CELEX: 32018M8950
Language: en
Date: 2018-12-11 00:00:00
Title: Commission Decision of 11/12/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8950 - BASF SE / BASF DOM / Clayton Dubilier & Rice, LLC) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                      Brussels, 11.12.2018
  In the published version of this decision, some                     C(2018) 8796
  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                             PUBLIC VERSION
  shown thus […]. Where possible the information
  omitted has been replaced by ranges of figures or a
  general description.
                                                                      To the notifying parties:
Subject:              Case M.8950 – BASF DOM Business/Solenis/JV
                      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 6 November 2018, the Commission received notification of a concentration
            pursuant to Article 4 of Regulation (EC) No 139/2004 (‘the Merger Regulation’)
            which would result from a proposed transaction by which BASF SE (“BASF”,
            Germany) and Clayton, Dubilier & Rice (“CD&R”, United States) intend to
            acquire joint control, within the meaning of Article 3(1)(b) and 3(4) of the
            Merger, over a newly formed Joint Venture that would combine Solenis, a
            CD&R portfolio company, with the global paper and water chemicals business
            of BASF SE (“BASF DOM”) (the “JV” or “the combined entity”)3.
(2)         In this Decision, BASF (including BASF DOM) and Solenis are collectively
            referred to as the 'Parties’ or “the Notifying Parties”.
1.        THE PARTIES
(3)         BASF is a publicly traded company and its business focuses on chemicals (e.g.
            petrochemicals and intermediates), performance products (e.g. dispersion and
1    OJ L 24, 29.1.2004, p. 1. With effect from 1 December 2009, the Treaty on the Functioning of the European
     Union ('TFEU') introduced certain changes, such as the replacement of 'Community' by 'Union' and 'common
     market' by 'internal market'. The terminology of the TFEU will be used throughout this Decision.
2    OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
3    Publication in the Official Journal of the European Union No C 414, 15.11.2018, p. 15.
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---      pigments), functional materials and solutions (e.g. construction chemicals and
     coatings), oil and gas, and agricultural solutions.
(4)  BASF DOM comprises all the assets constituting BASF’s global business in
     developing, manufacturing, marketing and selling wet-end paper chemicals and
     water treatment chemicals.
(5)  CD&R is a private equity investment group based in the US that originates,
     structures, and frequently acts as lead equity investor in management buyouts,
     strategic minority equity investments and other strategic investments.
(6)  Solenis, a CD&R portfolio company, is a specialty chemical company and
     provider of process and water solutions. Solenis’ product portfolio includes
     process aids, water treatment chemistries, functional additives and monitoring
     and control systems.
2.  THE OPERATION
(7)  The notified concentration consists of the acquisition of joint control over a
     newly formed JV by BASF and CD&R. Subsidiaries of Solenis would acquire
     BASF DOM, and a direct wholly owned subsidiary of BASF would acquire an
     approximate [CONFIDENTIAL] interest in “UK Topco”, a newly formed
     parent company of Solenis. Both BASF and CD&R would have veto rights that
     grant them the possibility to exercise decisive influence over UK Topco. This
     means that CD&R and BASF would acquire joint control over UK Topco,
     which would indirectly hold the combined Solenis and BASF DOM businesses
     (the “Transaction”).
(8)  Following the Transaction, the JV would perform all the functions of an
     autonomous undertaking on a lasting basis. In this respect, the Commission
     notes that, pre-Transaction, Solenis is already operating independently on the
     market, with an established market presence and sufficient resources. The JV
     would continue Solenis' existing business, combining it with BASF DOM, and
     would therefore continue to operate independently on the market, with sufficient
     resources and its own access to the market (with activities beyond one specific
     function of the parent companies). Moreover, the JV is expected to operate on a
     lasting basis as it is not incorporated for a specific period of time.
(9)  Therefore, the Transaction would result in a concentration within the meaning of
     Articles 3(1)(b) and 3(4) of the Merger Regulation.
                                               2
 ---pagebreak--- 3.      UNION DIMENSION
(10)      The undertakings concerned have a combined aggregate world-wide turnover of
          more than EUR 5 000 million4 (BASF EUR 64 475 million, CD&R EUR
          [CONFIDENTIAL] million). Each of them has a Union-wide turnover in excess
          of EUR 250 million (BASF EUR [CONFIDENTIAL] million, CD&R EUR
          [CONFIDENTIAL] million), but neither of them achieves more than two-thirds
          of their aggregate Union-wide turnover within one and the same Member State.
(11)      Therefore, the notified concentration has a Union dimension within the meaning
          of Article 1(2) of the Merger Regulation.
4.      MARKET DEFINITION
        4.1. End Chemicals with Paper and Pulp Applications
(12)      In previous decisions5, the Commission considered that paper and pulp
          chemicals could be categorised into (i) commodity chemicals, (ii) process
          chemicals, and (iii) functional chemicals:
         Commodity chemicals are non-specialty chemicals which are generally
             inexpensive and suitable for multiple different applications and industries;
         Process chemicals are used to improve the efficiency of and to provide
             ecological advantages to the production process itself, including preventing
             deposit and foam build-up, reducing the consumption of fresh water and
             energy and improving the drainage and/or reduction in fibre losses; and
         Functional chemicals are designed to impart various properties to the finished
             paper product ranging from enhanced optical properties and improved
             strength to enhanced printability, depending on the paper type produced,
             including paper for newspapers and magazines, printing paper, sanitary and
             household paper, packaging material and other specialised paper.
(13)      BASF DOM and Solenis are not involved in the production of commodity
          chemicals. These chemicals will therefore not be considered further for the
          purpose of this Decision.
        4.1.1. Process Chemicals
(14)      As described above, process chemicals are used to improve the paper and pulp
          making process.
(15)      In Clayton Dubilier & Rice/Ashland Water Technologies and CIBA/Raisio
          Chemicals, the Commission considered that process chemicals could be further
          sub-segmented into the following individual markets:6 (a) Defoamers, (b)
4  Turnover calculated in accordance with Article 5 of the Merger Regulation.
5  See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
   paras. 7-8 and Case M.5327 - Ashland/Hercules, Commission decision of 6 October 2008, para. 13.
