited, the
     Parties state that from a supply-side perspective, they are largely interchangeable.
     The technology and know-how used for production of all types of Cultures are
     largely similar. While not all suppliers of Cultures for Meat offer all three types of
     Cultures for Meat, the Parties argue that they could easily expand their portfolio.12
(16) If Cultures for Meat were to be segmented by type of end product, according to the
     Parties, a distinction between Cultures for Dried and Semi-Dried Sausages
     (potentially further sub-segmented into Cultures for Northern European
     ripening-style, Cultures for Southern European ripening-style and Cultures for US
     ripening-style), Cultures for Dried Cured Ham, Cultures for Cooked Sausages,
7    Form CO. para 6.53.
8    Form CO. paras 6.38-6.39.
9    Form CO para. 6.41.
10   Form CO paras. 6.41-6.42.
11   Form CO para 6.42.
12   Form CO paras 6.43-6.46.
                                                4
 ---pagebreak---         Cultures for Cooked Ham and other Cultures, in particular for Parboiled / Fresh
        Sausages could be considered.13
(17)    The Parties acknowledge that when considering Cultures for Meat by type of end
        product, demand-side substitutability would be limited, because different end
        product production processes require different types of Cultures for Meat. However,
        according to the Parties, supply-side substitutability is significant, as the technology
        and know-how used for the production of all types of Cultures for Meat are largely
        similar (with the exception of surface cultures which require different production
        assets). While not all suppliers of Cultures for Meat offer Cultures for all end
        products, the Parties argue that they could easily expand their portfolio.14
(18)    Finally, the Parties submit that in any case and in view of the moderate combined
        market shares of the Parties in such sub-segments, the exact market definition with
        respect to Cultures for Meat can be left open.15
4.1.1.3. The Commission’s assessment
(19)    The outcome of the market investigation provides strong indications that the market
        for the manufacture and supply of Cultures should be segmented and that in
        particular the manufacture and supply of Cultures for Meat, Dairy Cultures and
        Cultures for Plant-based food each constitute a distinct product market.
(20)    The majority of respondents to the market investigation consider that Cultures for
        Meat, Dairy Cultures and Cultures for Plant-based food constitute three separate
        markets due to their limited substitutability in terms of properties, modes of action,
        applications and/or price. While the majority of customers answered with ‘I do not
        know’, the majority of customers expressing their opinion indicated that a
        consideration of three separate markets is appropriate.16 A majority of competitors
        also considers this distinction appropriate.17
(21)    While one customer indicated that ‘[c]ulture development is a competence that can
        be applied to several areas of expertise’,18 another customer explained that ‘these
        are really 3 different markets (dosage of application, technology, people…)’.19
        Another customer explained that ‘[t]he respective cultures show other functionalities
        and other requirements depending on the application’.20 A further customer
        mentioned that ‘the cultures are mainly distinguished by their different application
        technology and the need for advice. In part there are also significant differences in
        regulatory/qualitative requirements […]’.21 While one competitor stated that
        ‘[s]uppliers of cultures can in principle produce both meat and dairy cultures even
13      Form CO para 6.47.
14      Form CO para 6.48.
15      Form CO para. 6.52.
16      Q1 – Questionnaire to customers, replies to question C.A.1.
17      Q2a and Q2b – Questionnaires to competitors, replies to question C.A.1.
18      Q1 – Questionnaire to customers, reply to question C.A.1.1.
19      Q1 – Questionnaire to customers, reply to question C.A.1.1.
20      Q1 – Questionnaire to customers, reply to question C.A.1.1.
21      Q1 – Questionnaire to customers, reply to question C.A.1.1. Courtesy translation. The original
        German text reads: ‘Die Kulturen unterscheiden sich hauptsächlich durch ihre unterschiedliche
        Anwendungstechnik und den Beratungsbedarf. Teilweise gibt es auch große Unterschiede bei
        regulatorischen/qualitativen Anforderungen‘.
                                                          5
 ---pagebreak---      though these two cultures are not interchangeable as regards their use in meat and
     dairy products’,22 it also indicated that in its view, ‘cultures for meat, dairy cultures
     and cultures for plant-based food constitute three different product segments. While
     the culture-base may be related with ability to leverage scale and know-how across
     the product segments, the underlying properties and modes of action of the cultures
     in the various applications differ’.23
(22) Further, while a majority of customers answered with ‘I do not know’, a majority of
     customers expressing their opinion do not consider suppliers of Cultures to be able
     to switch production across Cultures for Meat, Dairy Cultures or Cultures for Plant-
     based food, within a short period of time and without incurring significant additional
     costs.24 While one customer explained that ‘[s]witching is possible in case required
     know-how is available. Process/fermenters are similar’,25 other customers disagree.
     One customer cautioned and explained that it is ‘[p]ossible, however, with limits of
     sufficient cleaning. Also particular attention to labels respect such as vegan, halal,
     kosher etc and image/reputations risks if manufactured within one plant’.26 Another
     customer stated that ‘in part there are large differences in qualitative requirements
     […] which have a significant impact on the production’.27
(23) Competitors’ responses to this question are conflicting, with one competitor stating
     that ‘[i]n general, we consider there to be a high degree of supply-side substitution
     between said segments, mainly due to the above-mentioned ability to leverage scale
     and know-how across the various product segments by key suppliers in the
     market’.28 However, another competitor stated that the ‘[c]ost of requalification is
     considered to be high’.29
(24) While responses to the market investigation are not conclusive, they suggest a lack
     of demand-side substitutability and at best limited supply-side substitutability. It
     therefore appears that a distinction between separate markets for the manufacture
     and supply of Cultures for Meat, Dairy Cultures and Cultures for Plant-based food
     could be appropriate.
(25) However, the outcome of the market investigation is less conclusive with respect to
     whether a further distinction of the markets for the manufacture and supply of
     Cultures for Meat and Dairy Cultures (where the Parties overlap) either by type of
     culture or by end product would be appropriate.
(26) With respect to Cultures for Meat, while the majority of customers answered ‘I do
     not know’, the majority of customers expressing their opinion submit that the
     technology and know-how used in the production of acidifying, surface and
22   Minutes of a call with a competitor on 8 September 2020.
23   Q2a – Questionnaire to competitors, reply to question C.A.1.1.
24   Q1 – Questionnaire to customers, replies to question C.A.2.
25   Q1 – Questionnaire to customers, reply to question C.A.2.1.
26   Q1 – Questionnaire to customers, reply to question C.A.2.1.
27   Q1 – Questionnaire to customers, reply to question C.A.2.1. Courtesy translation. The original
     German text reads: ‘Teilweise gibt es große Unterschiede bei qualitativen Anforderungen […] die
     sich erheblich auf die Produktion auswirken‘.
28   Q2a – Questionnaire to competitors, reply to question C.A.2.1.
29   Q2b – Questionnaire to competitors, reply to question C.A.2.1.
                                                       6
 ---pagebreak---      protective Cultures for Meat are similar.30 A customer explained this by referring to
     the ‘[s]ame type of fermenters and know-how’.31 Another customer indicated that ‘all
     are produce[d] by fermentation, the way[s] to c[h]aracterize them are quite
     similar’.32 While competitors’ responses to this question are overall inconclusive,
     one competitor stated that ‘[b]roadly speaking, the culture-base and related
     know-how within the mentioned sub-segments of meat cultures are based on the
     same technology platform’.33
(27) To the question whether a supplier of a certain sub-type of Cultures for Meat
     (acidifying, surface or protective Cultures) can switch production to another sub-type
     in the short term and without incurring significant additional costs, responses from
     customers and competitors are inconclusive. While a customer explained that it
     thinks ‘a [switch] is difficult’,34 a competitor indicated that the sub-types of Cultures
     for Meat ‘are based on the same production and technology platforms’.35
(28) As regards the question whether a segmentation of the market for the manufacture
     and supply of Cultures for Meat by end-product would be appropriate, responses
     from customers and competitors are inconclusive. In response to the question of
     whether a supplier of Cultures for Meat can switch production across end
     applications, e.g. Dried and Semi-Dried Sausages, Dried Cured Ham or Cooked
     Meat, without incurring significant additional costs, a customer explained that ‘to
     find a new culture you have a long product development with expensive laboratory
     costs’.36 A competitor however stated that such Cultures for specific end-products
     ‘are based on the same production and technology platforms’ and that in its view,
     ‘cultures for meat constitute an overall market segment’.37
(29) Therefore, while it cannot be excluded that a further distinction of the market for the
     manufacture and supply of Cultures for Meat may be appropriate, the outcome of the
     market investigation does not conclusively support such a further distinction.
(30) With respect to Dairy Cultures, while the majority of customers answered ‘I do not
     know’, the majority of customers expressing their opinion submit that the technology
     and know-how used in the production of Dairy Culture sub-types such as acidifying,
     protective for fresh dairy, ripening for cheese and probiotic Cultures for fresh dairy
     are similar.38 While one customer stated that there are ‘[d]ifferent consumer needs
     and different manufacturing process[es]’,39 another customer explained that such
     sub-types utilise the ‘[s]ame basic processes, obviously with specific requirements
     for each area’ and that the ability to switch from Dairy Culture sub-types ‘depends
     on generally available knowledge within company and available equipment’.40
     Another customer also submitted a nuanced answer, stating that the sub-types of
30   Q1 – Questionnaire to customers, replies to question C.A.3.
31   Q1 – Questionnaire to customers, reply to question C.A.3.1.
32   Q1 – Questionnaire to customers, reply to question C.A.3.1.
33   Q2a – Questionnaire to competitors, reply to question C.A.3.1.
34   Q1 – Questionnaire to customers, reply to question C.A.4.1.
35   Q2a – Questionnaire to competitors, reply to question C.A.4.1.
36   Q1 – Questionnaire to customers, reply to question C.A.5.1.
37   Q2a – Questionnaire to competitors, reply to question C.A.5.1. and C.A.5.2.
38   Q1 – Questionnaire to customers, replies to question C.A.6.
39   Q1 – Questionnaire to customers, reply to question C.A.6.1.
40   Q1 – Questionnaire to customers, reply to question C.A.6.1.
                                                       7
 ---pagebreak---        Dairy Cultures utilise the ‘[s]ame type of fermenters, but for other fermentation
       process[es] and nutrients, specific knowledge [is] necessary’.41 Competitors’
       responses to this question are overall inconclusive, yet one competitor stated that
       ‘[b]roadly speaking, the culture-base and related know-how within the mentioned
       sub-segments of dairy cultures are based on the same technology platform’42 and
       another remarked that it ‘[s]uppose[s] an unique technology and know-how is
       used’.43
(31)   When asked whether a supplier of a certain sub-type of Dairy Cultures (acidifying,
       protective for fresh dairy, ripening for cheese, probiotic Cultures for fresh dairy) can
       switch production to another sub-type in the short term and without incurring
       significant additional costs, customers and competitors provide inconclusive
       responses. One customer stated there are ‘[d]ifferent manufacturing process[es]’.44
       Another customer stated that there are ‘specific requirements for each area’ and
       further that in any case it is important for the manufacturer to pay ‘particular
       attention to labels […] such as vegan, halal, kosher etc and image/reputations risks
       if manufactured within one plant’.45 A competitor however pointed out that all these
       sub-segments of Dairy Cultures ‘are based on the same technology platform’ and
       that ‘[t]his is confirmed by the fact that all key suppliers in the industry have
       offerings within all of these sub-types of cultures’.46
(32)   Therefore, whereas it cannot be excluded that a more refined product market, leading
       to a further segmentation of the market for the manufacture and supply of Dairy
       Cultures, may be appropriate, the outcome of the market investigation does not
       conclusively support such a further segmentation.
(33)   In conclusion, the Commission considers that, for the purposes of this Decision, it is
       appropriate to assess separately the markets for Dairy Cultures, Cultures for Meat
       and Cultures for Plant-based food. In any event, the exact scope of product market
       definition with respect to Cultures can be left open, since the Transaction would not
       raise serious doubts as to its compatibility with the internal market under any
       plausible alternative product market definition.
4.1.2. Relevant Geographic Market
(34)   The Commission has not previously defined a geographic market for Cultures.
(35)   The Parties submit that the market for Cultures should be defined as worldwide in
       scope, because suppliers of Cultures have manufacturing plants in all regions of the
       world and therefore can and do serve their customers on a worldwide basis.47
(36)   The outcome of the market investigation on the question whether an EEA or
       worldwide geographic market definition for Cultures is appropriate, is inconclusive.
41     Q1 – Questionnaire to customers, reply to question C.A.6.1.
42     Q2a – Questionnaire to competitors, reply to question C.A.6.1.
43     Q2b – Questionnaire to competitors, reply to question C.A.6.1.
44     Q1 – Questionnaire to customers, reply to question C.A.7.1.
45     Q1 – Questionnaire to customers, reply to question C.A.7.1.
46     Q2b – Questionnaire to competitors, reply to question C.A.7.1.
47     Form CO, para. 6.57.
                                                        8
 ---pagebreak--- (37) Whereas the majority of customers answered ‘I do not know’, the majority of
     customers expressing their opinion consider the conditions of competition (such as
     same suppliers, quality and price) to be generally the same in the EEA with respect
     to Dairy Cultures, Cultures for Meat and Cultures for Plant-based food.48 While one
     customer states that ‘[w]ithin the area of cultures […] the global players are limited
     an[d] thereby present in the entire world with more or less equal conditions’,49
     another customer submits that from its point of view with respect to dairy cultures,
     ‘the conditions for healthy competition are given in the EEA’.50
(38) In contrast, while the majority of competitors answered ‘I do not know’, the majority
     of competitors expressing their opinion consider the conditions of competition to be
     generally the same worldwide with respect to Dairy Cultures, Cultures for Meat and
     Cultures for Plant-based food.51
(39) Considering their own procurement of Diary Cultures, Cultures for Meat and
     Cultures for Plant-based food, whereas a majority of customers answered ‘I do not
     know’, a majority of customers expressing their opinion indicate the EEA as the
     relevant geographic scope.52 One customer explicitly stated that it ‘buy[s] Cultures
     via N&B and manufactured in Europe’.53 While the majority of competitors
     answered ‘I do not know’, those that provided substantive answers submit that the
     scope of their company’s sales for Dairy Cultures, Cultures for Meat and Cultures
     for Plant-based food is worldwide.54 One competitor stated that it ‘operates globally
     in more than 140 countries’.55
(40) In any event, for the purposes of this Decision, the exact scope of the geographic
     market definition with respect to Cultures can be left open, as the Transaction would
     not raise serious doubts as to its compatibility with the internal market under any
     plausible alternative geographic market definition.
4.2. Plant-based Proteins
(41) Plant-based Proteins are ingredients derived from plant sources, such as soy, wheat,
     pea, maize, corn, grains, canola, hemp, mung bean, rice, potato, algae, fungi, etc.
     They are mainly offered as Isolates, Concentrates, or Textured types, which have
     each varying percentages of protein content, forms (grain or powder), and
     technologies applied in the manufacturing process. Plant-based Proteins are used
     across a variety of applications, including food and beverage, health, infant nutrition,
     pet food, and animal feed. In the food industry, Plant-based Proteins can be used
     either as meat substitutes or as an additional bulking agent in meat products to
48   Q1 – Questionnaire to customers, replies to question B.1.
49   Q1 – Questionnaire to customers, reply to question B.1.1.
50   Q1 – Questionnaire to customers, reply to question B.1.1. Courtesy translation. The original French
     reads: ‘les conditions d’une concurrence saine sont réunies au sein de l’espace économique
     européen’.
51   Q2a and Q2b – Questionnaires to competitors, replies to question B.1.
52   Q1 – Questionnaire to customers, replies to question B.2.
53   Q1 – Questionnaire to customers, replies to question B.2.1.
54   Q2a and Q2b – Questionnaires to competitors, replies to question B.2.
55   Q2a – Questionnaire to competitors, reply to question B.2.1.
                                                       9
 ---pagebreak---         reduce the overall cost.56 Further, Plant-based Protein is often used as an ingredient
        for Active Nutrition, which includes protein fortified snack bars and protein
        beverages (such as protein shakes) that are largely used for weight management
        purposes and as sports and fitness nutrition.