6  See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
   para. 9 and Case M.3424 - CIBA/Raisio Chemicals, Commission decision of 26 May 2004, para. 8.
                                                            3
 ---pagebreak---            Contaminant Control Agents (“CC”), (c) Retention and Drainage agents
           (“RDA”), and (d) Biocides and slimicides (“BSA”).7
                         (a) Defoamers
(16)       Defoamers are chemical agents that remove, prevent, and block foam in
           manufacturing processes in all water-reliant processing industries. The build-up
           of foam can have a significant adverse effect on production processes and is a
           manufacturing hazard in a wide range of industries relying on liquids either as
           part of the production process or in the paper product itself. Defoamers can be
           based on several different chemicals, including silicone and silica, ethylene
           oxide/propylene oxide (“EO/PO”) surfactants, polyethylene glycol (“PEG”) and
           fatty acids and alcohols.
(17)       As regards product market definition, the Commission previously considered the
           defoamers market in Ashland/Hercules and in Clayton […]* & Rice/Ashland
           Water Technologies,8 but ultimately left open the question of whether the
           product market was limited to the defoamers supplied to the pulp and paper
           industry or whether the product market should include all defoamers.
(18)       The Parties submit that, due to demand-side and supply-side substitutability, the
           market should be defined broader than the supply of defoamers to the paper and
           pulp industry. According to the Parties, there is no difference between the
           chemistries in the defoamers used in the paper and pulp industries and those
           used by other industries. The Parties also submit that Solenis, and the majority
           of its main competitors, supply defoamers to all industries.
(19)       The Parties add that no separate markets should be defined for defoamers based
           on the defoamer chemistry. Defoamers of different chemistry are largely used
           interchangeably across industries.
(20)       As for geographic market definition, the Commission considered in previous
           decisions that the geographic market for defoamers is at least EEA-wide, but
           ultimately left the precise geographic market definition open9. The Parties
           submit that the geographic market is at least EEA-wide in scope. According to
           the Parties, customers have no national preferences and the commonality of
           products across different countries is supported by EU-wide standards with
           regard to environmental and production processes.
(21)       In any event, for the purposes of this Decision, it can be left open whether
           defoamers for the paper and pulp industry constitute a relevant product market
           separate from defoamers used in other industries, and whether there are separate
           product markets for defoamers based on their chemical components, since no
* Should read: “Dubilier”
7 In a past decision, the Commission considered BSA as a separate relevant product market (although the precise
    market delineation was ultimately left open). See Case M.5327 – Ashland/Hercules, Commission decision of 6
    October 2008, paras. 23-26. BASF DOM is not active in BSA. These chemicals will therefore not be considered
    further for the purpose of this Decision.
8 See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
    paras. 10 and 12 and Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, paras. 19-22.
9 See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
    paras. 11 and 12 and Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, para. 46.
                                                           4
 ---pagebreak---           serious doubts as to the compatibility of the notified concentration with the
          internal market arise under any plausible product market definition. The exact
          geographic scope of the market for defoamers can also be left open, since no
          serious doubts as to the compatibility of the notified concentration with the
          internal market arise under any plausible product market definition.
                      (b) Contaminant Control Agents ("CC")
(22)      CC are used to prevent particle contamination in manufacturing processes. They
          remove contaminants altogether or are used to break them down into smaller
          particles which can be washed away easily or scraped away in a next production
          step. The paper and pulp industry uses CC to eradicate contaminants that can
          have a negative impact on both the machinery and the end-product.
(23)      According to the Parties, the main types of CC are (i) fixation agents, (ii)
          dispersion agents and (iii) adsorption agents. The Parties submit that the various
          types of CC all serve the same purpose. Each type of CC utilises a different
          mechanism to solve the same underlying problem. In Clayton Dubilier &
          Rice/Ashland Water Technologies, the Commission considered all types of CC
          to belong to a single relevant product market including fixation agents,
          dispersion agents and adsorption agents but eventually left open the question of
          precise market definition.10 In BASF/CIBA, the Commission examined fixation
          agents (or fixatives) as a distinct relevant product market but ultimately left
          open the relevant product market definition.11
(24)      With regard to geographic market definition, the Commission in its past
          decisional practice considered the market for the supply of CC to be EEA-wide,
          but ultimately left the issue open.12 The Commission also considered the market
          for fixation agents to be at least EEA-wide but eventually left open the precise
          geographic market definition. The Parties submit that the relevant markets are
          EEA-wide, reflective of trans-border production and supply, competition and a
          customer base that is dispersed across the EEA.
(25)      In any event, for the purpose of this Decision, it can be left open whether the
          relevant product market includes all CC or whether there is a distinct relevant
          market for fixation agents, since no serious doubts arise under any plausible
          product market definition. The exact geographic scope of the market can also be
          left open, since no serious doubts arise under any plausible geographic market
          definition.
                      (c) Retention and Drainage Aids ("RDA")
(26)      RDA are added to the pulp at the wet end of the paper and pulp making process,
          during sheet formation and while promoting the drainage of water. Poor
          retention and/or drainage creates several problems with the production process
          (e.g., higher consumption of chemicals) and the quality of the final product.
10 See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
   para. 10.
11 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, paras. 64-66.
12 See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
   paras. 11-12 and Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, para. 46.
                                                        5
 ---pagebreak---          RDA compensate the negative anionic surface charges on the fillers, fibres and
         fines by forming molecular bridges between two particles to which they are
         absorbed. In so doing, RDA flocculate the fillers, fibres and fines into the pulp
         mat during sheet formation to prevent them from being drained away.
(27)     The Commission considered in previous decisions all RDA to belong to a single
         product market,13 but also considered a sub-segmentation of RDA into (i) RDA
         based on polymers such as PAM, PEI and PVAm, (ii) RDA based on
         dual/multicomponent systems and (iii) RDA including inorganic micro particles
         such as silica or bentonites. The Commission ultimately left the product market
         definition open.14
(28)     The Parties submitted that there is one single relevant market for RDA which
         must not be further sub-segmented. There is a high degree of substitutability
         between the different types of RDA and customers easily switch between
         retention and drainage aid chemical suppliers. In any event, the Parties
         explained that all RDA are based on polymers and that dual/multi-component
         systems can also include inorganic micro particles. On that basis, the Parties
         submitted that the tripartite classification of RDA that the Commission
         considered in BASF/CIBA should be understood as follows: (i) RDA based on a
         single polymer such as PAM, PEI, and PVAm (single-polymer RDA); (ii) RDA
         based on more than one polymers but excluding micro particles (multi-polymer
         RDA); and (iii) RDA including micro particles (micro-particle RDA). However,
         according to the Parties, any such segmentation “would be artificial and would
         not properly reflect demand”.15
(29)     As for geographic market definition, the Commission in its past decisional
         practice considered the geographic market for RDA to be at least EEA-wide, but
         ultimately left the product market definition open16. The Parties agree that the
         geographic market definition is at least EEA-wide.
(30)     In any event, for the purposes of this Decision, it can be left open whether the
         relevant product market includes all RDA or whether there are distinct relevant
         product markets for (i) single-polymer RDA; (ii) multi-polymer RDA; and (iii)
         micro particle RDA since no serious doubts as to the compatibility of the
         notified concentration with the internal market arise under any plausible product
         market definition. The exact geographic scope of the market for RDA can also
         be left open, since no serious doubts as to the compatibility of the notified
         concentration with the internal market arise under any plausible geographic
         market definition.
       4.1.2. Functional Chemicals
(31)     Functional chemicals are used to determine the specific properties of the end-
         product. Property alterations include increasing tensile strength, improving
         water resistance and varying colour and brightness. In its past decisional
13 See Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, paras. 16-18.
14 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, paras. 60-63.
15 See Form CO, para. 239.
16 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, para. 72 and Case M.5327 –
   Ashland/Hercules, Commission decision of 6 October 2008, para. 46.
                                                         6
 ---pagebreak---            practice, the Commission considered that the following categories of functional
           chemicals could be considered as separate markets: (i) Dry […]* Agents
           (“DSA”), (ii) Wet […]* Agents (“WSA”) and (iii) Sizing Agents17.
                         (a) Dry Strength Agents ("DSA")
(32)       DSA improve the bonds between fibres of paper to impart additional strength.
           DSA are specifically […]** on improving the general strength of paper and
           board in the dry state, in order to obtain the same strength at lower weight and
           generally improve the mechanical properties of the finished product. There are
           two types of DSA: (i) natural starch-based DSA and (ii) synthetic DSA,
           including products based on gPAM, PVAm, PAE resins, cellulose enzymes and
           carboxymethyl cellulose ("CMC").
(33)       Regarding product market definition, the Parties submit that the market covers
           all DSA used in the paper and pulp industry, namely natural starch-based DSA
           and synthetic DSA. The Parties argue that further segmenting DSA does not
           reflect the current and future demand patterns. According to the Parties,
           customers regularly combine natural and synthetic DSA in their processes and
           both types of DSA are interchangeable.
(34)       In BASF/CIBA18, the Commission considered natural starch-based DSA and
           synthetic DSA constitute two separate relevant product markets. The market
           investigation in the present case confirmed this. The majority of both
           informative respondents stated that starch-based DSA and synthetic DSA are not
           substitutable with each other.19
(35)       The Commission also considered whether the relevant market for synthetic DSA
           should be further sub-segmented based on the chemistry of each DSA (i.e.,
           whether there should be distinct relevant markets for gPAM-based DSA,
           PVAm-based DSA, etc). The market investigation showed that there are no
           distinct relevant markets for synthetic DSA of different chemistry. Customers
           and competitors indicated that DSA are purchased on the basis of their
           functionality – not their chemistry.20 One customer added that for dry strength, it
           often purchases packages of products with different chemistries.21
(36)       As for geographic market definition, the Commission in a previous decision
           considered the market for synthetic DSA to be at least EEA-wide, but ultimately
* Should read: “strength”
** Should read: “focused”
17 See Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, para. 15.
18 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, para. 59. In Ashland/Hercules, the
    Commission considered the product market for DSA should include all polymers, whether natural or synthetic,
    but ultimately left the issue open (Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008,
    paras. 30-32).
19 See Q14 of questionnaire Q1 to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products.
20 See Doc ID 672, Minutes from call with competitor, 22 November 2018, paras. 11-12, Doc ID 663, Minutes from
    call with competitor, 22 November 2018, para. 7, Doc ID 660, Minutes from call with customer, 21 November
    2018, para. 6, Doc ID 666, Minutes from call with competitor, 21 November 2018, para. 6, Doc ID 654, Minutes
    from call with customer, 21 November 2018, para. 4, Doc ID 651, Minutes from call with customer, 21 November
    2018, paras. 5-6.
21 See Doc ID 657, Minutes from call with customer, 21 November 2018, para. 8.
                                                           7
 ---pagebreak---          left the issue open.22 The Parties submit that the market for DSA is at least EEA-
         wide, referring to the absence of national preferences of customers, low
         transport costs and comparable prices throughout the EEA.
(37)     The market investigation in the present case confirmed that the market for
         synthetic DSA is likely EEA-wide. The vast majority of informative customer
         respondents sourced synthetic DSA solely from the EEA irrespective of the
         chemistry included in the synthetic DSA.23 The majority of competitors added
         that they do not compete with players located outside the EEA in the supply of
         synthetic DSA.24
(38)     For the purposes of this Decision, the Commission concludes that the relevant
         product market includes all synthetic DSA. The exact geographic scope of the
         market for synthetic DSA can be left open, since no serious doubts as to the
         compatibility of the notified concentration with the internal market arise under
         any plausible geographic market definition.
                      (b) Wet Strength Agents ("WSA")
(39)     WSA chemicals improve the properties of paper in both wet and dry state by
         creating stronger permanent molecular bonds. The aim is to improve the tensile
         strength of the paper product when wet to minimise rupture during use (e.g.
         kitchen paper towelling). Another application for WSA is packaging and
         paperboard (e.g. paper sacks, cardboard, fruit trays). WSA are based on different
         types of resins including PAE resins; glyoxal resins; amino resins; and PVAm
         resins.
(40)     In BASF/CIBA, the Commission stated that WSA must be distinguished from
         DSA.25 But it has not assessed in detail the relevant product market definition.