(42)    While both the N&B Business and IFF manufacture and sell Plant-based Proteins, in
        particular Soy-based Proteins, their activities overlap only to a limited extent given
        IFF’s minor activities in this area. IFF purchases Plant-Based Proteins, including SPI
        [details on IFF’s purchases and supply sources], for use in its production of Food
        Inclusions and Systems.
4.2.1. Relevant Product Market
4.2.1.1. The Commission’s decisional practice
(43)    The Commission has previously considered a market for protein products obtained
        from oilseed and other sources which would in particular include soy products. The
        Commission noted that there is a degree of substitutability with other products, such
        as milk products, fish products, eggs, peas, but also significant demand and supply-
        side substitutability with other plant sources such as grains, maize, and corn.57
(44)    More recently, the Commission left open whether protein products could also
        encompass oilseed meals or if a more narrow market for soy protein products
        including soy meal or maybe just for soy bean meal should be defined.58 The
        Commission further considered whether each individual soy protein product,
        namely, soy flour protein, textured soy protein (‘TSP’), soy protein concentrates
        (‘SPC’), and soy protein isolates (‘SPI’), could form separate segments — while
        noting that there was a considerable degree of demand-side substitutability between
        the different types—but ultimately left the product market definition open.59
4.2.1.2. The Parties’ views
(45)    The Parties submit that the Plant-based Protein market should not be segmented by
        the source of the protein, and that, in particular, soy-based proteins should not be
        considered a separate market product.
(46)    From a demand-side perspective, the Parties argue that consumers’ demand for
        vegetable protein is not specific to soy, that there is considerable interest in
        novel Plant-based Protein sources, and that food manufacturers often label their
        products therefore as “plant protein” or “vegetable protein” instead of “soy
        protein”. Further, they contend that plant protein prices are generally correlated
        with their protein content and product functionality and not only with the protein
        source. They submit that most of these Plant-based Proteins are used in a similar
        technical manner in the same applications as soy protein, such as meat alternatives,
        processed meats, beverages, nutrition bars, dairy-alternatives, etc. In addition, the
        Parties contend that pea protein in particular is attracting an increasing demand
56      Particularly in developing markets, Plant-based Proteins are blended with meat in order to reduce the
        price for the end user.
57      Commission decision of 20 July 1998 in Case M.1126 – Cargill / Vandermoortele, paragraph 12.
58      Commission decision of 8 May 2015, COMP/M.7682 – Goldman Sachs / Altor / Hamlet, paras. 19-24.
59      Commission decision of 8 May 2015, COMP/M.7682 – Goldman Sachs / Altor / Hamlet, paras. 20-24.
                                                        10
 ---pagebreak---      due to changing consumer preferences and is increasingly used as a source for
     Plant-based Protein.
(47) From a supply-side perspective, the Parties argue that several large companies
     are increasingly active in both soy and pea proteins. In addition, they contend
     that soy protein production facilities can be used for the production of pea
     proteins.
(48) Further, the Parties submit that segmentation by protein type (isolated, textured,
     concentrated, flour) would not be appropriate, given the degree of demand-side
     substitutability between the individual product types.
(49) They contend that this is particularly true for protein concentrates and protein
     isolates such as SPC, SPI, pea protein concentrates (“PPC”), and pea protein
     isolates (“PPI”) since these products are applied in a similar fashion and for similar
     end uses. They argue that, as a result, the majority of SPI sold globally is sold in
     direct competition with SPC and that therefore, SPC pricing dynamics impact
     SPI.
(50) Finally, the Parties submit that the Plant-based Proteins market generally should not
     be divided into segments by application due to the following considerations on
     demand-side and supply-side substitutability.
(51) From a demand-side perspective, the Parties argue that Plant-based Proteins can
     be used across several applications. For example, Plant-based Protein
     concentrates and isolates can be used for meat and meat substitute applications,
     for snacks and beverages for Active Nutrition, and for other applications such as
     instant meals, bakery applications, etc.
(52) From a supply-side perspective, the Parties argue that many sophisticated
     suppliers such as Archer Daniels Midland (“ADM”), Cosucra, and Roquette as
     well as an increasing number of Chinese suppliers such as Gushen and Goldensea
     already currently supply protein products across most or all major end
     applications. In addition, they contend that many competitors in the SPC / SPI
     segment have the capabilities to upgrade their portfolio and enter additional
     segments such as Active Nutrition. If one were to consider separate segments
     based on a distinction by end application, the Parties would consider, mainly because
     of limited demand-side substitutability, a potential segmentation of the Plant-based
     Protein market between: (i) animal feed, (ii) meat and meat substitute applications,
     (iii) Active Nutrition, (iv) bakery, and (v) others.
(53) As regards Plant-based Proteins for Active Nutrition the Parties submit that, for
     reasons of demand-side and supply-side substitutability they should not be further
     segmented between products used in beverages and those used in snacks: there is
     limited difference between the Plant-based Proteins used in beverage applications
     and snack applications and customers of Plant-based Proteins for Active Nutrition
     typically buy the same ingredient for use in protein bars and protein shakes.
(54) In any event, the Parties submit that the exact product market definition can be left
     open on the ground that the Transaction does not give rise to any competitive
     concerns under any plausible product market definition.
                                                11
 ---pagebreak--- 4.2.1.3. The Commission’s assessment
(55)    The outcome of the market investigation suggests that the market for the supply of
        Plant-based Proteins could be segmented by source of Plant-based Protein, by type
        of Plant-based Protein, and by end application.
(56)    As regards the source of Plant-based Protein, overall, a vast majority of respondents
        expressing an opinion in the market investigation indicated that Plant-based Proteins
        from soybean constituted a separate market due to limited demand and supply
        substitutability.
(57)    A majority of customers expressing an opinion indicated that Soy-based Proteins are
        not interchangeable with Plant-based Proteins from other sources in terms of their
        characteristics, modes of action and intended use.60 The majority of competitors took
        the same view.61
(58)    One customer pointed out in this respect that “[e]ach specific protein source has its
        specific nutritional profile, functionality as flavor.”62, while another explained that
        “[t]he interchangeability is pretty much associated with final product application,
        meaning that proteins from different sources will deliver different product
        characteristics and characteristics will need to be modified in the rest of the
        formulation.”63
(59)    While one competitor commented that “[s]ome proteins are interchangeable but it
        depends upon the application and properties required. Each protein has pros and
        cons.”64, another explained that “[s]oy provides a broad range of functionalities at a
        competitive price. While functionalities partly have been matched by other plant
        proteins those usually have a weak point regarding price competitiveness. From a
        purely technological reason it is therefore difficult to replace soy. Considering
        additional aspects such as sustainability, labelling there are alternatives to soy.”65
(60)    The majority of customers expressing an opinion indicated that suppliers of Plant-
        based Proteins are not able to switch production between the different plant-protein
        sources in a limited period of time and without incurring into significant additional
        costs.66 The majority of competitors took the same view.67
(61)    On this point, a customer replied: “Technically Yes but cross contamination
        (Allergen control) is huge and therefore manufacturing sites are generally specific
        and only manufacturing sites are generally specific and only manufacture one type
        in a facility to avoid costly clean downs and testing to ensure no potential for cross
        contamination.”68, while another commented that “the proteins have different
        behaviour and thus typically require a fundamentally new recipe development with
60      Q1 – Questionnaire to customers, replies to question D.A.1.
61      Q2a and Q2b – Questionnaires to competitors, replies to question D.A.1.
62      Q1 – Questionnaire to customers, reply to question D.A.1.1.
63      Q1 – Questionnaire to customers, reply to question D.A.1.1.
64      Q2a – Questionnaire to customers, reply to question D.A.1.1.
65      Q2b – Questionnaire to customers, reply to question D.A.1.1.
66      Q1 – Questionnaire to customers, replies to question D.A.2.
67      Q2a and Q2b – Questionnaires to competitors, replies to question D.A.2.
68      Q1 – Questionnaire to customers, reply to question D.A.1.1.
                                                         12
 ---pagebreak---      all associated cost. Plus, prices of different plant-based proteins differ
     significantly.”69
(62) For its part, a competitor commented: “To the best of my knowledge, suppliers are
     usually focused on one protein so their equipment is usually set up to process that. In
     addition, here may be issues with accessing raw materials to process”70, whereas
     another competitor indicated that “[s]witching between the different proteins within a
     short time is not feasible. While similar processes are applied significant
     adjustments need to be made which requires time and money”, while acknowledging
     that “[a]dapting an existing plant and fully switching to a different raw material is
     possible. A direct switch may be considered for protein sources that are very closely
     related (e.g. pea and faba bean)”.71
(63) As regards a segmentation by type of Plant-based Proteins (isolates, concentrates,
     textured and flour), respondents to the market investigation generally submitted that
     this was warranted, due to limited demand and supply substitutability.
(64) The majority of customers expressing an opinion stated that different types of
     Plant-based Proteins are not interchangeable with one another, taking into
     consideration their intended use.72 The majority of competitors took the same view.73
(65) A customer commented on this issue that “[a]ll the mentioned products have unique
     properties and functionalities and perform very differently in application.”74, while
     another explained that “[t]he protein content and purity levels are different between
     these ingredients and will limit the interchangeability of each.”75
(66) One competitor explained that “[w]hile not fully interchangeable certain
     replacement of one by the other is possible if the application is adapted
     accordingly”76, while another commented: “Each protein type has its own specific
     uses.”77 Another remarked: “In my view, they have different functionality and
     applications”78.
(67) While a large majority of customers replied that they did not know the answer to this
     question, the majority of those expressing an opinion indicated that suppliers of
     Plant-based Proteins are not able to switch production between the different plant-
     protein sources in a limited period of time and without incurring significant
     additional costs.79 The majority of competitors took the same view.80
69   Q1 – Questionnaire to customers, reply to question D.A.1.1.
70   Q2a – Questionnaire to customers, reply to question D.A.2.1.
71   Q2b – Questionnaire to customers, reply to question D.A.2.1.
72   Q1 – Questionnaire to customers, replies to question D.A.5.
73   Q2a and Q2b – Questionnaires to competitors, replies to question D.A.1.
74   Q1 – Questionnaire to customers, reply to question D.A.5.1.
75   Q1 – Questionnaire to customers, reply to question D.A.5.1.
76   Q2b – Questionnaire to competitors, reply to question D.A.5.1.
77   Q2a – Questionnaire to competitors, reply to question D.A.5.1.
78   Q2a – Questionnaire to competitors, reply to question D.A.5.1.
79   Q1 – Questionnaire to customers, replies to question D.A.6.
80   Q2a and Q2b – Questionnaires to competitors, replies to question D.A.6.
                                                      13
 ---pagebreak--- (68) A customer commented on this point: “Set up costs will be significant to change”81.
     A competitor explained: “Flours and concentrates are generally made together (a
     dry process). Isolates (a wet process) are made on completely different equipment.
     Either flours, concentrates or isolates (or combinations) can be used as the
     feedstock for texturised proteins.”82, while another stated: “It can be expected that
     the know-how is sufficient to enter a new category. Switching from one to the other
     is not feasible as different technologies are involved”83.
(69) As regards a segmentation by application of Plant-based Proteins, such as meat
     substitutes or active nutrition, the replies from respondents to the market
     investigation generally indicated that this would be warranted.
(70) On the question whether the manufacturing processes and quality and safety
     requirements differ across the various applications of Plant-based Proteins a majority
     of customers replied that they did not know the answer, but a majority of those
     expressing their opinions said that this was the case.84 A majority of competitors
     took the same view.85
(71) A customer explained: “Cross contamination is a big issue and manufacturers have
     to go to great length to ensure the product is free from "Contamination". Quality
     and testing plays a big role. Manufacturing set ups could be similar for multiple raw
     materials.”86, while another specified: “Quality and safety requirements are different
     between food, feed and infant nutrition for example.”87 A competitor commented:
     “Manufacturing process strongly impacts the performance in application. The
     requirements on manufacturing and quality are stricter for critical applications
     where technical performance is key or applications which target special target
     groups”.88
(72) On the question whether a supplier could switch its production to serve a different
     application in a short period of time and without incurring significant additional
     costs, the majority of customers replied that they did not know the answer to the
     question, but themajority of those expressing their opinion said that this was not
     possible.89 The majority of competitors took the same view.90
(73) A customer explained: “It would never be advised. Food nutrition is and will always
     have very strict parameters and manufacturing a food ingredient in the same
     location as animal ingredients would not be or should not be allowed.”91 A
     competitor commented: “Cost to change from feed protein to food-grade can be very
     high - potentially a complete re-build.”92 , while another explained “Changing from
81   Q1 – Questionnaire to customers, reply to question D.A.6.1.
82   Q2a – Questionnaire to customers, reply to question D.A.6.1.
83   Q2a – Questionnaire to customers, reply to question D.A.6.1.
84   Q1 – Questionnaire to customers, replies to question D.A.4.
85   Q2a and Q2b – Questionnaires to competitors, replies to question D.A.4.
86   Q1 – Questionnaire to customers, reply to question D.A.4.1.
87   Q1 – Questionnaire to customers, reply to question D.A.4.1.
88   Q2b – Questionnaire to competitors, reply to question D.A.4.1. [
89   Q1 – Questionnaire to customers, replies to question D.A.4.2
90   Q2a and Q2b – Questionnaires to competitors, replies to question D.A.4.2
91   Q1 – Questionnaire to customers, replies to question D.A.4.2
92   Q2a – Questionnaire to customers, replies to question D.A.4.2
                                                      14
 ---pagebreak---        feed to food production will require significant adaptations to process as well as
       safety/quality requirements. Active nutrition will therefore be significantly more
       difficult to target”.93
(74)   The results of the market investigation suggest a degree of supply-side
       substitutability among various applications based on the source of protein. On the
       question whether each source of Plant-based Protein such as soy or peas can be used
       in different applications such as meat/meat substitutes, active nutrition, bakery or
       animal feed, the majority of customers indicated that this was the case.94 A majority
       of competitors expressing their opinions took the same view.95
(75)   A customer indicated that different Plant-based Protein sources may be used for the
       same application but that Soy-based Proteins are not substitutable by other sources in
       certain applications: “Soy Based proteins have unique properties both nutritionally
       and functionally. it is possible that in certain applications they are not
       interchangeable. But in certain applications they can be substituted.”96, while a
       competitor commented “It is possible to use the different protein sources in all/most
       applications. Differences may include taste - which can be helped with flavours /
       taste modulators.”97
(76)   It follows from the above, and in the light of the results of the market investigation,
       that within the area of Plant-based Proteins it is appropriate to distinguish separate
       markets for the supply of Plant-based Proteins, segmented by source, type, and
       application.
(77)   In conclusion, the Commission considers that, for the purposes of this Decision, it is
       appropriate to assess the market for Plant-based Proteins, distinguishing between
       (i) separate markets for the supply of Plant-based Proteins, segmented by type, in
       particular Soy-based and Pea-based Isolates and Concentrates; (ii) separate markets
       for the supply of Soy-based Proteins, segmented by type, in particular SPI, SPC and
       TSP; and (iii) separate markets for the supply of Plant-based Proteins, segmented by
       application, in particular meat substitutes and active nutrition, including snacks and
       beverages. In any event, for the purposes of this Decision, the exact scope of the
       product market definition with respect to Plant-based Proteins can be left open, since
       the Transaction would not raise serious doubts as to its compatibility with the
       internal market under any plausible alternative product market definition.
4.2.2. Relevant Geographic Market
(78)   In previous decisions, the Commission found the market for Plant-based Proteins to
       be at least EEA-wide in scope. While for certain products transport costs may limit
93     Q2b – Questionnaire to customers, replies to question D.A.4.2
94     Q1 – Questionnaire to customers, replies to question D.A.3.
95     Q2a and Q2b – Questionnaires to competitors, replies to question D.A.3.
96     Q1 – Questionnaire to customers, replies to question D.A.3.1
97     Q2a – Questionnaire to competitors, replies to question D.A.3.1
                                                        15
 ---pagebreak---      the distance over which they can be transported at economically viable costs, they
     are traded on international commodity markets and are not subject to trade barriers.98
(79) The Parties submit that these considerations remain valid today and that the markets
     for Plant-based Protein may be global in scope. In any event, the Parties submit that
     the exact geographic market definition can be left open as the Transaction does not
     give rise to any competitive concerns irrespective of the exact market definition.
(80) The outcome of the market investigation on the question whether an EEA or
     worldwide geographic market definition for Soy-based Proteins is appropriate, is not
     entirely conclusive, but provides certain indications suggesting a global scope.