         The Parties submit that WSA constitute a separate relevant product market
         encompassing all different types of resins.
(41)     As regards the geographic market definition, the Parties submit that the market
         for WSA is EEA-wide because market characteristics; demand; and regulation
         for WSA is similar across the EEA.
(42)     In any event, for the purposes of this Decision, it can be left open whether there
         is one relevant product market including all WSA or whether there are distinct
         relevant product markets for PAE resin-based WSA; glyoxal-based resin WSA;
         amino resin-based WSA; and PVAm resin-based WSA, since no serious doubts
         as to the compatibility of the notified concentration with the internal market
         arise under any plausible product market definition. The exact geographic scope
         of the market can be left open, since no serious doubts as to the compatibility of
         the notified concentration with the internal market arise under any plausible
         geographic market definition.
22 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, paras. 72-73.
23 See Q9 of questionnaire Q1 to customers of end chemical products.
24 See Q12 of questionnaire Q2 to competitors in end chemical products.
25 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, para. 56.
                                                           8
 ---pagebreak---                        (c) Sizing Agents
(43)      Sizing agents are used in the paper and pulp industry during paper
          manufacturing to provide resistance to liquid penetration, control the spread of
          inks and impart other performance-related properties (i.e abrasiveness,
          creasibility, finish, printability, smoothness and surface bond strength, while
          decreasing surface porosity and fuzzing).
(44)      There are two types of sizing agents, depending on where in the paper-making
          process they are added: (i) internal sizing agents and (ii) surface sizing agents.
          The former are mixed into the pulp slurry before sheet formation on the
          machine, while the latter are applied after sheet formation at the size press.
(45)      As regards relevant product market definition, the Commission acknowledged in
          previous decisions that sizing agents may be segmented into internal sizing
          agents and surface sizing agents, and that within internal sizing agents a further
          distinction could be made based on the chemical components.26 The
          Commission ultimately left the issue open. The Parties consider that all sizing
          agents belong to one single relevant product market. However, they ultimately
          conclude that the issue can be left open.
(46)      As regards the geographic market definition, the Commission in past decisions
          considered that the market for sizing agents is at least EEA-wide but ultimately
          left the issue open.27 The Parties agree that the market for sizing agents is EEA-
          wide in scope, because product prices are comparable within the EEA and most
          customers and suppliers operate across the EEA.
(47)      In any event, for the purposes of this Decision, it can be left open whether there
          is one single market including all sizing agents or whether there are separate
          product markets for surface sizing agents and internal sizing agents or whether
          there are separate product markets within internal sizing agents based on product
          chemistry, since no serious doubts arise under any plausible product market
          definition. The exact geographic scope of the market for sizing agents can also
          be left open, since no serious doubts arise under any plausible geographic
          market definition.
        4.2. End Chemicals with Water Treatment Applications
(48)      Water treatment is the process of removing impurities that are present in the
          water using either mechanical or chemical processes to make it more suitable for
          use for either industrial or human consumption.
(49)      According to the Parties, the relevant product market includes all water
          treatment chemicals. The Parties submit in this respect that, even though there
          are certain differences between the municipal and industrial water treatment,
26 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, paras. 67-69, Case M.3424 -
   CIBA/Raisio Chemicals, Commission decision of 26 May 2004, para. 11, Case M.1304 - Hercules/BetzDearborn,
   Commission decision of 5 October 1998, paras. 9-13, and Case M.390 - Akzo/Nobel Industries, Commission
   decision of 10 January 1994, paras. 28-31.
27 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, para. 72, Case M.3424 - CIBA/Raisio
   Chemicals, Commission decision of 26 May 2004, para. 13, Case M.1304 - Hercules/BetzDearborn, Commission
   decision of 5 October 1998, para. 19, and Case M.390 - Akzo/Nobel Industries, Commission decision of 10
   January 1994, paras. 30-31.
                                                         9
 ---pagebreak---           there are also many similarities between the chemistries used. However, the
          Parties submit that, for the purpose of this Decision, the water treatment
          chemicals market can be sub-segmented into: (i) chemicals for municipal water
          treatment and (ii) chemicals for industrial water treatment could be considered
          as relevant.
(50)      In its past practice, the Commission considered water treatment chemicals as
          forming a separate relevant product market. The Commission also considered
          that there could be distinct relevant product markets for (i) chemicals for
          industrial water treatment and (ii) chemicals for municipal water treatment. But
          ultimately the issue was left open.28
(51)      In previous decisions, the Commission has considered the markets for (i)
          chemicals for industrial water treatment and (ii) chemicals for municipal water
          treatment to be likely EEA-wide in scope. The exact market definition was
          however left open.29 The Parties agree that these relevant markets are at least
          EEA-wide.
        4.2.1. Industrial Water Treatment Chemicals
(52)      Within chemicals for industrial water treatment, the Commission considered in
          past decisions distinct relevant markets for (i) chemicals for water cooling and
          boiler applications and (ii) chemicals for influent and effluent water treatment30.
          The exact product market definition was ultimately left open.
(53)      Chemicals for water cooling and boiler applications aim at ensuring safe and
          efficient operations by preventing corrosion and eliminating scale and
          deposition. In previous decisions, the Commission has left the exact scope of the
          product market for chemicals for water cooling and boiler applications open31.
          The Parties submit that the exact product market can be left open as the
          Transaction does not raise concerns under any plausible product market
          definition.
(54)      Chemicals for influent and effluent water treatment are supplied for the
          treatment of influent water, that is water that goes into an industrial plant and
          which is used in the production process and effluent water, i.e. waste water that
          flows from an industrial plant. In its previous decisions, the Commission
          considered whether to distinguish the market for influent and water treatment
          chemicals into coagulants and flocculants or based on the physical forms in
          which chemicals for influent and effluent water treatment are sold. 32 The
          Commission ultimately left the exact product market definition open. The
28 See Case M.8452 - Suez/GE Water and Process Technologies, Commission decision of 19 July 2017, paras. 44-
   47.
29 See Case M.8452 - Suez/GE Water and Process Technologies, Commission decision of 19 July 2017, para. 48 and
   Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014, para.
   19.
30 See Case M.8452 - Suez/GE Water and Process Technologies, Commission decision of 19 July 2017, para. 45 and
   Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014, para.
   20.
31 See Case M.8452 - Suez/GE Water and Process Technologies, Commission decision of 19 July 2017, para. 47.
32 See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
   paras. 21-23 and Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, paras. 36-37.
                                                        10
 ---pagebreak---           Parties submit that the exact product market can be left open as the Transaction
          does not raise concerns under any plausible product market definition.
(55)      In past decisions, the Commission considered whether the above relevant
          markets are EEA-wide in scope. The Commission ultimately left the exact
          geographic market definition open.33 The Parties agree that these relevant
          markets are at least EEA-wide.
        4.2.2. Municipal Water Treatment Chemicals
(56)      In previous decisions, the Commission considered whether the market for
          municipal water treatment chemicals should be further segmented into (i)
          municipal wastewater treatment chemicals and (ii) chemicals for treatment for
          potable water. However, the Commission ultimately left the exact product
          market definition open34. The Parties submit that the exact product market can
          be left open as the Transaction does not raise concerns under any plausible
          product market definition.
(57)      In past decisions, the Commission considered whether the above relevant
          markets are EEA-wide in scope. The Commission ultimately left the exact
          geographic market definition open.35 The Parties agree that these relevant
          markets are at least EEA-wide.
        4.2.3. Conclusion
(58)      For the purpose of this Decision, the Commission considers that it can be left
          open whether there is a relevant market for all water treatment chemicals or
          whether there are separate relevant markets for chemicals for industrial water
          treatment and chemicals for municipal water treatment, since no serious doubts
          as to the compatibility of the notified concentration with the internal market
          arise under any plausible product market definition.
(59)      The Commission also considers that the question whether within industrial
          water treatment chemicals, distinct relevant markets can be defined for (i)
          chemicals for water cooling and boiler applications and (ii) chemicals for
          influent and effluent water treatment can be left open, since no serious doubts as
          to the compatibility of the notified concentration with the internal market arise
          under any plausible product market definition.
(60)      Similarly, the Commission also considers that the question whether within
          municipal water treatment chemicals, distinct relevant markets should be
          defined for (i) municipal wastewater treatment chemicals and (ii) potable water
          treatment chemicals can be left open, since no serious doubts as to the
          compatibility of the notified concentration with the internal market arise under
          any plausible product market definition.
33 See Case M.8452 - Suez/GE Water and Process Technologies, Commission decision of 19 July 2017, paras. 48-49
   and Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, para. 46.
34 See Case M.7207 - Clayton Dubilier & Rice/Ashland Water Technologies, Commission decision of 6 June 2014,
   paras. 17 and 19.
35 See Case M.8452 - Suez/GE Water and Process Technologies, Commission decision of 19 July 2017, paras. 48-49
   and Case M.5327 – Ashland/Hercules, Commission decision of 6 October 2008, para. 46.
                                                       11
 ---pagebreak--- (61)      The exact geographic scope of the market can also be left open, since no serious
          doubts as to the compatibility of the notified concentration with the internal
          market arise under any plausible geographic market definition.
        4.3. End Chemicals Divided by Chemistry
(62)      End chemicals with different functionalities (e.g., DSA or RDA) are often based
          on the same chemistry. Moreover, a single end chemical product can have
          several functionalities, if its chemistry so allows.
(63)      The Commission considered whether separate relevant markets can be
          delineated for end-chemicals with paper and pulp applications on the basis of
          the product's chemistry.
        4.3.1. PVAm-based chemicals
(64)      The polymer polyvinylamine ("PVAm") can be used in functional chemicals to
          increase the dry strength of the paper product. It can also be used in process
          chemicals for retention and drainage during the paper and pulp making process.
(65)      The Parties submitted that there is no separate relevant market for PVAm-based
          chemicals. Relevant markets in end chemicals for paper and pulp applications
          should be defined based on functionality, i.e., the parameter that is most relevant
          to customers. In more detail, according to the Parties:36
         Each of the effects for which PVAm is used in papermaking can be, and is,
             successfully achieved by other chemistries (e.g. cationic starches, cationic
             PAM, gPAM, amphoPAM) or through process modifications (e.g. different
             fibre mix, or small modifications to the paper machine). There is no specific
             functionality or application requiring PVAm-based chemicals;
         From a demand-side perspective, customers (i.e. paper mills) do not purchase
             end chemicals based on their chemistry. Rather, they ask suppliers to present
             offers for a dry strength programme or a retention & drainage programme;
         From a supply-side perspective, end chemicals for paper and pulp applications
             are not marketed with a specific reference to their chemistry. These chemicals
             are typically sold under the supplier's brand (e.g., BASF DOM's PVAm-based
             product is called Xelorex) and no specific reference is made to the product's
             chemistry. Marketing of end chemicals for paper and pulp applications
             focuses on explaining the properties of the product to customers but no the
             underlying chemistry;
         There is no grade of paper which requires or which lists PVAm as its
             component. Industry guidance37 summarizing the requirements for different
             paper grades refers to the functionality of the paper and not its components,
             e.g., PVAm; and
36 See Notifying Parties' submission of 22 November 2018, "Competitive Assessment of PVAm Supply Chain",
   paras. 3 and 20-31.
37 E.g., Harmonized Codes for different paper grades published by the Confederation of European Paper Industries
   ("CEPI"). See Notifying Parties' submission of 22 November 2018, "Competitive Assessment of PVAm Supply
   Chain", Annex 1.
                                                          12
 ---pagebreak---          None of the main market studies on chemicals for paper and pulp applications
             suggests separate relevant markets based on the chemistry of the products.