(81) As regards the geographic scope in which the conditions of competition (such as
     suppliers, quality and price) are generally the same with regard to Soy-based
     Proteins, a majority of customers replied that they did not know the answer to the
     question. Among the customers who expressed an opinion an equal number
     considered this to be EEA-wide and to be global.99 Similarly, while a majority of
     competitors replied that they did not know the answer to the question, an equal
     number of competitors expressing an opinion considered the geographic scope of
     Soy-based Proteins markets to be EEA-wide and to be global.100
(82) With regard to Plant-based Protein overall one customer commented: “For all
     ingredients (with the exception of Plant Proteins) there is competition available on a
     worldwide basis. For plant based proteins, the suppliers tend to use a regional
     specific portfolio and pricing strategy”101, while a competitor explained: “Plant
     protein producers compete on global level with additional smaller local producers
     in certain areas”102. However, another competitor considered Soy-based Proteins
     markets to be global in contrast to Plant-based Protein markets in general, deemed
     more regional: “Most markets are global with the exception of proteins which tend to
     be more regional. Soy proteins, lecithin are global”.103
(83) As regards their own procurement of Soy-based Protein a majority of customers
     replied that they did not know, but a majority of those expressing their opinion said
     that they purchase such ingredients on a global scale.104 Similarly, as regards their
     own sales of Soy-based Proteins, a majority of competitors replied that they did not
     know, but a majority of those expressing an opinion stated that they sold those
     ingredients on a worldwide basis.105 One competitor commented that it “markets
     plant-based proteins (soy and pea) and lecithin globally”.106
98   Case COMP.7682 – Goldman Sachs / Altor / Hamlet, para. 29. See also Case COMP/M.941 – ADM /
     Actos & Hutcheson – Soya Mainz, paras. 18 et seq.; Case COMP/M.1126 – Cargill / Vandermoortele,
     para. 13.
99   Q1 – Questionnaire to customers, replies to question B.1.
100  Q2a and Q2b – Questionnaires to competitors, replies to question B.1.
101  Q1 – Questionnaire to customers, replies to question B.1.
102  Q2a – Questionnaire to customers, replies to question B.1.
103  Q2b – Questionnaire to customers, replies to question B.1.
104  Q1 – Questionnaire to customers, replies to question B.2.
105  Q2a and Q2b – Questionnaire to customers, replies to question B.2.
106  Q2a – Questionnaire to customers, replies to question B.2
                                                      16
 ---pagebreak--- (84)    In the light of those responses, the outcome of the market investigation provides
        certain indications suggesting that a worldwide rather than an EEA-wide geographic
        market definition is appropriate as regards Soy-based Proteins.
(85)    In any event, for the purposes of this Decision, the exact scope of the geographic
        market definition with respect to Soy-based Proteins can be left open, as the
        Transaction would not raise serious doubts as to its compatibility with the internal
        market under any plausible alternative geographic market definition.
4.3.    Gums
(86)    Gums are a type of hydrocolloids, which are additives that react with water to form
        gels, pastes, and emulsions. They are used to impart creaminess, thickness, and
        viscosity, in a variety of industries including food and beverage and personal care. In
        particular, Gums are used to improve the texture and / or mouth feel of the end
        product.
(87)    N&B manufactures and sells guar gum, locust bean gum, xanthan gum and gellan
        gum. IFF does not manufacture any gums but purchases […] locust bean gum
        [details on IFF’s purchases and supply sources] for application in its Systems and
        Food Inclusions.
4.3.1. Relevant Product Market
4.3.1.1. The Commission’s decisional practice
(88)    The Commission has not previously considered possible market definitions for
        Gums.
4.3.1.2. The Parties’ views
(89)    The Parties submit that all sources of gum should be included in the same market
        and that a further segmentation of the gum market by different sources is not
        warranted. In any case, they contend that the exact product market definition for
        gums can be left open as the Transaction does not give rise to any competitive
        concerns irrespective of the exact market definition.
(90)    From a demand-side perspective, the Parties submit that Gums from different
        sources serve the same function, i.e., to improve the texture and / or mouth feel of
        the end product. While there may be certain differences in the price and specific
        properties of Gums from different sources, they contend that customers can and do
        substitute Gums from different sources for different applications. They submit that
        while there are certain niche applications, e.g., non-regurgitation milk for babies
        where only one source of Gum is used, generally Gums from different sources share
        the same function. The Parties contend that even in these niche applications, gums
        may compete with other texturants such as starches and gelatin.
(91)    From a supply-side perspective, the Parties contend that suppliers of Gums are
        typically active in Gums from several sources. They submit that multinational
        suppliers with diversified portfolios such as the N&B Business, Tate & Lyle and
        Cargill and even niche players such as LBG Sicilia, Polygal and CPKelco typically
        supply Gums from various sources.
                                                    17
 ---pagebreak--- 4.3.1.3. The Commission’s assessment
(92)    The outcome of the market investigation suggests that the market for the supply of
        Gums should be segmented by source of gum, in particular locust bean, and provides
        some indications that a segmentation by end application, in particular infant
        nutrition, could be warranted.
(93)    As regards the source of gum, a majority of respondents expressing an opinion in the
        market investigation submitted that gums from locust bean constituted a separate
        market due to limited demand and supply substitutability.
(94)    A majority of customers expressing an opinion indicated that Locust Bean Gums
        (LBG) are not interchangeable with gums from other sources (e.g. guar gum,
        xanthan gum and gellan gum) in terms of properties, intended use, mode of action
        and/or price.107 A majority of competitors considered that Locust Bean Gum is
        interchangeable, but only with certain other gums.108
(95)    One customer pointed out that “[t]he functional characteristics of LBG are very
        specific, also synergy possibilities with other hydrocolloids are very specific for this
        product group” 109 while another explained that “LBG is not interchangeable due its
        specific abilities in the stabilization process of a fruit preparation.”110
(96)    A competitor stated: “In certain applications substitution is fully or partially
        possible”111, while another explained: “The interchange is rarely 1 to 1. It is
        application dependent. LBG can be replaced by a combination of other gums such as
        Tara, if customer is willing to adjust their formulation and differences in texture and
        stability are acceptable.”112
(97)    A majority of customers expressing their opinion said that suppliers of hydrocolloids
        gums are not able to switch production between Gums from different sources (locust
        bean, guar, xanthan and gellan gums) within a short period of time and without
        incurring significant additional costs.113 A majority of competitors took the same
        view.114
(98)    A customer replied: “Not necessarily, since extraction process can differ quite a lot
        – from cleaning, separation to extraction itself. Also feedstocks origination differ,
        and it’s an advantage to have to production closer to farming area.”115, while
        another commented that “switching between guar and locust bean gum would be
        possible to our best knowledge. Others are not possible due to other technology.”116
107     Q1 – Questionnaire to customers, replies to question E.A.1.
108     Q2a and Q2b – Questionnaires to competitors, replies to question E.A.1.
109     Q1 – Questionnaire to customers, reply to question E.A.1.1.
110     Q1 – Questionnaire to customers, reply to question E.A.1.1.
111     Q2a – Questionnaire to competitors, reply to question E.A.1.1.
112     Q2a – Questionnaire to competitors, reply to question E.A.1.1.
113     Q1 – Questionnaire to customers, replies to question D.A.2.
114     Q2a and Q2b – Questionnaires to competitors, replies to question D.A.2.
115     Q1 – Questionnaire to customers, reply to question D.A.1.1.
116     Q1 – Questionnaire to customers, reply to question D.A.1.1.
                                                         18
 ---pagebreak--- (99)  A competitor commented: “Gums come from different sources. Manufacturing
      plants and process lines are built and adapted to the specific hydrocolloid you are
      trying to produce”. 117
(100) On the question whether other texturants such as starches and gelatin can be used
      instead of Locust Bean Gum for certain applications, the results of the market
      investigation are inconclusive. There was no majority among customers or
      competitors expressing their opinion to confirm or reject this possibility, nor to
      suggest that other substitutes may exist.118
(101) One customer indicated that [starch and gelatin are “very different raw material,
      which does not give the same outcome of stability/consistency/desired outcome”119,
      whereas another stated: “When LBG is combined with guar or xanthan gum for
      gelling properties, it could be replaced by gelatin, for general thickening reasons.
      The functionality of LBG could be substituted by using certain starches”.120
(102) As regards a further segmentation of Locust Bean Gum by end application, such as
      infant nutrition, the results of the market investigation generally suggest that this is
      warranted due to limited demand-side and supply-side substitutability.
(103) A majority of customers expressing their opinion said that the market for Locust
      Bean Gum should be further segmented by end applications, such as infant nutrition,
      either because not all Locust Bean Gum can be used for the same application or
      because suppliers need specific technology and/or know-how and there are different
      certification processes.121 Among the very few competitors who expressed an
      opinion, there was no majority to confirm or reject such further segmentation.122
(104) A customer stated: “IFT [infant nutrition] application requires different handling
      than non IFT”, while another commented: “Suppliers need specific technology
      and/or know-how and there are different certification processes.”123
(105) A competitor explained: “There is refined lbg on the market as well that is different
      than crude lbg targeting specific applications (e.g water gels that need clarity);
      N&B manufacture lbg and refined lbg.”124
(106) In the light of the above considerations and taking account of the results of the
      market investigation, it is appropriate to distinguish separate markets for the supply
      of Gums, segmented by source and separate markets for the supply of Locust Bean
      Gum, segmented by application.
(107) In conclusion, the Commission considers that, for the purposes of this Decision, it is
      appropriate to assess the market for Gums, distinguishing between separate markets
117   Q1 – Questionnaire to customers, reply to question D.A.1.1.
118   Q1 – Questionnaire to customers, replies to question E.A.3; Q2a and Q2b – Questionnaires to
      competitors, replies to question E.A.3.
119   Q1 – Questionnaire to customers, replies to question E.A.3.1
120   Q1 – Questionnaire to customers, replies to question E.A.3.1
121   Q1 – Questionnaire to customers, replies to question E.A.4.
122   Q2a and Q2b – Questionnaires to competitors, replies to question E.A.4.
123   Q1 – Questionnaire to customers, replies to question E.A.4.1
124   Q2a– Questionnaires to competitors, replies to question E.A.4.1
                                                       19
 ---pagebreak---        for the supply of Gums, namely: (i) a separate market, segmented by source, in
       particular for the supply of Locust Bean Gum; and (ii) a separate market for the
       supply of Locust Bean Gum, segmented by application, in particular for the supply
       of infant nutrition. In any event, for the purposes of this Decision, the exact scope of
       the product market definition with respect to Gums can be left open, since the
       Transaction would not raise serious doubts as to its compatibility with the internal
       market under any plausible alternative product market definition.
4.3.2. Relevant Geographic Market
(108) In previous cases where the Commission examined the possible market definition for
       hydrocolloids, it found that the markets were at least EEA-wide, in some cases
       worldwide in scope.125
(109) The Parties submit that the relevant geographic market for Hydrocolloids and any
       potential sub-segments is at least EEA-wide, if not worldwide in scope.
(110) In any event, the Parties submit that the exact product market definition can be left
       open as the Transaction does not give rise to any competitive concerns irrespective
       of the exact market definition.
(111) The outcome of the market investigation on the question whether an EEA or
       worldwide geographic market definition for Locust Bean Gum is appropriate is not
       entirely conclusive, but provides indications suggesting a global scope.
(112) Asked about the geographic scope in which the conditions of competition (such as
       same suppliers, quality and price) are generally the same with regard Locust Bean
       Gum, while the majority of customers replied that they did not know the answer to
       the question, a majority of customers expressing their opinion considered this to be
       global.126 Similarly, the majority of competitors replied that they did not know the
       answer to the question, while the majority of competitors expressing their opinion
       considered the geographic scope of Locust Bean Gum markets to be global.127
(113) One customer commented on this point: “Within the area of cultures and enzymes
       the global players are limited and thereby present in the entire world with more or
       less equal conditions. Locust bean gum and emulsifiers are located in the same
       manner as cultures and enzymes and are therefore also equal in setup”128.
(114) As regards their own procurement of Locust Bean Gum the majority of customers
       replied that they did not know, but the vast majority of those expressing their
       opinion said that they purchase such ingredients on a global scale.129 One customer
       commented on this point: “LBG, guar gum and enzymes are bought for all global
       affiliates on all continents”.130
125    See Case COMP/M.4550 – Dow Chemical Company / Wolff Walsrode, para. 23; Case COMP/M.8440–
       DuPont / FMC, paras. 43, 133, 147-148, 161-162; Case COMP/M.3975 – Cargill / Degussa Food
       Ingredients, para. 92; Case COMP/M.3337 – Best Agrifund / Nordfleisch, paras. 118-119.
126    Q1 – Questionnaire to customers, replies to question B.1.
127    Q2a and Q2b – Questionnaires to competitors, replies to question B.1.
128    Q1 – Questionnaire to customers, replies to question B.1.1
129    Q1 – Questionnaire to customers, replies to question B.2.
130    Q1 – Questionnaire to customers, replies to question B.2.1
                                                        20
 ---pagebreak--- (115) As regards their own sales of Locust Bean Gum, a large majority of competitors
       replied that they did not know, while a small majority of those expressing an opinion
       stated that they sold those ingredients on a basis other than global or EEA-wide.131
(116) , In the light of the above responses, the Commission considers that the market
       investigation has provided valid indications suggesting that a worldwide rather than
       an EEA-wide geographic market definition is appropriate as regards the supply of
       Locust Bean Gum.
(117) In any event, for the purposes of this Decision, the exact scope of the geographic
       market definition with respect to Gums can be left open, as the Transaction would
       not raise serious doubts as to its compatibility with the internal market under any
       plausible alternative geographic market definition.
4.4.   Microcrystalline Cellulose
4.4.1. Relevant Product Market
(118) Microcrystalline cellulose (‘MCC’), also known as cellulose gel, is manufactured
       from pure, depolymerized alpha cellulose. The gel is then dried to produce a powder.
       MCC is used primarily in pharmaceuticals, as an excipient, but also in food
       applications as a stabilizer, opacifier, to add viscosity and texture. N&B
       manufactures and sells MCC for both pharmaceutical and food applications. IFF
       only uses MCC for food applications in the manufacturing of its Functional
       Ingredient Systems and Flavours.
(119) In a previous decision, the Commission considered that MCC was part of a
       pharmaceutical excipients market.132 More recently, the Commission considered
       whether there was a distinct product market for all different kinds of MCC but
       ultimately left the product market definition open.133
(120) The Parties acknowledge that for food ingredient manufacturers colloidal and non-
       colloidal are not interchangeable, as the later does perform the function that food
       ingredient manufacturers look for. Non-colloidal MCC is mainly used in the
       pharmaceutical applications and/or nutraceuticals.134 Based on supply substitutability
       reasons, the Parties however submit that there is one single MCC product market
       comprising both MCC for pharmaceutical and food applications.135
(121) The market investigation results are however not conclusive. While some customers
       and competitors indicated that it is possible for suppliers to switch production
       without incurring in significant additional costs and within a limit period of time,
       others suggested that a switch from food to pharmaceutical applications is more
       difficult than from pharmaceutical to food applications given the more stringent
131    Q2a and Q2b – Questionnaire to customers, replies to question B.2.
132    Commission decision of 13 July 1999, COMP/M.1517 – Rhodia/Donau Chemie/Albright & Wilson,
       para. 32.
133    Commission decision of 27 July 2017, COMP/M.8440 – DuPont / FMC (Health and Nutrition
       Business), paras. 158-160.
134    Form CO, para.6.509.
135    Form CO, paras. 6.510 and 6.511.
                                                      21
 ---pagebreak---        regulatory requirements regarding MCC for pharmaceutical applications.136 More
       importantly one customer stressed that “there is more competition in the supply of
       MCC used in the food industry and prices are lower.”137
(122) In any event, for the purposes of this Decision, the exact scope of product market
       definition with respect to MCC can be left open, since the Transaction would not
       raise serious doubts as to its compatibility with the internal market under any
       plausible alternative product market definition.
4.4.2. Relevant Geographic Market
(123) In a previous decision, the Commission considered that the pharmaceutical
       excipients market including MCC was essentially EEA-wide.138 Later, the
       Commission considered that a MCC product market was at least EEA wide in scope,
       if not worldwide, but ultimately left the exact geographic definition open.