(66)      The market investigation confirmed the position of the Notifying Parties that no
          separate relevant market should be defined for PVAm-based end chemicals in
          the paper and pulp sector. In more detail:
         The vast majority of informative customer respondents explained that end
             chemicals for paper and pulp applications are purchased on the basis of their
             functionality – not their chemistry.38 Customers added that for a given
             functionality (e.g., dry strength) they often purchase packages of products
             with different chemistries.39 Several customers acknowledged that they did
             not know what the chemistry in the products purchased for retention and
             drainage or for dry strength is. As one customer put it, "suppliers make
             available safety data sheets in the course of the product trials, but these
             sheets are not always clear on the active ingredients that the product
             combines";40
         Customers trial gPAM-based or cPAM-based chemicals when they seek to
             switch away from PVAm-based chemicals. Several customers who consider
             switching away from a PVAm-based product have completed lab trials or
             engaged in commercial discussions with suppliers of gPAM-based or cPAM-
             based chemicals.41 According to one of the respondents, "PVAm-based
             products are substitutable with products containing different chemistries, as
             long as they all have the same functionality. [We] would consider replacing
             [a PVAm-based product] with a gPAM-based or a cPAM-based product used
             for retention and drainage and dry strength… PVAm is one chemistry among
             others";42
         Customers use PVAm-based chemicals typically only in one of their plants
             while they use products of a different chemistry to achieve the same result
             (e.g., increased dry strength) in other plants. Yet, customers explained that the
             paper product must be of a consistent quality irrespective of the plant where it
             was manufactured and of the chemistries used. This indicates that customers
             do not consider PVAm-based chemicals as essential to impart specific
             qualities to the paper product;
         Market respondents also suggested a supplier of end chemicals with paper and
             pulp applications can easily start supplying PVAm-based chemicals. The cost
             of the reactors required to manufacture PVAm is limited. One of the
             competitors of the Notifying Parties, who manufactures PVAm-based
             chemicals in the EEA, stated that it has spare capacity and that it could make
38 See Doc ID 672, Minutes from call with competitor, 22 November 2018, paras. 11-12, Doc ID 663, Minutes from
   call with competitor, 22 November 2018, para. 7, Doc ID 660, Minutes from call with customer, 21 November
   2018, para. 6, Doc ID 666, Minutes from call with competitor, 21 November 2018, para. 6, Doc ID 654, Minutes
   from call with customer, 21 November 2018, para. 4, Doc ID 651, Minutes from call with customer, 21 November
   2018, paras. 5-6.
39 Doc ID 657, Minutes from call with customer, 21 November 2018, para. 8.
40 Doc ID 657, Minutes from call with customer, 21 November 2018, para. 7.
41 Doc ID 660, Minutes from call with customer, 21 November 2018, para. 4, Doc ID 669, Minutes from call with
   customer, 23 November 2018, para. 4, Doc ID 648, Minutes from call with customer, 21 November 2018, para. 5.
42 Doc ID 660, Minutes from call with customer, 21 November 2018, paras 6 and 9.
                                                          13
 ---pagebreak---              available PVAm-based chemicals for resale in the EEA to any supplier who
             would require so.43
(67)     Based on the results of the market investigation, the Commission concludes that
         there is no distinct relevant product market for PVAm-based chemicals with
         paper and pulp applications.
       4.3.2. PAM-based Chemicals and cPAM-based Chemicals
(68)     Polyacrylamide (“PAM”) is a water soluble polymer which can be anionic
         ("aPAM"), cationic ("cPAM") or non-ionic. It has a medium to high molecular
         weight and is used to flocculate solids in solutions containing organic and
         inorganic chemical substances. PAM is produced as liquid, powder or emulsion.
         It is mainly used as an input chemical in the manufacture of waste water
         products or water treatment products, for paper manufacturing and for mineral
         processing. In the paper and pulp sector, cPAM is used predominantly for
         retention and drainage but also for contaminant control purposes and to impart
         wet strength to the paper product. Other types of PAM (e.g., aPAM) can be used
         to impart dry strength to the paper product.
(69)     The Parties submitted that customers (i.e. paper mills) do not purchase end
         chemicals based on their chemistry. Rather, they ask suppliers to present offers
         for a programme to achieve a specific functionality, e.g., retention and drainage.
         The Parties added that in each product market where the Parties offer PAM-
         based or (more specifically) cPAM-based products, usually several alternative
         formulations are available on the basis of different chemistries and they all
         compete with each other if they can achieve comparable results.44
(70)     The market investigation did not provide clear indications whether PAM-based
         or cPAM-based chemicals constitute distinct relevant product markets. The
         majority of informative customer respondents stated that cPAM-based
         chemicals are not substitutable with products based on other chemistries in the
         EEA for the paper and pulp sector.45 However, customers also insisted that "it is
         possible to get similar effects with different basic chemicals".46 Some customers
         acknowledged that they do not distinguish end chemicals based on chemistry but
         only based on functionality.47
(71)     For the purposes of this Decision, it can be left open whether PAM-based
         chemicals constitute a relevant product market separate from products based on
         other chemistries. No serious doubts as to the compatibility of the notified
         concentration with the internal market arise under any plausible product market
         definition (separate relevant product market for PAM-based chemicals or
         relevant product markets based on functionality as described in paragraphs (12)-
         (47) above).
43 See Q26.1 of questionnaire Q2 to competitors in end chemical products.
44 Reply of the Notifying Parties to RFI 6, 5 December 2018, paras. 2-5 and 11-12.
45 See Q52 to questionnaire Q1 to customers of end chemical products.
46 See Q52 to questionnaire Q1 to customers of end chemical products, question 52.
47 See Q51 to questionnaire Q1 to customers of end chemical products, question 51.
                                                           14
 ---pagebreak--- (72)     It can also be left open whether cPAM-based chemicals constitute a relevant
         product market separate from products based on other chemistries. No serious
         doubts as to the compatibility of the notified concentration with the internal
         market arise under any plausible product market definition (separate relevant
         product market for cPAM-based chemicals or relevant product markets based on
         functionality as described in paragraphs (12)-(47) above).
(73)     The Commission previously considered the geographic scope of PAM to be
         EEA-wide, however left the precise geographic definition open.48 The Parties
         did not contest that the geographic market for PAM-based chemicals, including
         cPAM-based chemicals, is at least EEA-wide in scope. In any event, the precise
         definition can be left open, since no serious doubts as to the compatibility of the
         notified concentration with the internal market arise under any plausible
         geographic market definition.
       4.4. Raw and Intermediate Chemicals
       4.4.1. Dimethylaminopropylamine ("DMAPA")
(74)     DMAPA is a colourless liquid used as an intermediate commodity chemical.