(124) The Parties submit that the geographic market is worldwide. A small majority of
       customers and competitors who expressed a view considered also the market to be
       worldwide in scope. 139 In any event, for the purposes of this Decision, the exact
       scope of the geographic market definition with respect to MCC can be left open, as
       the Transaction would not raise serious doubts as to its compatibility with the
       internal market under any plausible alternative geographic market definition.
4.5.   Emulsifiers
(125) An emulsifier is a substance that prevents the separation of immiscible compounds
       by increasing the kinetic stability of a mixture. Emulsifiers have the ability to
       stabilise emulsions, i.e., a mix of hydrophilic (e.g., water) and hydrophobic (e.g., oil)
       substances. Emulsifiers can be synthetic (e.g. sourced from vegetable oils, sugar
       alcohols, organic acids and glycerol) or natural. The most common natural
       Emulsifiers are Lecithin-derived.
(126) N&B manufactures and supplies Lecithin-derived and synthetic Emulsifiers,
       primarily for food applications. IFF sources Emulsifiers including natural
       Emulsifiers like Lecithin, but also synthetic Emulsifiers like Distilled
       Monoglycerides (‘DISMO’) and Diacetyl Tartaric Esters of Monoglycerides
       (‘DATEM’). IFF only sources food grade Emulsifiers.
136    Q1-Questionnaire to Customers, replies to question F.A.1. Q2a and Q2b - Questionnaire to
       Competitors, replies to question F.A.2.
137    Q1-Questionnaire to Customers, replies to question F.A.1.
138    Commission decision of 13 July 1999, COMP/M.1517 – Rhodia/Donau Chemie/Albright & Wilson,
       para. 46.
139    Q1-Questionnaire to Customers, replies to question B.1 and Q2a - Questionnaire to Competitors,
       replies to question B.1.
                                                       22
 ---pagebreak--- 4.5.1. Relevant Product Market
4.5.1.1. The Commission’s decisional practice
(127) In a previous decision, the Commission considered synthetic Emulsifiers and
        Lecithin-derived Emulsifiers to belong to separate product markets.140
(128) With respect to synthetic Emulsifiers, the Commission has in a previous decision
        considered possible separate product markets for the following types of synthetic
        Emulsifiers: DATEM, mono-diglycerides and DISMO.141 The product market
        definition was however ultimately left open.
(129) With respect to Lecithin-derived Emulsifiers, the Commission has in a previous
        decision considered a distinction between ‘Special’ Fluid Lecithin (destined for
        specific applications), De-Oiled Lecithin (typically used in food applications (oil and
        fat spreads, instant products, bakery) and the health and nutrition segments (food
        additives, sports nutrition)), and Fractioned Lecithin (mainly used for sophisticated
        non-food applications such as pharmaceuticals, cosmetics, and personal care
        products). It has further distinguished between genetically modified (‘GM’) and non-
        GM Lecithin-derived Emulsifiers.142
4.5.1.2. The Parties’ views
(130) Aside of the product market distinction’s discussed in the Commission’s precedent
        decisions, the Parties explain that with respect to synthetic Emulsifiers a distinction
        by chemical class could be considered: Esters Emulsifiers (including DATEM),
        DISMO, Fatty acids Emulsifiers, Other Synthetic Emulsifiers (including mono-
        diglycerides).143
(131) The Parties submit that the product market definition with respect to Emulsifiers can
        be left open, as the Transaction does not give rise to competition concerns
        irrespective of the exact market definition.144
4.5.1.3. The Commission’s assessment
(132) While a majority of customers responding to the market investigation answered with
        ‘I do not know’, a majority of customers expressing their view consider that
        synthetic Emulsifiers and Lecithin-derived Emulsifiers belong to separate markets.145
        A majority of competitors expressing their opinion also endorse this distinction.146 In
        this context a customer dissents and states that ‘[b]oth product groups are used in
        similar applications’.147 However another customer states that in its ‘experience the
        two category[ies] are different for performance in our application and cannot be
140     Commission decision of 29 March 2006 in Case M.3975 – Cargill/Degussa Food Ingredients,
        paragraphs 22-29.
141     Commission decision of 15 July 2008 in Case M.5109 – Danisco/Abitec, paragraphs 13-26.
142     Commission decision of 29 March 2006 in Case M.3975 – Cargill/Degussa Food Ingredients,
        paragraphs 30-74.
143     Form CO para 6.407.
144     Form CO para 6.409.
145     Q1 – Questionnaire to customers, replies to question G.A.1.
146     Q2a and Q2b – Questionnaires to competitors, replies to question G.A.1.
147     Q1 – Questionnaire to customers, reply to question G.A.1.1.
                                                         23
 ---pagebreak---       interchange[d]’.148 A competitor explains that ‘synthetic emulsifiers and the lecithin-
      driven emulsifiers have a completely different chemistry (chemical molecule classes)
      with different functionalities, and thus related production processes and value
      chains and scope of application are completely different’.149 A further competitor
      states that ‘[c]ustomers don’t use them interchangeably’.150
(133) With respect to Lecithin-derived Emulsifiers, while majorities of customers and
      competitors answered with ‘I do not know’, majorities of customers and competitors
      expressing their opinion consider it appropriate to distinguish between Special Fluid
      Lecithin, De-Oiled Lecithin and Fractioned Lecithin Emulsifiers.151 A customer in
      this context submits that ‘[t]hey are indeed used for specific applications as
      mentioned’.152
(134) With respect to synthetic Emulsifiers, while a majority of respondents answered ‘I
      do not know’, small majorities of customers and competitors expressing their
      opinion consider a further distinction by chemical class (e.g. Esters Emulsifiers,
      DISMO, Fatty acids Emulsifiers) appropriate.153 In this context, one customer states
      that ‘different type[s] of emulsifiers provide for different functionalities’.154
      However, another customer explains that while ‘[t]he products are not
      interchangeable (different functionalities) [they] are all used in the same and similar
      market segments’.155
(135) While replies from customers are inconclusive, a majority of competitors expressing
      their opinion consider that suppliers of a given chemical class of synthetic Emulsifier
      are not able to switch their production to another chemical class without incurring
      significant additional costs and to do so in a short period of time.156 In this context
      one competitor explains that the ‘[p]roduction set-up for different emulsifiers can be
      very different; e.g. related to corrosiveness of acids used in esterification;
      distilliation temperatures etc’.157 Another customer states that ‘[i]n many cases the
      manufacture of these ingredients utilise different equipment and chemistry making it
      difficult to switch’.158
(136) Therefore, on the basis of the responses to the market investigation, it appears that a
      distinction between different types of Lecithin-derived remains appropriate and
      further that a distinction between different chemical classes of synthetic Emulsifiers
      is likely appropriate.
148   Q1 – Questionnaire to customers, reply to question G.A.1.1.
149   Q2a – Questionnaire to competitors, reply to question G.A.1.1.
150   Q2a – Questionnaire to competitors, reply to question G.A.1.1.
151   Q1 – Questionnaire to customers, replies to question G.A.2., and Q2a and Q2b – Questionnaires to
      competitors, replies to question G.A.2.
152   Q1 – Questionnaire to customers, reply to question G.A.2.1.
153   Q1 – Questionnaire to customers, replies to question G.A.3., and Q2a and Q2b – Questionnaires to
      competitors, replies to question G.A.3.
154   Q1 – Questionnaire to customers, reply to question G.A.3.1.
155   Q1 – Questionnaire to customers, reply to question G.A.3.1.
156   Q1 – Questionnaire to customers, replies to question G.A.4., and Q2a and Q2b – Questionnaires to
      competitors, replies to question G.A.4.
157   Q2a – Questionnaire to competitors, reply to question G.A.4.1.
158   Q2a – Questionnaire to competitors, reply to question G.A.4.1.
                                                       24
 ---pagebreak--- (137) In any event, for the purposes of this Decision, the exact scope of product market
       definition with respect to Emulsifiers can be left open, since the Transaction would
       not raise serious doubts as to its compatibility with the internal market under any
       plausible alternative product market definition
4.5.2. Relevant Geographic Market
(138) In previous decisions, discussion synthetic Emulsifiers, the Commission found the
       geographic market to be at least EEA-wide.159 With respect to GM ‘Special’ Fluid
       Lecithin Emulsifiers and GM De-Oiled Lecithin Emulsifiers, the Commission
       considered a worldwide market, while with respect to non-GM ‘Special’ Fluid
       Lecithin Emulsifiers and non-GM De-Oiled Lecithin Emulsifiers it considered an
       EEA-wide market.160
(139) While the Commission has not previously considered a geographic market for
       Fractioned Lecithin, the Parties submit that it should similarly be at least EEA-wide
       if not worldwide in scope. In any event, the Parties submit that the geographic
       market definition with respect to Emulsifiers can be left open, as the Transaction
       does not give rise to competition concerns irrespective of the exact market
       definition.161
(140) The outcome of the market investigation on the question whether an EEA or
       worldwide geographic market definition for Emulsifiers is appropriate, is
       inconclusive.
(141) While a large majority of customers answered ‘I do not know’, the majority of
       customers expressing their opinion submit that for synthetic Emulsifiers and for
       Lecithin-derived Emulsifiers the geographic area where conditions of competition
       are generally the same is worldwide. While a large majority of competitors answered
       ‘I do not know’, a majority of competitors expressing their opinion considers the
       conditions for competition to be generally the same in the EEA for synthetic
       Emulsifiers and worldwide for Lecithin-derived Emulsifiers.162
(142) Considering the scope of their own procurement of synthetic and Lecithin-derived
       Emulsifiers, while a majority of customers answered ‘I do not know’, a majority of
       customers expressing their opinion consider it to be worldwide. Those competitors
       providing substantive answers also consider their sales to have a worldwide scope.163
(143) Therefore, on the basis of the responses to the market investigation, it appears that a
       worldwide geographic market definition with respect to Emulsifiers may be most
       appropriate.
(144) In any event, for the purposes of this Decision, the exact scope of the geographic
       market definition with respect to Emulsifiers can be left open, as the Transaction
159    Commission decision of 15 July 2008 in Case M.5109 – Danisco/Abitec, paragraphs 27-30.
160    Commission decision of 29 March 2006 in Case M.3975 – Cargill/Degussa Food Ingredients,
       paragraphs 84-91.
161    Form CO para 6.410.
162    Q1 – Questionnaire to customers, replies to question B.1., and Q2a and Q2b – Questionnaires to
       competitors, replies to question B.1.
163    Q1 – Questionnaire to customers, replies to question B.2., and Q2a and Q2b – Questionnaires to
       competitors, replies to question B.2.
                                                     25
 ---pagebreak---        would not raise serious doubts as to its compatibility with the internal market under
       any plausible alternative geographic market definition.
4.6.   Enzymes
4.6.1. Relevant Product Market
(145) Enzymes are biological catalysts that regulate the rate at which chemical reactions
       proceed in living organisms. They can be used as ingredients and as processing aids
       in a variety of applications.
(146) The Parties submit that Industrial Enzymes and naturally extracted enzymes (known
       as Specialty Enzymes) belong to different product markets. According to the Parties,
       these two types of enzymes are used by different types of customers: Industrial
       Enzymes are used as ingredients and/or processing aids in the home and personal
       care, food, beverage and animal feed industries; whereas Specialty Enzymes are used
       in human health supplements. Unlike Industrial Enzymes, Specialty Enzymes have
       effects during (and after) the consumption of the finished product to which they are
       added. Generally, Specialty Enzymes are also sold at higher prices.164
(147) The Parties have also considered a segmentation of the Industrial Enzymes by end
       application into industrial, food and beverage, home and personal care, and animal
       nutrition applications. According to the Parties, while the same enzyme backbone
       might be broadly applicable across a number of industries, the format of the enzyme
       needs to be tailored to the needs of the relevant industry. In addition, different regulatory
       and registration requirements apply depending on the end application. The Parties
       however underlined that Industrial Enzymes suppliers are generally active across several
       end applications, can leverage on their knowledge in one industry to another and the
       equipment required is broadly the same across the different end applications.165
(148) The Parties also submitted that a further segmentation of the Industrial Enzymes for
       food applications market is not warranted. According to the Parties, Enzymes for
       food applications generally interchangeable and there is a significant supply-side
       substitutability as already today suppliers are active across the various end
       applications: bakery, bakery, dairy, brewing, carbohydrate processing, fish processing,
       meat and culinary processing.166
(149) In the market investigation, a majority of customers and competitors who expressed a
       view considered that indeed Industrial and Specialty Enzymes belong to separate
       markets.167 A majority of respondents also agreed with the segmentation of Industrial
       Enzymes by end application168 but, as the Parties, they said that no further segmentation
       is warranted, either because they considered the Enzymes in the food industry to be
164    Form CO, para. 6.199
165    Form CO, paras 6.461 to 6.463
166    Form CO, paras 6.466 and 6.667.
167    Q1-Questionnaire to Customers, replies to questions H.A.1. and H.A.2; Q2a - Questionnaire to
       Competitors, replies to questions H.A.1 and H.A.2.
168    Q1-Questionnaire to Customers, replies to question H.A.3; and Q2a - Questionnaire to Competitors,
       replies to question H.A.3.
                                                       26
 ---pagebreak---        interchangeable, either because they considered that suppliers can easily switch between
       the production of the different subtypes, or both.169
(150) In any event, for the purposes of this Decision, the exact scope of product market
       definition with respect to Enzymes can be left open, since the Transaction would not
       raise serious doubts as to its compatibility with the internal market under any
       plausible alternative product market definition.
4.6.2. Relevant Geographic Market
(151) The Parties submit that the relevant geographic market for Enzymes (including for
       each of the Industrial and Speciality Enzyme markets) is at least EEA-wide if not
       worldwide in scope as raw materials are generally readily available, transportation
       costs are low, and there are no trade barriers except for product registration
       requirements for supplement ingredients, food, and feed enzymes.170
(152) The market investigation results were not conclusive, while a small majority of
       customers who expressed a view considered the geographic market to be EEA wide
       in scope, in particular for industrial enzymes for feed, a small majority of
       competitors who expressed a view considered the geographic market to be
       worldwide.171
(153) In any event, for the purposes of this Decision, the exact scope of the geographic
       market definition with respect to Enzymes can be left open, as the Transaction would
       not raise serious doubts as to its compatibility with the internal market under any
       plausible alternative geographic market definition.
4.7.   Probiotics
4.7.1. Relevant Product Market
(154) Probiotics are live beneficial bacteria that are naturally created by the process of
       fermentation in foods like yogurt, sauerkraut, miso soup, kimchi, and others.
       Probiotics are consumed for their health benefits, especially gut health. Probiotics
       are sold as nutritional dietary supplement products. They are also used as active
       pharmaceutical ingredients and as functional ingredients in food and beverage
       products.
(155) The Parties submit there is a high demand-side and supply-side substitutability
       between Probiotics used in dietary supplements and in food and beverages
       applications, and therefore the relevant product market should include all probiotics
       used in human health. N&B argues that it sells the same Probiotics to both food and
       dietary supplement manufacturers. Probiotics for both these application have the
       same sources and follow the same development and formulation processes.
       Moreover, according to the Parties, for the end customer there is no significant
       difference with respect to the desired health effect between intake of probiotics from
169    Q1-Questionnaire to Customers, replies to question H.A.4; and Replies to Q2a - Questionnaire to
       Competitors, replies question H.A.4
170    Form CO, para. 6.200.
171    Q1-Questionnaire to Customers, replies to question B.1. and Q2a - Questionnaire to Competitors,
       replies to question B.1
                                                     27
 ---pagebreak---        food and/or beverages compared to dietary supplements. From the supply-side
       perspective, the Parties submit that the manufacturing assets are the same and there
       are a few differences in the regulatory requirements.172
(156) The results of the market investigation were however not conclusive. Whereas
       a majority of competitors who expressed a view consider that Probiotics used by
       dietary supplement and food and beverage manufacturers are the same, customers
       were divided on whether or not these two products are interchangeable, although a
       small majority of customers considered that suppliers can easily change production
       from one to another use without incurring into significant costs.173
(157) In any event, for the purposes of this Decision, the exact scope of product market
       definition with respect to Probiotics can be left open, since the Transaction would
       not raise serious doubts as to its compatibility with the internal market under any
       plausible alternative product market definition.
4.7.2. Relevant Geographic Market
(158) The Parties submit that the geographic market should be worldwide in scope.
       According to the Parties, manufacturers of probiotics supply customers worldwide,
       they do not need a local presence, transportation costs do not represent a significant
       fraction of overall costs, and there are no relevant trade barriers.174
(159) The market investigation results also point out for a worldwide scope, in particular
       as regards the Probiotics for use in dietary supplements.175
(160) In any event, for the purposes of this Decision, the exact scope of the geographic
       market definition with respect to Probiotics can be left open, as the Transaction
       would not raise serious doubts as to its compatibility with the internal market under
       any plausible alternative geographic market definition.
5.     COMPETITIVE ASSESSMENT
5.1.   Legal Framework
(161) Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
       whether a proposed concentration would significantly impede effective competition
       in the internal market or in a substantial part of it, in particular through the creation
       or strengthening of a dominant position. Depending on the position of the Parties in
       the supply chain, a concentration may entail horizontal and/or non-horizontal effects.
(162) Horizontal effects arise when the parties to a concentration are actual or potential
       competitors in one or more of the relevant markets concerned. The Commission
172    Form CO paras. 6.492 and 6.493
173    Q1-Questionnaire to Customers, replies to questions I.A.1 and I.A.2; and Q2a - Questionnaire to
       Competitors, replies to question I.A.1 and I.A.2.
174    Form CO, para.494.
175    Q1-Questionnaire to Customers, replies to questions B.1 and B.2; and Q2a - Questionnaire to
       Competitors, replies to questions B.1 and B.2.
                                                         28
 ---pagebreak---       appraises horizontal effects in accordance with the guidance set out in the Horizontal
      Merger Guidelines.176
(163) Non-horizontal effects arise when the parties to a concentration operate in different
      levels of the supply chain in certain relevant markets (vertical effects) or when the
      Parties operate in closely related markets (conglomerate effects). The Commission
      appraises non-horizontal effects in accordance with the guidance set out in the
      Non-Horizontal Merger Guidelines.177
(164) Both Horizontal and Non-Horizontal Merger Guidelines distinguish between two
      main ways in which mergers between actual or potential competitors on the same
      relevant market may significantly impede effective competition, namely
      non-coordinated and coordinated effects.
(165) In horizontal mergers, non-coordinated effects may significantly impede effective
      competition by eliminating the competitive constraint imposed by each merger party
      on the other, as a result of which the merged entity would have increased market
      power, without resorting to coordinated behaviour. In that regard, the Horizontal
      Merger Guidelines consider not only the direct loss of competition between the
      merging firms, but also the reduction in competitive pressure on non-merging firms
      in the same market that could be brought about by the merger.178
(166) The Horizontal Merger Guidelines list a number of factors which may influence
      whether or not significant non-coordinated effects are likely to result from a merger,
      such as the large market shares of the merging firms, the fact that the merging firms
      are close competitors, the limited possibilities for customers to switch suppliers or
      the fact that the merger would eliminate an important competitive force.179
      Furthermore, in accordance with the Horizontal Merger Guidelines, a merger with a
      potential competitor can also have horizontal anti-competitive effects where the
      potential competitor constrains the behaviour of firms active in the market.180 Not all
      these factors need to be present for significant non-coordinated effects to be likely.
      The list of factors is also not an exhaustive list.
(167) In non-horizontal mergers, non-coordinated affects may arise when the concentration
      gives rise to foreclosure. In vertical mergers, foreclosure can take the form of input
      foreclosure, where the merger is likely to raise costs of downstream rivals by
      restricting their access to an important input; and/or of customer foreclosure, where
      the merger is likely to foreclose upstream rivals by restricting their access to
      a sufficient customer base.181
(168) In addition, the Non-Horizontal Merger Guidelines also state that a concentration
      may entail conglomerate effects. Conglomerate effects may arise in a concentration
      where the undertakings involved are active on closely related markets and may also
176   Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
      concentrations between undertakings (“Horizontal Merger Guidelines”), OJ C 31, 05.02,2014
177   Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control
      of concentrations between undertakings (“Non-Horizontal Merger Guidelines”) (2008/C 265/07).
178   Horizontal Merger Guidelines, paragraph 24
179   Horizontal Merger Guidelines, paragraph 26
180   Horizontal Merger Guidelines, paragraph 59.
181   Non-Horizontal Merger Guidelines, para 30
                                                     29
 ---pagebreak---        lead to the foreclosure of rivals, by allowing the merged entity to leverage a strong
       market position from one market to another by means of tying, bundling or other
       exclusionary practice.182
(169) In accordance with the above legal framework, the Commission has carried out an
       extensive competitive assessment of the Transaction in order to assess whether the
       Transaction would impede effective competition within the internal market on
       accounts of:
       (a)       possible horizontal non-coordinated effects in the relevant markets for the
                 manufacture and supply of Cultures and Plant-based Proteins;
       (b)       possible vertical non-coordinated effects in the relevant markets for the
                 supply of Locust Bean Gum, Plant-based Proteins for Active Nutrition, SPI,
                 MCC for Food Applications, Synthetic Emulsifiers overall, Ester Emulsifiers,
                 DISMO, Fatty Acid Emulsifiers, Other Synthetic Emulsifiers, De-Oiled
                 Lecithin Emulsifiers overall, GM De-Oiled Lecithin, and Non-GM De-Oiled
                 Lecithin, in particular by assessing the likelihood of foreclosure scenarios
                 and, in particular, whether the merged entity would have the (i) ability and
                 (ii) the economic incentive to foreclose its rivals, as well as (iii) whether such
                 foreclosure strategy would have a detrimental effect on competition, causing
                 harm to consumers183; and
       (c)        possible conglomerate effects in closely related markets.
5.2.   Horizontal non-coordinated effects
(170) Affected markets arise due to the horizontal overlap between the Parties’ activities in
       the manufacture and sale of Cultures and Plant-based Proteins.184
5.2.1. Cultures
(171)   The Parties only overlap in the manufacture and supply of Dairy Cultures and
       Cultures for Meat. Therefore, horizontally affected markets with respect to Cultures
       only arise in Dairy Cultures and Cultures for Meat, as well as in certain
       sub-segments thereof. […]. Table 1 shows the horizontally affected markets in
       Cultures.
182    Non-Horizontal Merger Guidelines, para 93.
183    Non-Horizontal Merger Guidelines, paras 32 and 94.
184    As mentioned above the Transaction gives rise to other de minimis overlaps that do not amount to
       affected markets. In the market investigation, one company referred to one of these markets. The
       company considered that the “[t]he size and scope of the business is very concerning as it will distort
       competition, hinder innovation and create barriers to entry” in the natural antioxidants and
       antimicrobial markets. While the Parties have a combined market share of [0-5]% worldwide and [5-
       10]% in the EEA in the natural antioxidants market, N&B does not manufacture natural antioxidants,
       it only resells them in blends or as stand-alone ingredients. Only in a very narrow market definition
       by compound, the Parties would have a combined share of [20-30]% in the supply of rosemary extract
       in the EEA. However, in this case the increment, brought by N&B, is below [0-5]%. The Parties also
       do not overlap in the supply of natural microbial control agents, where only N&B is present. In the
       view of these facts, the Commission considers that the concerns voiced by the Company are not
       substantiated.
                                                         30
 ---pagebreak---  ---pagebreak---       (around [0-5]%). While N&B has considerable activities in Dairy Cultures and
      considers itself a significant innovator in that market, IFF is not a relevant player in
      Dairy Cultures [details on IFF’s activities and production process]. Finally, there are
      a number of strong competitors in Dairy Cultures overall as well as in the segment of
      acidifying Cultures – most prominently the market leader Chr. Hansen.187
(174) The market investigation largely confirms the arguments brought forward by the
      Parties. While N&B is named by many customers and competitors responding to the
      market investigation as an important supplier of Dairy Cultures, IFF is only named
      by two customers and no competitors.188 None of the replying customers or
      competitors consider N&B and IFF to be among the top five of each other’s closest
      competitors in Dairy Cultures.189 Further, customers and competitors generally
      consider manufacturers such as N&B, Chr. Hansen, CSK and DSM to be the most
      capable in Dairy Cultures when considering parameters such as quality, R&D
      capabilities or portfolio. IFF by contrast is not ascribed any capabilities by the
      majority of respondents.190
(175) All customers expressing their opinion consider that the Transaction will not have an
      impact on their company with respect to the procurement of Dairy Cultures.191 While
      the majority of competitors answered ‘I do not know’, a large majority of
      competitors expressing their opinion also do not consider the Transaction to have an
      impact on their company with respect to the supply of Dairy Cultures.192 Overall, no
      customer or competitor expressed a substantiated concern with respect to the market
      for the manufacture and supply of Dairy Cultures, or a segment thereof (in particular
      acidifying Cultures or Cultures for Cheese).
(176) It follows from the foregoing that irrespective of whether an EEA or worldwide
      market is considered, and whether Dairy Cultures overall or segments such as
      acidifying Cultures or Cultures for Cheese are considered, the Transaction would
      lead to the combination of a well-established supplier (N&B) with another supplier
      with only a very minor market presence and limited capabilities (IFF).
(177) In the light of the above considerations, and, in particular, in the light of the
      moderate combined market share and the very small increment brought about by the
      Transaction (around [0-5]% by IFF) and taking account of the results of the market
      investigation, the Commission considers that the horizontal overlap brought about by
      the Transaction in the manufacture and supply of Dairy Cultures overall, acidifying
      Cultures and Cultures for Cheese is not such as to raise serious doubts as to its
      compatibility with the internal market.
187   Form CO paras 6.69, 6.71 and 6.77.
188   Q1 – Questionnaire to customers, replies to question C.B.1., and Q2a and Q2b – Questionnaires to
      competitors, replies to question C.B.1.
189   Q1 – Questionnaire to customers, replies to questions C.B.2. and C.B.3, and Q2a and Q2b –
      Questionnaires to competitors, replies to questions C.B.2. and C.B.3.
190   Q1 – Questionnaire to customers, replies to question C.B.4., and Q2a and Q2b – Questionnaires to
      competitors, replies to question C.B.4.
191   Q1 – Questionnaire to customers, replies to question J.1.
192   Q2a and Q2b – Questionnaires to competitors, replies to question J.1.
                                                        32
 ---pagebreak--- 5.2.1.2. Cultures for Meat
(178) With respect to the market for the manufacture and supply of Cultures for Meat as
        well as segments thereof, the Parties submit that the combined shares of the Parties
        remain moderate and that the merged entity trails significantly behind the clear
        market leader in all relevant Culture for Meat Segments, Chr. Hansen. They further
        state that the Parties are not close competitors, that the Transaction would not
        eliminate an important competitive force, and would not combine two important or
        competing innovators. Further, there are several strong competitors and barriers to
        entry are insignificant, and customers can switch and have significant buyer
        power.193
(179) Specifically, the merged entity’s combined share in Cultures for Meat overall would
        remain below 20% ([10-20]% worldwide and [10-20]% in the EEA). Only when
        considering certain sub-segments of Cultures for Meat, would combined market
        shares exceed 20%, namely in acidifying Cultures ([20-30]% in the EEA), surface
        Cultures ([20-30]% worldwide and [20-30]% in the EEA),194 Dried & Semi-Dried
        Fermented Sausages Northern European style ([20-30]% worldwide) and Dried
        Cured Ham ([20-30]% worldwide and [20-30]% in the EEA).
(180) The Parties further argue that within Cultures for Meat, both Parties currently only
        have […] within their top 20 worldwide and EEA customers. In addition, the Parties
        submit that the Parties have generally different customer basis in Cultures for Meat,
        with N&B mainly supplying large food companies across multiple regions
        worldwide, and IFF mainly small- and medium-sized companies mostly located in
        the EEA.195 Overall, Chr. Hansen would remain the market leader in Cultures for
        Meat, and while the merged entity would become the second largest supplier, there
        would be a number of other competitors who at least globally have a competitive
        position similar to that of the Parties (e.g. Kerry or Lallemand) and who could easily
        expand their activities in the EEA.196
(181) The Commission notes that according to data submitted by the Parties and with
        respect to acidifying Cultures for Meat, the merged entity would have an EEA
        market share of [20-30]%, while Chr. Hansen would be the clear market leader with
        [60-70]%. With respect to surface Cultures for Meat, the merged entity would have a
        worldwide share of at most [20-30]% and an EEA share of at most [20-30]%, while
        Chr. Hansen would have a worldwide share of [20-30]% and an EEA share of [30-
        40]%. Lallemand would be another strong player in this segment with a [20-30]%
        share worldwide and a [20-30]% share in the EEA. With respect to Cultures for
        Dried & Semi-Dried Fermented Sausages Norther European style, the merged entity
        would have a worldwide share of [20-30]%, while Chr. Hansen would be the clear
        market leader with [60-70]%. With respect to Cultures for Dried Cured Ham, the
        merged entity would have a worldwide share of [20-30]% and an EEA share of [20-
        30]%, while Chr. Hansen would be the clear market leader with a worldwide share
        of [50-60]% and an EEA share of [50-60]%. It therefore appears that first and
        foremost Chr. Hansen would remain by far the market leading player across all
        affected potential markets.
193     e.g. Form CO paras 6.67, 6.69, 6.71, 6.72-73, 6.76 and 6.90.
194     IFF sales in surface Cultures relate to [details on IFF’s activities].
195     Form CO para 6.69.
196     Form CO para 6.71.
                                                            33
 ---pagebreak--- (182) Further, the market investigation largely confirms the arguments brought forward by
      the Parties. While N&B is mentioned by a majority of customers responding to the
      market investigation as an important supplier of Cultures for Meat, IFF is only
      mentioned by one customer and by one competitor.197 The majority of respondents
      to the market investigation expressing their opinion do not consider N&B and IFF to
      be close competitors with respect to Cultures for Meat. While two customers
      consider N&B to be the closest competitor of IFF in Cultures for Meat, overall, a
      majority of respondents expressing their opinions consider Chr. Hansen to be the
      closest competitor of both N&B and IFF in Cultures for Meat.198 When asked
      whether IFF has a competitive advantage in the supply of Cultures for Meat, one
      competitor remarks that ‘[a]cquiring Frutarom has increased IFF[‘s] competitive
      position’.199 However, another competitor submits that IFF does not have a
      competitive advantage ‘compared to other suppliers such as e.g. Kerry, N&B and
      Chr. Hansen’.200
(183) While the majority of customers replied ‘I do not know’, all customers expressing
      their opinions consider that the Transaction will not have an impact on their
      company with respect to the procurement of Cultures for Meat.201 Further, while a
      majority of competitors replied ‘I do not know’, a majority of competitors
      expressing their opinions also consider that the Transaction will not have an impact
      on their company with respect to the supply of Cultures for Meat. One competitor to
      the Parties in Cultures for Meat submits that ‘[g]iven that N&B and IFF are some of
      the main competitors of [the Company] within meat cultures, the transaction will
      potentially have some negative influence on [the Company] and the market
      dynamics more generally in this segment. However, it does not raise a material
      concern for [the Company]’.202 This concern however does not relate to the market
      for the manufacture and supply of Cultures for Meat specifically, but rather to the
      circumstance that the Parties are active in meat-related ingredients also outside the
      field of Cultures, whereas the competitor in question is only active in Cultures.203
(184) It therefore appears that irrespective of whether an EEA or worldwide market is
      considered, and whether Cultures for Meat overall or segments such as acidifying
      Cultures, surface Cultures, Dried & Semi-Dried Fermented Sausages Northern
      European style or Dried Cured Ham are considered, the Transaction would combine
      two not particularly close players in the market and create an entity with moderate
      market shares, significantly lagging behind the clear market leader Chr. Hansen.
(185) In the light of the above considerations, and, in particular, in the light of the
      moderate combined market shares and the presence of a clearly market leading
      competitor, and taking account of the results of the market investigation, the
      Commission considers that the horizontal overlap brought about by the Transaction
      in the manufacture and supply of Cultures for Meat overall, acidifying Cultures,
197   Q1 – Questionnaire to customers, replies to question C.B.1., and Q2a and Q2b – Questionnaires to
      competitors, replies to question C.B.1.
198   Q1 – Questionnaire to customers, replies to questions C.B.2. and C.B.3, and Q2a and Q2b –
      Questionnaires to competitors, replies to questions C.B.2. and C.B.3.