         DMAPA is used in the manufacture of betaines which are used as co-surfactants
         in personal care products like shampoo and body wash. DMAPA is also used in
         various other applications, such as the production of, inter alia, APTAC and
         APTAC Q, which Solenis uses to produce, cPAM.
(75)     As regards product market definition, in BASF/Cognis, the Commission found
         that DMAPA constitutes a separate product market.49
(76)     According to the Parties, DMA3 (ADAME) and DMA3Q (ADAMEQ) could be
         used as an alternative for the production of cPAM. The Parties therefore submit
         that the relevant upstream market should be defined widely to include both
         alternatives for the production of cPAM. However, the Parties also submit the
         relevant product market can be left open in the absence of vertical concerns.
(77)     As regards geographic market definition, in a previous decision, the
         Commission found that the market for DMAPA was at least EEA-wide, but
         ultimately left open the question whether the exact geographic scope was EEA-
         wide or worldwide50.
(78)     The Parties submit that the geographic scope of the market should be
         worldwide, based on the fact that most DMAPA producers either have a single
         production plant or two production plants worldwide. The Parties further argue
         that exports from the EEA are substantial, i.e. [20-30]% of all EEA DMAPA
         production in 2017.
(79)     For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
48 See Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009, paras. 41-42.
49 Case M.5927 – BASF/Cognis, Commission decision of 30 November 2010.
50 Case M.5927 – BASF/Cognis, Commission decision of 30 November 2010.
                                                       15
 ---pagebreak---          internal market even on the narrowest possible market definition, that is to say
         the supply of DMAPA in the EEA.
       4.4.2. Diethylenetriamine ("DETA")
(80)     DETA is used mainly as a building block for WSA in the paper industry, in
         chelating agent synthesis and for detergents. DETA is also used as an
         intermediate in corrosion inhibitors, polyamide resins, asphalt additives and
         epoxy hardener systems. Solenis purchases DETA to produce DSA, WSA and
         sizing agents.
(81)     As regards product market definition, in previous decisions, the Commission
         identified DETA as a sub-segment of the product market for ethylene amines
         (commodity chemical intermediate products derived from ethylene). In Dow
         Chemical / Union Carbide51, the Commission considered different types of
         ethylene amines (i.e. DETA, AEEA, TETA, TEPA and AEP) as separate
         product markets, but ultimately left the product market definition open. In
         Huntsman/CIBA TE business52, the Commission confirmed each type of
         ethylene amines is likely to form a separate product market, leaving the exact
         market definition open.
(82)     The Parties do not contest the Commission’s precedents to consider DETA as a
         separate product market, but submit that the exact product market definition can
         be left open.
(83)     As regards geographic market definition, in previous decisions53, the
         Commission considered the market for ethylene amines (including DETA) to be
         worldwide in scope, but ultimately left the exact market open.
(84)     The Parties submit that the geographic market for DETA is worldwide. The
         Parties argue that transport costs are low and there are no safety or other
         restrictions to transportation. According to the results of the market
         investigation, the majority of competitors of the Parties in the supply of DETA
         consider they compete with suppliers from outside the EEA54.
(85)     For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of DETA in the EEA.
       4.4.3. Amino ethyl ethanol amine ("AEEA")
(86)     AEEA is a commodity chemical intermediate product, derived from ethylene.
         AEEA is used for various applications, including epoxy hardeners, fuel
         additives, chelating agents, surfactants and fabric softeners among others. In
51 Case M.1671 – Dow Chemical/Union Carbide, Commission decision of 3 May 2000.
52 Case M.4179 – Huntsman/CIBA TE Business, Commission decision of 30 June 2006.
53 Case M.1671 – Dow Chemical/Union Carbide, Commission decision of 3 May 2000, and Case M.4179 –
   Huntsman/CIBA TE Business, Commission decision of 30 June 2006.
54 Q.10 of Q3 – Questionnaire to suppliers of and competitors in raw materials.
                                                           16
 ---pagebreak---          paper and water chemicals, AEE is used to produce CC, DSA, RDA and water
         treatment chemicals.
(87)     As regards product market definition, as stated in paragraph (81), the
         Commission identified AEEA as a sub-segment of ethylene amines in DOW
         Chemical / Union Carbide55, but ultimately left the product market definition
         open. In BASF/Cognis56, the Commission confirmed that AEEA is likely to be a
         separate product market, but kept the exact market definition open.
(88)     The Parties submit that AEEA forms a single product market, as it is a
         homogenous product, which differs from other ethylene amines.
(89)     As regards geographic market definition, in previous decisions, the Commission
         considered the geographic market for AEEA to be likely worldwide, but
         ultimately left the exact geographic scope of the market open.
(90)     The Parties submit that the market should be considered as worldwide since
         substantial amounts of products are imported and exported from and to the EEA,
         transportation costs are low and there are no significant barriers to import and
         export AEEA.
(91)     For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of AEEA in the EEA.
       4.4.4. Adipic Acid (“AA”)
(92)     AA has multiple downstream applications, including in the automotive, textiles
         and electronics industries. The foremost application of AA is to produce nylon
         for the automotive industry. Paper and water chemicals use AA to a limited
         extend as an input for the production of cPAM and PAE resins for use as WSA
         and DSA. Solenis purchases its AA from BASF for use as WSA.
(93)     As regards product market definition, in Solvay/Rhodia57, the Commission
         considered AA as a separate product market, but ultimately left the exact
         product market definition open. More specifically, the Commission left open the
         question whether AA and hexamethylene diamine (HMD) belong to the product
         market.
(94)     The Parties submit that AA constitutes the relevant product market upstream,
         taking into account that HMD cannot be considered as an alternative to AA.
(95)     As regards geographic market definition, the Commission considered, in a
         previous decision58, the market for AA and HMD to be at least EEA wide. The
         Parties submit that the exact geographic scope of the market can be left open.