199   Q2b – Questionnaire to competitors, reply to question C.B.11.
200   Q2a – Questionnaire to competitors, reply to question C.B.11.
201   Q1 – Questionnaire to customers, replies to question J.1.
202   Q1 – Questionnaire to customers, replies to question J.1.1.
203   Minutes of a call with a competitor, 8 September 2020.
                                                        34
 ---pagebreak---         surface Cultures, Dried & Semi-Dried Fermented Sausages Northern European style
        and Dried Cured Ham is not such as to raise serious doubts as to its compatibility
        with the internal market.
5.2.1.3. Cultures for Plant-based food
(186) The Parties […] do not overlap in the manufacture and supply of Cultures for Plant-
        based food. N&B has a global market share of [10-20]% and an EEA market share
        of [30-40]%. IFF is […] not active in the manufacture and supply of Cultures for
        Plant-based food. […].
(187) The merged entity will in any case continue to be constrained worldwide and in the
        EEA by other established competitors active in Cultures for Plant-based food, such
        as Kerry, Chr. Hansen and Sabinsa. All customers and competitors expressing their
        opinion consider that the Transaction will not have an impact on their company with
        respect to the procurement or sale of Cultures for Plant-based food.204
(188) In the light of the foregoing and taking account of the results of the market
        investigation, the Commission considers that the Transaction does not raise serious
        doubts as to its compatibility with the internal market in relation to the manufacture
        and supply of Cultures for Plant-based food.
5.2.1.4. Conclusion on Cultures
(189) Even if considering a market for the manufacture and supply of Cultures overall, the
        merged entity would only have a market share of [20-30]% worldwide and [20-30]%
        in the EEA, with small increments from IFF ([0-5]% and [0-5]% respectively). The
        fact that IFF is not a significant presence in Cultures overall is confirmed by a major
        competitor in Cultures stating that it ‘does not compete with IFF’.205
(190) In the market investigation, and in contrast to submissions by the Parties, customers
        consider there to be significant barriers to enter the supply of cultures.206 Otherwise,
        respondents to the market investigation largely confirm the submissions by the
        Parties. In addition to the aspects specific to Dairy Cultures, Cultures for Meat and
        Cultures for Plant-based food discussed above, respondents to the market
        investigation submit that they are not aware of any particular culture only supplied
        by N&B, IFF and possibly a limited number of competitors.207
(191) Overall, significant majorities of respondents to the market investigation expressing
        their opinion consider that the Transaction will not have an impact on their Company
        with respect to Dairy Cultures, Cultures for Meat and Cultures for Plant-based
204     Q1 – Questionnaire to customers, replies to question J.1., and Q2a and Q2b – Questionnaires to
        competitors, replies to questions J.1. and J.1.1. While one competitor describes a ‘minor concern’ in
        relation to Cultures for plant-based food’, this concern does not relate to the Parties’ position in the
        market for the manufacture and supply of Cultures for plant-based food as such, but rather to the
        Parties’ activities also in other plant-based food ingredient segments outside of the market for
        Cultures.
205     Minutes of a call with a competitor on 8 September 2020.
206     Q1 – Questionnaire to customers, replies to question C.B.10.
207     Q1 – Questionnaire to customers, replies to question C.B.7., and Q2a and Q2b – Questionnaires to
        competitors, replies to question C.B.7.
                                                          35
 ---pagebreak---  ---pagebreak---         have significant buyer power. Moreover, they argue that barriers to entry are
        moderate and that several strong competitors will constrain the Parties post-
        Transaction. They submit that competitors in soy producing regions such as China
        are important and account for much of the global Plant-based Protein sales. In
        addition, they submit that the degree of market concentration in Plant-based Proteins
        is generally low. They argue that in addition to the larger international players such
        as ADM, CJ Selecta and Goldensea, there are numerous smaller suppliers who
        compete particularly strongly for regional small or medium-sized customers.
(195) As regards Plant-based Proteins overall, the market investigation confirms that IFF is
        not viewed as a strong competitor. Customers and competitors generally consider
        manufacturers N&B and ADM to be the most capable in Plant-based Proteins when
        considering parameters such as quality, R&D capabilities or portfolio. IFF by
        contrast is not awarded any capabilities by any respondents except one customer.210
(196) Market feedback confirms the presence of various competitors, including from Asia.
        Several Chinese companies were cited among the top three suppliers of Plant-based
        Proteins, including Gushen, Shansong and Goldensea.211 A competitor commented:
        “According to the Company, the market for plant-based proteins, which are
        primarily used as an alternative for meat, is competitive. The Company considers
        that there are many players in the plant-based protein market who are able to
        produce with high-quality standards. Indeed, the Company faces competition
        worldwide, from Asia (Chinese players in particular), America and Europe”.212
5.2.2.1. Soy-based Proteins
(197) As regards Soy-based Proteins in particular, the Parties submit that they face
        strong competition from various suppliers, in particular from competitors in soy
        producing regions such as Asia, who are actively and effectively competing
        globally and in the EEA. They contend that Chinese competitors have
        significantly improved their product quality and consistency over recent years
        and account for c. [30-40]% of the global market by value. In addition, they
        contend that alternative protein sources such as pea and rice are gaining
        increasing importance, which has led to the entry of new competitors, putting
        significant pressure on traditional soy protein producers.
(198) The Commission notes that according to data submitted by the Parties and with
        respect to Soy-based Proteins overall, the merged entity would have a worldwide
        market share of [20-30]%, with ADM in second position at [10-20]%. With respect
        to a market comprising SPI and SPC, the merged entity would have a worldwide
        market share of [20-30]%, with ADM in second position at [10-20]%. As regards
        SPI as a separate market, the combined entity would have a [40-50]% market share
        in the EEA, with ADM in third position at [5-10]%, while on a worldwide basis it
        would have a [30-40]% market share, with ADM in second position at [10-20]%.
        With respect to TSP, the merged entity would have an EEA share of [20-30]%, with
        Sojaprotein as the market leader at [30-40]% and ADM the third supplier at [10-
210     Q1 – Questionnaire to customers, replies to question C.B.4., and Q2a and Q2b – Questionnaires to
        competitors, replies to question C.B.4.
211     Q1 – Questionnaire to customers, replies to question D.B.2., and Q2a and Q2b – Questionnaires to
        competitors, replies to question D.B.2.
212     Minutes of a call with a competitor on 20 August 2020
                                                        37
 ---pagebreak---       20]%. In each of these markets IFF’s share does not exceed [0-5]%, except in SPI,
      where it reaches [0-5]% on a global basis. It therefore appears that the combined
      entity’s market shares would generally remain moderate, that the increment from IFF
      is limited and that strong competitors, in particular ADM, would remain present
      across all affected potential markets.
(199) Contrary to what the Parties claim, customers replying to the market investigation do
      consider barriers to enter the supply of Soy-based Proteins to be moderately
      significant.213 Otherwise, respondents to the market investigation largely confirm the
      submissions by the Parties. While N&B is named by many customers and
      competitors responding to the market investigation as an important supplier of
      Soy-based Protein, including SPC, SPI and TSP, IFF is named by no customers or
      competitors.214 Only one customer and one competitor replying to the market
      investigation consider N&B and IFF to be among the top five of each other’s closest
      competitors in SPC, SPI or TSP.215
(200) Market feedback and the results of the market investigation confirm the presence of
      competitors from Asia. Both customers and competitors cited several Chinese
      companies among the top three suppliers of SPC, SPI and TSP, including Gushen,
      Shansong and Goldensea.216 A customer commented: “Other important suppliers are
      ADM in the USA and the Chinese suppliers [Confidential] ADM and the Chinese
      suppliers are primarily active in the supply of soy protein isolates.”217 According to
      the same customer, as regards the Plant-based Proteins market “[…] there is no
      difference in the quality offered by Chinese suppliers and western suppliers.
      [Confidential]. The Company has concluded supply agreements with all these
      [Confidential] suppliers”.218
(201) A large majority of respondents confirm that there is an increasing demand for non-
      soy-based proteins, in particular for pea protein.219 A customer commented: “Soy is
      seen as old technology and has over many years been tainted due to GMO issues.
      The trends are for "other" protein sources and Pea is just one of them.”220
(202) No customers expressing their opinion consider that the Transaction will have a
      negative impact on their company with respect to the procurement of Soy-based
      Proteins.221 A large majority of customers expressing their opinion considered that
      the Transaction would have no impact on price, quality and/or innovation of the
      supply of Soy-based Proteins.222 While the majority of competitors answered ‘I do
      not know’, a majority of those expressing their opinion also do not consider the
213   Q1 – Questionnaire to customers, replies to question C.B.10.
214   Q1 – Questionnaire to customers, replies to question C.B.1., and Q2a and Q2b – Questionnaires to
      competitors, replies to question C.B.1.
215   Q1 – Questionnaire to customers, replies to questions C.B.2. and C.B.3, and Q2a and Q2b –
      Questionnaires to competitors, replies to questions C.B.2. and C.B.3.
216   Q1 – Questionnaire to customers, replies to question D.B.2., and Q2a and Q2b – Questionnaires to
      competitors, replies to question D.B.2.
217   Minutes of a call with a customer on 19 August 2020
218   Minutes of a call with a customer on 19 August 2020
219   Q1– Questionnaire to customers, replies to question D.B.7; Q2a and Q2b – Questionnaires to
      competitors, replies to question D.B.7
220   Q1– Questionnaire to customers, replies to question D.B.7
221   Q1 – Questionnaire to customers, replies to question J.1.
222   Q1 – Questionnaire to customers, replies to question J.2.2.
                                                        38
 ---pagebreak---         Transaction to have an impact on their company with respect to the supply of
        Soy-based Proteins.223 Overall, no customer or competitor expressed a substantiated
        concern with respect to the market for the manufacture and supply of Soy-based
        Protein, or any subsegment.
(203) It therefore appears that irrespective of whether an EEA or worldwide market is
        considered, and whether Soy-based Proteins overall or segments for SPC/SPI, SPI or
        TSP are considered, the Transaction would lead to the combination of a well-
        established supplier (N&B) with another supplier whose market presence and
        capabilities are very limited (IFF).
(204) In view of the above, and, in particular the very small increments brought about by
        the Transaction (not more than [0-5]% by IFF), the Commission considers that the
        horizontal overlap brought about by the Transaction in the manufacture and supply
        of Soy-based Protein overall, SPC/SPI, SPI and TSP is not such as to raise serious
        doubts as to its compatibility with the internal market.
5.2.2.2. Plant-based Proteins for Meat Substitutes
(205) The Parties argue that many companies are active in the hypothetical sub-segment
        for meat and meat substitutes, including the large multinational ADM, pea protein
        producer Roquette, and low cost Chinese competitors such as Gushen, Goldensea,
        and Yuwang. They contend that in the EEA, there are also strong regional players
        such as the Belgian Cosucra and the Serbian Sojaprotein. In addition, they submit
        that in this subsegment there are also a large number of other, smaller competitors
        with higher shares than IFF.
(206) The Commission notes that according to data submitted by the Parties and with
        respect Plant-based Proteins for Meat Substitutes, the merged entity would have an
        EEA share of [20-30]%, with IFF bringing a small increment of [0-5]%. ADM
        would remain the second supplier at [10-20]% and Sojaprotein the third supplier at
        [10-20]%. It therefore appears that the combined entity’s combined market shares
        would remain moderate, that the increment from IFF is limited, and that strong
        competitors, in particular ADM, would remain present.
(207) Overall, no customer or competitor expressed a substantiated concern with respect to
        the market for Plant-based Proteins, including any segment for Meat Substitutes.
(208) It therefore appears that irrespective of whether an EEA or worldwide market is
        considered, when a segment for Plant-based Proteins for Meat Substitutes is
        considered, the Transaction would lead to the combination of a well-established
        supplier (N&B) with another supplier whose market presence and capabilities are
        very limited (IFF).
(209) In view of the above, and, in particular, in light of the moderate combined market
        share and the very small increment brought about by the Transaction ([0-5]% by
        IFF), the Commission considers that the horizontal overlap brought about by the
        Transaction in the manufacture and supply of Plant-based Protein for Meat
        Substitutes is not such as to raise serious doubts as to its compatibility with the
        internal market.
223     Q2a and Q2b – Questionnaires to competitors, replies to question J.1.
                                                       39
 ---pagebreak--- 5.2.2.3. Plant-based Proteins for Active Nutrition
(210) The Parties contend that IFF is barely active in Plant-based Proteins for Active
        Nutrition, including snack and beverage applications, and is more focused on the
        segment for meat and meat substitutes, [details on IFF’s business plans and strategy].
        They contend that in this potential sub-segment for Active Nutrition, IFF is not
        active at all in the EEA and only to a negligible extent at worldwide level. They
        further submit that many strong competitors are also able to deliver the product
        quality and consistency required for beverage and snack applications, such as the
        multinational ADM, the Japanese Fuji Oil, European-based competitors such as the
        Belgian Cosucra and the Serbian Sojaprotein, but also Chinese producers including
        Gushen, Goldensea, and Yuwang, which they claim have improved their product
        consistency over the last years and offer aggressive prices. They submit that there
        are also a large number of other, smaller competitors with higher shares than IFF
        present in this segment.
(211) The Parties further contend that the market for Protein beverages and protein
        fortified snack bars is growing, and that all suppliers have spare capacity, which they
        have an incentive to use for this segment in light of the higher prices compared to the
        meat and meat substitutes segment. They submit by way of example that there have
        been recent capacity increases for pea protein which were mostly targeted at Active
        Nutrition. They further submit that pea protein was historically not used in beverage
        applications due to its taste profile, but is now increasingly being used, to the
        detriment of the growth of soy protein beverages.
(212) In addition, they submit that dairy protein (whey protein) is the traditional protein
        source for Active Nutrition and exercises significant competitive pressure on plant-
        proteins for this application. They contend that dairy protein sources are the
        longstanding preferred protein due to their familiar taste and strong nutritional
        profile.
(213) The Commission notes that according to data submitted by the Parties and with
        respect Plant-based Proteins for Active Nutrition including snacks and beverages,
        the merged entity would have a worldwide share of [40-50]%, with IFF bringing a
        small increment of less than [0-5]%. ADM would remain the second supplier at [5-
        10]% and Fuji Oil the third supplier at [0-5]%. It therefore appears that the increment
        from IFF is limited, and that strong competitors, in particular ADM, would remain
        present.
(214) Overall, no customer or competitor expressed a substantiated concern with respect to
        the market for Plant-based Proteins, including any segment for Active Nutrition.
(215) It therefore appears that irrespective of whether an EEA or worldwide market is
        considered, when a segment for Plant-based Proteins for Active Nutrition is
        considered, the Transaction would lead to the combination of a well-established
        supplier (N&B) with another supplier whose market presence and capabilities are
        very limited (IFF).
(216) In view of the above, and, in particular, in light of the very small increments brought
        about by the Transaction (not more than [0-5]% by IFF), the Commission considers
        that the horizontal overlap brought about by the Transaction in the manufacture and
        supply of Plant-based Protein for Active Nutrition is not such as to raise serious
        doubts as to its compatibility with the internal market.
                                                   40
 ---pagebreak--- 5.2.2.4. Plant-based Protein Isolates and Concentrates
(217) The Commission notes that according to data submitted by the Parties and with
        respect to Plant-based Protein Isolates and Concentrates comprising SPC, SPI, PPC
        and PPI, the merged entity would have a worldwide share of [20-30]%, with IFF
        bringing a small increment of [0-5]%. ADM would remain the second supplier at
        [10-20]% and CJ Selecta the third supplier at [5-10]%. It therefore appears that the
        combined entity’s market shares would remain moderate, that the increment from
        IFF is limited, and that strong competitors, in particular ADM, would remain
        present.
(218) Overall, no customer or competitor expressed a substantiated concern with respect to
        the market for Protein Isolates and Concentrates.
(219) It therefore appears that irrespective of whether an EEA or worldwide market is
        considered, and whether Plant-based Proteins overall or a segment for Protein
        Isolates and Concentrates is considered, the Transaction would lead to the
        combination of a well-established supplier (N&B) with another supplier whose
        market presence and capabilities are very limited (IFF).
(220) In view of the above, and, in particular, in light of the moderate combined market
        share and the very small increment brought about by the Transaction ([0-5]% by
        IFF), the Commission considers that the horizontal overlap brought about by the
        Transaction in the manufacture and supply of Plant-based Protein Isolates and
        Concentrates is not such as to raise serious doubts as to its compatibility with the
        internal market.
5.2.2.5. Conclusion on Plant-based Proteins
(221) The results of the market investigation indicate that N&B is a leading competitor in
        the markets for Plant-based Proteins, in particular Soy-based proteins, where IFF’s
        presence is hardly mentioned by respondents. In the Plant-based Protein markets
        where the Transaction gives rise an affected market, the increment from IFF is very
        limited, ranging from <[0-5]% to [0-5]%. N&B’s market share does not exceed [50-
        60]% in any of those markets: in Soy-based Proteins overall, the merged entity
        would have a market share of [20-30]% worldwide, with a small increment from IFF
        ([0-5]%). In addition, the replies to the market investigation do not suggest that any
        supplier of Plant-based Proteins offers a product that could not be supplied by
        competitors.224
(222)    Overall, significant majorities of respondents to the market investigation expressing
        their opinions consider that the Transaction will not have an impact on their
        companies with respect to Soy-based Proteins.225 In addition, significant majorities
        of respondents to the market investigation expressing an opinion submit that they do
224     Q1 – Questionnaire to customers, replies to question C.B.7., and Q2a and Q2b – Questionnaires to
        competitors, replies to question D.B.6.
225     Q1 – Questionnaire to customers, replies to question J.1., and Q2a and Q2b – Questionnaires to
        competitors, replies to questions J.1.
                                                       41
 ---pagebreak---        not expect the Transaction to have an impact on the market for the supply of Soy-
       based Protein in terms of price, quality, or innovation.226
(223) In conclusion, in the light of the foregoing and taking account of the results of the
       market investigations the Commission considers that the Transaction does not raise
       serious doubts as to its compatibility with the internal market in relation to the
       manufacture and supply of Plant-based Proteins.
5.2.3. Overall R&D efforts/ innovation
(224) The Parties’ R&D efforts and strategies [details on the Parties’ R&D strategies].227
       In addition, a majority of respondents to the market investigation considered that the
       combination of the Parties’ R&D capabilities will allow the merged entity to
       compete better with its rivals,228 and to bring new and/or better products into the
       markets.229 Moreover, the majority of respondents is of the view that the
       combination of the Parties’ R&D capabilities will not hamper innovation, including
       by hindering the rivals ability or incentive to innovate.230
5.3.   Vertical non-coordinated effects
(225) The Transaction gives rise to vertical links between N&B’s manufacture and supply
       of Gums and Plant-based Proteins and IFF’s purchases of these ingredients as inputs
       for its food inclusions and systems production and between N&B’s manufacture and
       supply of MCC and Emulsifiers and IFF’s purchases of these ingredients as inputs
       for its flavours and systems production. These actual vertical links give rise to the
       following vertically affected markets: the markets for the supply of Locust Bean
       Gum, Plant-based Proteins for Active Nutrition, SPI, MCC for Food Applications,
       Synthetic Emulsifiers overall, Ester Emulsifiers, DISMO, Fatty Acid Emulsifiers,
       Other Synthetic Emulsifiers, De-Oiled Lecithin Emulsifiers overall, GM De-Oiled
       Lecithin, and Non-GM De-Oiled Lecithin.
5.3.1. Gums
(226) As mentioned above in paragraph (126), N&B manufactures and supplies Locust
       Bean Gum. Vertically affected markets arise due to IFF’s purchases of c. EUR […]
       of Locust Bean Gum in 2019, [details on IFF’s purchases].
226    Q1 – Questionnaire to customers, replies to question J.2., and Q2a and Q2b – Questionnaires to
       competitors, replies to questions J.2.
227    Form CO, Section V and Parties’ internal documents submitted as Annexes to Section V.
228    Q1 – Questionnaire to customers, replies to question L.5; and Q2a and Q2b – Questionnaires  to
       competitors, replies to questions L.5.
229    Q1 – Questionnaire to customers, replies to question L.6; and Q2a and Q2b – Questionnaires  to
       competitors, replies to questions L.6.
230    Q1 – Questionnaire to customers, replies to question L.4; and Q2a and Q2b – Questionnaires  to
       competitors, replies to questions L.4.
                                                     42
 ---pagebreak---  ---pagebreak---       product compared to guar gum, in particular for certain grades and applications such
      as baby food/infant nutrition.233
(233) A majority customers replying to the market investigation do consider barriers to
      enter the supply of Locust Bean Gum to be moderately significant. However, several
      comments confirm that this mainly relates to the sourcing of locust bean kernels.234
      Customers do not report any recent entry or expect forthcoming entry in Locust Bean
      Gum but several do mention that there has been expansion of production capacity by
      N&B competitors in recent years.235
(234) A majority of customers submit that the merged entity would not have the ability or
      incentive to deteriorate supply conditions of Locust Bean Gum or guar gum to
      certain customers.236 On the question whether there would be sufficient alternative
      sources of supply available to customers, should the merged entity deteriorate supply
      conditions for Locust Bean Gum and/or guar gum, the results of the market
      investigation were inconclusive.237 The replies from customers indicate that they
      would have enough alternative sources for supply of standard grades of both
      products but a number of respondents stated that they would have difficulties
      replacing N&B’s supply of cold-soluble Locust Bean Gum for infant nutrition.
(235) As regards any vertical concerns relating to N&B’s supply of Locust Bean Gum for
      infant nutrition in particular, the Parties submit that IFF does not purchase any LBG
      for infant nutrition applications from N&B, or any other suppliers. On that basis,
      there is no vertical link between the Parties in this putative sub-segment.
(236) No customers expressing their opinion in the market investigation consider that the
      Transaction will have an impact on their company with respect to the procurement of
      Locust Bean Gum.238 Similarly, no competitors expressing their opinion consider
      that the Transaction will have an impact on their company as regards the supply of
      Locust Bean Gum.239 A large majority of customers and competitors expressing their
      opinions considered that the Transaction would have no impact on price, quality
      and/or innovation of the supply of Locust Bean Gum.240
(237) As regards the risk of customer foreclosure, the Commission considers that the
      merged entity would not have the ability to restrict access to a significant customer
      base due to the limited size of IFF’s purchases. Even if IFF were to purchase all of
      its demand for Locust Bean Gum from the N&B Business, rival suppliers would not
      be foreclosed from supplying these ingredients to downstream manufacturers of
      Systems, nor from supplying them to downstream food manufacturers or
233   Q1 – Questionnaire to customers, replies to question E.B.1.1. and Q2a and Q2b – Questionnaires to
      competitors, replies to question E.B.1.1
234   Q1 – Questionnaire to customers, replies to question E.B.4.
235   Q1 – Questionnaire to customers, replies to question E.B.5.
236   Q1 – Questionnaire to customers, replies to question G.B.5., and Q2a and Q2b – Questionnaires  to
      competitors, replies to question G.B.2.
237   Q1 – Questionnaire to customers, replies to question G.B.6., and Q2a and Q2b – Questionnaires  to
      competitors, replies to question G.B.3.
238   Q1 – Questionnaire to customers, replies to question J.1.
239   Q2a and Q2b – Questionnaires to competitors, replies to question J.1.
240   Q1 – Questionnaire to customers, replies to question J.2 - and Q2a and Q2b – Questionnaires    to
      competitors, replies to question J.2.
                                                       44
 ---pagebreak---  ---pagebreak---       addition, they argue that N&B does not have the incentive to deteriorate its supply of
      SPI to IFF’s rivals as IFF’s demand for SPI only accounts for a fraction of the SPI
      sales of the N&B Business.
(245) They further submit that the Transaction does not give rise to any risk of customer
      foreclosure as the merged entity will not have the ability nor the incentive to
      foreclose other ingredients manufacturers from supplying IFF’s competitors with
      SPI, since IFF’s demand for SPI represents only a de minimis portion of the total
      global demand.
(246) The Commission notes that there are a number of established competitors active in
      SPI, which will continue to compete with N&B also after the Transaction. The data
      provided by the Parties indicate that N&B is the market leader in the supply of SPI
      on an EEA basis, with a [40-50]% market share, while the next three competitors,
      including ADM and two Chinese players, have shares between [5-10] and [10-20]%.
      On a worldwide basis, N&B is the market leader with [30-40]%, while the next three
      competitors, including ADM and two Chinese players, have market shares around
      [10-20]%.
(247) Given IFF’s very limited purchases of SPI, IFF’s worldwide and EEA-wide share of
      demand is estimated by the Parties to be below [0-5]%.
(248) With regard to SPI, ADM and N&B are mentioned among the top three suppliers by
      the same number of both customers and competitors replying to the market
      investigation, while Cargill and Wilmar are also cited by several respondents.241 This
      indicates that there would be sufficient alternative sources of supply available to
      customers, should the merged entity deteriorate supply of SPI.242
(249) No customer having expressed an opinion in response to the market investigation
      considers that the Transaction will have a negative impact on their company with
      respect to the procurement of Soy-based Proteins.243 Conversely, a large majority of
      customers expressing their opinion considered that the Transaction would have no
      impact on price, quality and/or innovation of the supply of Soy-based Proteins.244
      While the majority of competitors answered ‘I do not know’, a majority of those
      expressing their opinion do not consider that the Transaction will have an impact on
      their company with respect to the supply of Soy-based Proteins.245 Overall, no
      customer or competitor expressed a substantiated concern with respect to the market
      for the manufacture and supply of Soy-based Protein, or any sub-segment thereof.
(250) As regards the risk of customer foreclosure, the Commission considers that the
      merged entity would not have the ability to restrict access to a significant customer
      base due to the limited size of IFF’s purchases. Even if IFF were to purchase all of
      its demand for SPI from the N&B Business, rival suppliers would not be foreclosed
      from supplying these ingredients to downstream manufacturers of Systems, nor from
241   Q2a and Q2b – Questionnaires to competitors, replies to question C.B.1.
242   Q1 – Questionnaire to customers, replies to question G.B.6., and Q2a and Q2b – Questionnaires to
      competitors, replies to question G.B.3.
243   Q1 – Questionnaire to customers, replies to question J.1.
244   Q1 – Questionnaire to customers, replies to question J.2.2.
245   Q2a and Q2b – Questionnaires to competitors, replies to question J.1.
                                                       46
 ---pagebreak---        supplying them to downstream food manufacturers or manufacturers in other
       industries. A customer foreclosure strategy is therefore not likely.
(251) As regards the risk of customer foreclosure, the Commission considers that the
       merged entity would also not have the ability or the incentive to stop or worsen
       supplies to downstream competitors. Given IFF’s low share of demand for SPI the
       N&B Business has no incentive to deteriorate its supplies of SPI to IFF’s
       competitors and other downstream food manufacturers. In any case, several
       alternative suppliers of SPI will remain available to IFF’s competitors post-
       Transaction.
(252) Based thereupon, the Commission considers that the notified concentration does not
       entail risks of either customer foreclosure or input foreclosure in any of the potential
       markets for Plant-based Protein.
(253) In light of above and in view of the results of the market investigation, the
       Commission concludes that the notified concentration does not raise serious doubts
       as to its compatibility with the internal market in relation to the vertical link between
       the supply of Plant-based Protein, in particular Plant-based Protein for Active
       Nutrition and SPI (upstream) and the manufacture of Systems and Food Inclusions
       (downstream).
5.3.3. MCC
(254) N&B manufactures and supplies MCC for both pharmaceutical and food
       applications. IFF only purchases MCC for food applications, in particular for its
       Systems and Flavours. IFF does not purchase MCC for pharmaceutical applications.
       IFF purchases its MCC needs [details on IFF’s purchases and sources of supply].
(255) According to the Parties’ estimates, in 2019 N&B had a [30-40]% market share
       worldwide regarding the supply of MCC and of [40-50]% regarding specifically the
       supply of MCC for food applications. N&B could not present data for the EEA but
       for the EMEA where it has market share of [20-30]% in the supply of MCC and [30-
       40]% in the supply of MCC for food applications. N&B however submitted that […]
       of its EMEA sales of MCC for food applications sales take place in the EEA and that
       similarly […] of the EMEA sales take place in the EEA.246
(256) N&B faces competition from a few other suppliers worldwide and in the EEA,
       including for MCC for food applications. In the EEA and specifically for MMC for
       food, the market leader according to the Parties is JRS (with a share of around [50-
       60]%); other suppliers are Mingtai and Roquette (Blanver).
(257) IFF purchases of colloidal MCC are limited (less than EUR […] worldwide and less
       than EUR […] in the EEA). IFF’s share of the demand for MCC for food
       applications (colloidal MCC) is therefore negligible (below [0-5]% both worldwide
       and in the EEA).
246    Form CO, Annex 7.9. Within EMEA, N&B supplies MCC for food applications in […] in addition to
       the EEA countries.
                                                  47
 ---pagebreak--- (258) Due to the size of IFF limited purchases, the merged entity would not have the
       ability to restrict access to a significant customer base. A customer foreclosure
       strategy is therefore not likely.
(259) The merged entity would also not have the ability or the incentive to adopt an input
       foreclosure strategy. In addition to the alternative suppliers of colloidal MCC, this
       product is not a critical input for IFF’s business, or for its competitors. The small
       quantities purchased by IFF also reflect the fact that IFF and other flavour and
       fragrance houses are not the main customers of colloidal MCC products. These are
       generally purchased by food manufacturers, which do not compete with IFF (or its
       rivals) downstream.
(260) The fact that the proposed Transaction does not have a material impact on N&B’s
       ability and incentives in the supply of MCC came also across in the market
       investigation. The few customers that expressed a view, considered that post-
       Transaction the merged entity would not have the ability or incentive to deteriorate
       the supply conditions of MCC for food applications.247
(261) In light of above, and in view of the results of the market investigation, the
       Commission concludes that the notified concentration does not raise serious doubts
       as to its compatibility with the internal market in relation to the vertical link between
       the supply of MCC for food applications (upstream) and the manufacture of
       Functional Ingredients Systems and Flavours (downstream).
5.3.4. Emulsifiers
(262) As mentioned above in paragraph (126), N&B manufactures and supplies Lecithin-
       derived and synthetic Emulsifiers, primarily for food applications. IFF sources only
       food-grade Emulsifiers, both synthetic and Lecithin-derived. Therefore, no actual or
       potential vertical links exist with respect to non-food grade Emulsifiers.
(263) IFF purchased around EUR […] of Emulsifiers in 2019. Of this, EUR [details on
       IFF’s purchases] of Lecithin-derived Emulsifiers and around EUR […] of synthetic
       Emulsifiers [details on IFF’s purchases].248
(264) Table 5 shows the vertically affected markets in Emulsifiers.249 N&B has a market
       share of 30% or more both in Synthetic Emulsifiers and the potential distinct
       markets therein by chemical class (both worldwide and in EMEA). With respect to
       Lecithin-derived Emulsifiers, N&B’s share only exceeds 30% in De-Oiled Lecithin
       Emulsifiers worldwide. N&B could not present data for the EEA but for the EMEA.
       N&B however submitted that for all potential markets concerned, the split of N&B’s
       sales between the EEA and the rest of the EMEA would be similar to the one for the
       respective potential market overall.250
247    Q1-Questionnaire to Customers, replies to question F.B.5.
248    Form CO para 6.411.
249    Within Fractionated Lecithin Emulsifiers, the Notifying Parties estimate N&B to have a market share
       of less than [0-5]% worldwide and in the EEA.
250    Share of N&B sales and of the overall potential market that relates to the EEA: synthetic Emulsifiers
       overall approx. […]%, Ester Emulsifiers approx. […]%, DISMO approx. […]%, Fatty Acid
       Emulsifiers approx. […]%, Other Synthetic Emulsifiers approx. […]%, Lecithin-derived Emulsifiers
                                                       48
 ---pagebreak---  ---pagebreak---        of Emulsifiers from N&B specifically mentions that these would be easy to
       replace.254
(269) Further, while a majority of customers and competitors answered ‘I do not know’,
       a majority of customers and competitors expressing their opinions submit that the
       merged entity would not have the ability and incentive to deteriorate supply
       conditions of synthetic Emulsifiers or De-Oiled Lecithin Emulsifiers to certain
       customers.255 Majorities of customers and competitors expressing their views further
       submit that in any case, there would be sufficient alternative sources of supply
       available to customers, should the merged entity deteriorate supply conditions for
       synthetic Emulsifiers or De-Oiled Lecithin Emulsifiers.256
(270) Overall, a large majority of market respondents expressing their opinions do not
       expect the Transaction to have an impact on their business in relation to
       Emulsifiers.257
(271) Based thereupon, the Commission considers that the notified concentration does not
       entail risks of either customer foreclosure or input foreclosure in any of the potential
       markets for Emulsifiers.
(272) In light of above, and in view of the results of the market investigation, the
       Commission concludes that the notified concentration does not raise serious doubts
       as to its compatibility with the internal market in relation to the vertical link between
       the supply of Emulsifiers (upstream) and the manufacture of Functional Ingredients
       Systems (downstream).
5.4.   Conglomerate effects
5.4.1. General considerations of the conglomerate effects of the Transaction
(273) In the present case, the possibility of conglomerate effects arises from the
       complementary of the Parties’ product portfolios, N&B’s significant market position
       in certain product segments, and the fact that already today both Parties cross-sell
       and offer technical and commercial bundles. One of the rationale of the Transaction
       also seems to be the combination of portfolios to offer “full-set solutions” to respond
       to consumer preferences.258 However, based on the information gathered and on the
       outcome of the market investigation, it is unlikely that post-Transaction the merged
       entity will be able to engage in anticompetitive foreclosure of rivals by offering
       technical or commercial bundles or integrated solutions for food applications or for
       the personal and home care industries, for the following reasons.
(274) First, while the majority of respondents to the market investigation considers that the
       merged entity will have the largest product portfolio and the ability and incentive to
254    Minutes of a call with a customer on 10 September 2020.
255    Q1 – Questionnaire to customers, replies to question G.B.5., and Q2a and Q2b – Questionnaires to
       competitors, replies to question G.B.2.
256    Q1 – Questionnaire to customers, replies to question G.B.6., and Q2a and Q2b – Questionnaires to
       competitors, replies to question G.B.3.
257    Q1 – Questionnaire to customers, replies to question J.1., and Q2a and Q2b – Questionnaires to
       competitors, replies to question J.1.
258    Form CO, paras.3.14.
                                                      50
 ---pagebreak---       cross-sell and offer technical bundles (blends/systems, integrated solutions),259 the
      majority of respondents to the market investigation also considers that
      post-Transaction there will remain several alternative sources of supply for the
      products in question. As a customer put it “[t]o our best knowledge, there are
      sufficient alternative suppliers for all products concerned.” Another customer said
      “[t]he market is still fragmented with many other supplier”.260
(275) The market investigation confirmed that already today competitors of IFF and of
      N&B, such as Givaudan, Symrise, Kerry, DSM, ADM, Cargill, Tate & Lyle,
      Ingredion, JRS, among other, offer blends/systems of ingredients as well as
      integrated solutions. One competitor stated that “[f]unctional systems, i.e. blends of
      different ingredients, are widely used in the industry”261. Whereas a majority of
      respondents referred that the capability of matching the bundles offered by the
      merged entity depended on the exact blend/integrated solution, several respondents
      confirmed the Parties’ claim that competitors also enter into partnerships and/or
      outsource certain ingredients to be able to offer a blend or integrated solution.262 One
      customer indicated that “[c]ompetitors of IFF/N&B will have possibilities to
      purchase the single products to combine it in bundles”; a competitor mentioned “in
      many situations, industry partnerships will be able to create joint solutions, which
      can compete with IFF/N&B's integrated solutions”.263
(276) Second, the market investigation indicated that one cannot talk about a market trend
      towards blends or integrated solutions and that not all customers prefer such
      offers.264 It seems the large customers rather procure single ingredients and develop
      the blends/systems themselves. As a customer put it, “for small and mid-sized
      companies, there is often a growing demand for and/or supply of integrated
      solutions. For the large companies, this demand does often not exist. They prefer to
      buy the products separately to keep control on the recipe, suppliers and costs, except
      when there is functional benefit in the use of integrated solutions.” As a competitor
      described it, “[t]here is an industry desire to sell more integrated solutions but from
      a market standpoint, there is no trend but rather some opportunities to deliver more
      value by the combination of ingredients or to support companies who do not have
      product development expertise or resources”.265
(277) Third, the market investigation indicated that customers are not willing overall to
      compromise on the quality of their end product, nor incur risk for their own
      production processes for savings in transaction costs. The vast majority of
      respondents considers that customers value the quality, performance and stability of
259   Q1 – Questionnaire to customers, replies to questions K.3. and K.8.2; and Q2a and Q2b         –
      Questionnaires to competitors, replies to questions K.3. and K.9.
260   Q1 – Questionnaire to customers, replies to question K.6.1.
261   Q2a – Questionnaire to competitors, replies to question K.4.1.
262   Q1 – Questionnaire to customers, replies to question K.7; and Q2a and Q2b – Questionnaires   to
      competitors, replies to question K.7.
263   Q1 – Questionnaire to customers, replies to question K.7.1; and Q2a and Q2b – Questionnaires to
      competitors, replies to question K.7.1.
264   Q1 – Questionnaire to customers, replies to question K.5; Q2a and Q2b – Questionnaires       to
      competitors, replies to question K.5.
265   Q1 – Questionnaire to customers, replies to question K.5.1; and Q2a and Q2b – Questionnaires to
      competitors, replies to question K.5.1.
                                                        51
 ---pagebreak---        their supplies and do not switch suppliers based only on transaction costs.266 As
       a customer put it “[s]avings on transaction costs by reducing suppliers cannot
       compensate the risk assumption in terms of product quality and production
       processes”.267
(278) In fact, the majority of respondents considered that customers would not be locked in
       by the merged entity bundle offers and cross-selling practices, as they would be able
       to switch suppliers.268 One customer explained that “[d]ue to the competitive
       landscape in the relevant product markets, customers are still able to switch
       suppliers.”269 Another customer mentioned that “customers still would be able to
       switch suppliers and find alternative sources”.270 A further customer indicated that
       “they [customers] would be still able to find alternatives, but might have to open up
       the ingredient mix and source it from different suppliers or go to another "solution
       provider".”271 A competitor said that “[w]e expect customers to be able to continue
       to switch suppliers like today”.272 Another competitor considered “risk of a major
       lock-in of the customer base to be quite hypothetical.”273
(279) Similarly, a majority of respondents also considered that the large portfolio of
       products and the opportunity to cross-sell would not give the merged entity the
       ability to exclude rivals.274
(280) In the light of N&B’s significant position (market share of at least [30-40]%) in
       some markets and market segments closely related to the products offered by IFF,
       the Commission has investigated whether the merged entity could leverage its
       position from these markets to others by means of tying, bundling or other
       exclusionary practices. On balance, as explained bellow, the results of the market
       investigation indicate that the merged entity is unlikely to have the ability and
       incentive to implement such foreclosure strategies.
5.4.2. Cultures
(281) N&B has a significant position in Fresh Dairy Cultures ([30-40]% worldwide and
       [30-40]% in the EEA).275 However, N&B is not the market leader. It is not only
       constrained by the market leader, Chr. Hansen, but also by other established
       competitors such as DSM and Glanbia. More importantly, already today, other
       suppliers offer bundles of Fresh Dairy Cultures with flavours and/or colours,
       including Chr. Hansen, the Kerry Group, DSM, Sacco, Lallemand, and Vivolac.276
266    Q1 – Questionnaire to customers, replies to question K.10; and Q2a and Q2b – Questionnaires to
       competitors, replies to question K.12.
267    Q1 – Questionnaire to customers, replies to question K.10.
268    Q1 – Questionnaire to customers, replies to question K.8.3; and Q2a and Q2b – Questionnaires to
       competitors, replies to question K.9.2.
269    Q1 – Questionnaire to customers, reply to question K.8.3.
270    Q1 – Questionnaire to customers, reply to question K.8.3.
271    Q1 – Questionnaire to customers, reply to question K.8.3.
272    Q2a– Questionnaires to competitors, reply to question K.9.2.
273    Q2a– Questionnaires to competitors, replies to question K.9.2.
274    Q1 – Questionnaire to customers, replies to question K.6; and to Q2a and Q2b – Questionnaires to
       competitors, replies to question K.6.
275    Form CO, Table 64.
276    Form CO, para.6.719.
                                                        52
 ---pagebreak--- (282) One of the cultures competitors mentioned that the merged entity would have a
       significant product portfolio, particularly in plant-based and meat ingredients, and
       that the merged entity would become a “one-stop shop” against which it may be
       more difficult to compete. However, the same competitor acknowledged that the
       success of such one-stop shop strategy “will very much depend on how customers
       will react to the Transaction. Whether they will still want a specialised product or
       will go for a bundle with a broader portfolio of products.” The competitor also
       acknowledged it “does not expect the Parties to leverage their reinforced market
       position post-transaction in an anti-competitive way. What is more [the competitor]
       is confident about its strategy of being a player specialised in cultures and enzymes
       and will continue to foster innovation in relation to its services”277
5.4.3. Soy-based Proteins
(283) As analysed above, N&B holds a strong market position in Soy Protein Isolates ([30-
       40]% worldwide and [40-50]%), as well as in other product segmentations by end
       application such as Plant-based Proteins for Active Nutrition ([40-50]% worldwide
       and [40-50]% in the EEA) and beverages ([40-50]% worldwide and [40-50]% in the
       EEA). However, these are commoditised products and there are several other
       suppliers on the market: not only multinational players such as ADM but also
       Chinese players, which are selling globally.
(284) One competitor in Plant-based Proteins referred to the difficulty of competing with a
       supplier with a large portfolio: “The combined product portfolio could make it
       tougher for competitors with a more limited product range” and, in particular,
       referred to the possibility that the merged entity would have to combine Plant-based
       Proteins with flavours and masking agents.278 Today none of the Parties offer such
       bundle but other competitors do offer bundles of Soy-based Proteins and masking
       flavours for all types of soy-based proteins, including ADM, Kerry, Cargill, Symrise
       and Givaudan.279
5.4.4. Locust Bean Gum
(285) N&B has a strong position in the Locust Bean Gum market ([30-40]% worldwide
       and [30-40]% in the EMEA).280 However, it faces competition from established
       suppliers. In fact, the majority of the respondents in the market investigation
       considered that there will be alternatives sources of supply to the merged entity
       bundles anchored in Locust Bean Gum.281 As a customer explained: “IFF/N&B is in
       a privileged condition, since not many players will have the combined expertise of
       such entity. However many players are already structuring themselves within
       ecosystem network/open innovation, which means, partnering with other market
       players (non competitors) with different expertise to offer a holistic solution
       approach to consumers.”282
277    Minutes of call with a competitor held on 8 September 2020.
278    Q2a – Questionnaires to competitors, replies to questions D.B.9 and D.B.10.
279    Parties’ response to RFI no. 1.
280    Form CO, Table 64.
281    Q1 – Questionnaire to customers, replies to question E.B.12; and Q2a and Q2b – Questionnaires to
       competitors, replies to question E.B.9.
282    Q1 – Questionnaire to customers, replies to question E.B.12.
                                                        53
 ---pagebreak--- 5.4.5. MCC
(286) N&B has a significant position in MCC for food applications ([40-50]% worldwide
       and [30-40]% in the EEA) and in MCC for pharmaceutical applications ([30-40]%
       worldwide and [20-30]% in the EEA)283. Despite its leading position in MCC for
       food applications, N&B faces competition from other well-established players such
       as JRS, Mingtai, Roquette, Asahi. These suppliers are also present in the segment for
       pharmaceutical applications where, JRS takes the lead.284
(287) In the market investigation, a MCC competitor mentioned it would be more difficult
       to compete with the merged entity as they can leverage on its wide portfolio of
       products.285 However, already today other suppliers are able to provide similar
       bundles of MCC and flavours (Chr. Hansen) and fragrances (Firmenich)286. The
       Parties have also argued that MCC is a commoditised product readily available on
       the market, which makes it a less interesting product to bundle. Other competitors
       could therefore match the bundle, not giving the merged entity the opportunity to
       differentiate itself.287
5.4.6. Emulsifiers
(288) N&B has a significant position in Synthetic Emulsifiers ([30-40]% worldwide and in
       the EEA)288 where it faces competition from Kerry Group, Palsgaard, Corbion, BASF,
       Oleon, and Lon.289 N&B has also a significant position in De-oiled Lecithin
       Emulsifiers ([30-40]% worldwide and [20-30]% in the EEA)290 but faces
       competition from well-established suppliers such as ADM, Cargill and smaller
       players such as Stern, Lecico, Lasenor, Soya International.291 More importantly
       already today suppliers such as Kerry and AMD offer combinations of emulsifiers
       and flavours.292
(289) In the market investigation, no conglomerate concerns were voiced in relation to
       these products.
5.4.7. Enzymes
(290) N&B has a significant position in Enzymes for Carbohydrates Processing ([30-40]%
       worldwide and [30-40]% in the EEA).293 N&B faces however competition from the
       market leader Novozymes (c. [40-50]% worldwide and c. [40-50]% in the EEA), as
       well as from other players such as AB Enyzmes, Sensun, BASF.294 N&B has also a
       moderate position in Enzymes for Animal Feed ([20-30]% worldwide and [20-30]%
283    Form CO, Table 64.
284    Form CO, Annex 7.9
285    Q2a– Questionnaires to competitors, replies to question J.1.1
286    Form CO, para. 6.724.
287    Parties’ reply to RFI no. 1.
288    Form CO, Table 64.
289    Form CO, para. 6.697.
290    Form CO, Table 64.
291    Form CO, para. 6.698.
292    Form CO, paras. 6. 672 and 6.673.
293    Form CO, Table 64.
294    Form CO, para. 6.727.
                                                        54
 ---pagebreak---        in the EEA)295 but faces competitions from several other players such as DSM,
       Huvepharma, Adisseo, Abvista and BASF.
(291) More importantly, a majority of respondents the market investigation did not
       consider that the Transaction would give the merged entity the ability or incentive to
       leverage on these products to sell other products.296 As a competitor explained:
       “[t]he Transaction does not, in [the competitor’s] view, give the IFF/N&B entity any
       additional power [and] incentive to bundle products.297 Moreover, the majority of
       respondents also considered that there would be other sources of supply to match the
       merged entity bundle offers.298
5.4.8. Probiotics
(292) N&B has a significant position in Probiotics for Dietary Supplements ([30-40]%
       worldwide and [10-20]% in the EEA). However, N&B faces competition from
       established players such as Chr. Hansen, Lallemand, and Biogaia. In addition,
       already today, other suppliers have in their product portfolio probiotics and colours
       (Chr. Hansen), and probiotics colours and flavours (DSM).299.
(293) More importantly, no respondent to the market investigation voiced concerns and
       some competitors expressly referred to the unlikely success of a bundle strategy. One
       competitor added “we experience - and expect to continue to experience after the
       transaction - that customers source probiotic solutions primarily as a stand-alone
       product.”; another competitor explained “[m]ost customers will look for the best
       offerings by each supplier, and the bundling effect possible from the new entity is
       considered modest in [the competitor’s] view”.300
(294) In light of above, and in view of the results of the market investigation, the
       Commission concludes that the possibility of conglomerate effects arising from the
       Transaction does not result in serious doubts as to its compatibility with the internal
       market.
295    Form CO, para. and footnote 448
296    Q1 – Questionnaire to customers, replies to question H.B.7 and H.B.8; and Q2a and Q2b –
       Questionnaires to competitors, replies to questions H.B.4 and H.B.5
297    Q2a– Questionnaires to competitors, replies to questions H.B.4.1. H.B.5.1.
298    Q1 – Questionnaire to customers, replies to question H.B.9; and lies to Q2a and Q2b – Questionnaires
       to competitors, replies to question H.B.6
299    Form CO, para. 6.728.
300    Q2a – Questionnaires to competitors, replies to questions I.B.2 and I.B.3.
                                                         55
 ---pagebreak--- 6.    CONCLUSION
(295) For the above reasons, the European Commission has decided not to oppose the
      notified operation and to declare it compatible with the internal market and with the
      EEA Agreement. This Decision is adopted in application of Article 6(1)(b) of the
      Merger Regulation and Article 57 of the EEA Agreement.
                                                    For the Commission
                                                    (Signed)
                                                    Margrethe VESTAGER
                                                    Executive Vice-President
                                               56