         According to the results of the market investigation, suppliers of AA consider
55 Case M.1671 - Dow Chemical/Union Carbide, Commission decision of 3 May 2000.
56 Case M.5927 – BASF/Cognis, Commission decision of 30 November 2010.
57 Case M.6230 – Solvay/Rhodia, Commission decision of 5 August 2011.
58 Case M.6230 – Solvay/Rhodia, Commission decision of 5 August 2011.
                                                        17
 ---pagebreak---          themselves to be in competition with suppliers of AA located outside the EEA,
         irrespective of the final application of the AA supplied.59 However, the majority
         of customers indicated that they only purchase AA from suppliers located in the
         EEA, due to the need for consistent quality and security of supply. The results of
         the market investigation do not change based on the final application of AA60.
(96)     For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of AA in the EEA.
       4.4.5. Polyvinylamine (“PVAm”)
(97)     PVAm can be used as a viable alternative or complementary chemical to natural
         starch when applied to increase strength levels. In the paper production
         processes, PVAm can be used as an input for the manufacturing of DSA, RDA
         and to a much lesser extent for CC. The Parties submit that PVAm can either be
         sold as an end-us product or combine with other monomers to produce specialty
         chemicals for DSA, RDA and to a lesser extent CC.
(98)     The Commission has not previously analysed the market for PVAm.
(99)     The Parties submit that the relevant product market is PVAm. The results of the
         market investigation indicate that the majority of the customers consider PVAm
         as an important input in the manufacturing of CC, RDA and DSA, irrespective
         of the end-use of the PVAm61.
(100)    According to the results of the market investigation, all customers of PVAm
         replying to the questionnaire indicated that they source PVAm solely from
         suppliers inside the EEA, irrespective of the end-use of the purchased PVAm62.
(101)    For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of PVAm in the EEA.
       4.4.6. Surfactants
(102)    Surfactants are used in the consumer goods sector as inputs for detergents,
         cleaners and personal care products and in the industrial sector as processing
         aids.
(103)    As regards product market definition, in previous decisions,63 the Commission
         found that anionic surfactants (i.e., surfactants with a negative charge, such as
59 Q.19 of Q3 – questionnaire to suppliers of and competitors in raw materials.
60 Q.65 of Q2 – questionnaire to competitors in end-chemical products.
61 Q.74 of Q2 – questionnaire to competitors in end-chemical products.
62 Q.73 of Q2 – questionnaire to competitors in end-chemical products.
63 Case M.5927 – BASF/Cognis, Commission decision of 30 November 2010.
                                                            18
 ---pagebreak---           sulfates/sulfonates64) and non-ionic surfactants (i.e., surfactants with no charge,
          such as alkoxylates65) constitute distinct product markets. The Commission also
          considered further segmenting the markets of anionic and non-ionic surfactants,
          but ultimately left the question open.
(104)     The Parties submit that the relevant product market for anionic surfactants and
          non-ionic surfactants can be left open since the Transaction only gives rise to
          minor vertical links between the activities of the Parties and only with respect
          the supply of alkoxylates and sulfates/sulfonates.
(105)     As regards geographic market definition, in previous decisions,66 the
          Commission concluded that the plausible markets for anionic and non-ionic
          surfactants were at least EEA-wide. The Parties submit that the market for non-
          ionic surfactants is at least EEA-wide in scope but likely worldwide, while they
          consider the market for anionic surfactants is worldwide in scope.
(106)     According to the results of the market investigation, the vast majority of
          customers of anionic surfactants source solely from suppliers located in the
          EEA, irrespective of the use of the anionic surfactants67. These results are
          confirmed by the suppliers of anionic surfactants68.
(107)     For the purpose of the present Decision, taking into account the fact that the
          Transaction only gives rise to vertical links limited to the supply of alkoxylates
          and sulfates/sulfonates, the Commission considers that the exact product market
          definition can be left open as no serious doubt as to the compatibility of the
          notified concentration with the internal market arise under any product market
          definitions. In relation to the exact geographic scope of the market, the
          Commission considers that it can be left open, as no serious doubts as to the
          compatibility of the notified concentration with the internal market arise under
          the narrowest EEA-wide definition.
        4.4.7. Edetic acid ("EDTA")
(108)     EDTA is used for industrial water treatment and many other applications (e.g.,
          laundry detergents, soap, textile processing). In water treatment, EDTA is
          effective at preventing scale and deposits of calcium carbonate, sulphate, and
          phosphate from forming in boilers, evaporators, heat exchangers, and filters. In
          paper & pulp, EDTA use is primarily for mechanical pulping and bleaching with
          sodium hydrosulfite.
(109)     The Commission has not previously analysed the market of EDTA.
64 Sulfates and sulfonates constitute the bulk of anionic surfactant (ca. 90%). They are produced through sulfonation
   and sulfation of the relevant raw materials. Other anionic surfactants, so-called specialty anionics, are produced in
   a variety of other methods. In the present case, the vertical link arising from the Transaction in relation to anionic
   surfactants is limited to the supply of sulfates and sulfonates.
65 Alkoxylates are the most important synthetic class of non-ionic surfactants, formed by reacting alcohols or fatty
   acids of varying alkyl chain length which are not water-miscible with alkylene oxides which form the water
   miscible part of the molecule. The non-ionic surfactants Solenis purchases from BASF are alkoxylates.
66 Case M.5927 – BASF/Cognis, Commission decision of 30 November 2010.
67 Q.97 of Q2 – questionnaire to competitors in end-chemical products.
68 Q.37 of Q3 – questionnaire to suppliers and competitors in raw materials.
                                                               19
 ---pagebreak--- (110)    The Parties submit that there is some evidence that EDTA can be substituted
         with at least one aminopolycarboxylic acid chelating agent in the paper & pulp
         industry. In particular, the Parties argue that EDTA can be (at least partially)
         substituted by DTPA. The Parties submit that the product market definition
         should not just include EDTA, but could also include all aminopolycarboxylic
         acid chelating agents. However, for the purpose of this decision, the Parties
         submit that the product market definition can be left open.
(111)    The Parties submit that the market for EDTA is at least EEA-wide. The Parties
         also submit that the market for aminopolycarboxylic acid could be global.
         However, for the purpose of this decision, the Parties submit that the exact
         geographic scope of the market can be left open.
(112)    For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of EDTA in the EEA.
       4.4.8. Poly-diallyldimethylammonium-chloride ("PolyDADMAC")
(113)    PolyDADMAC is used to produce pulp and paper and water treatment
         chemicals which can be used to produce CC, DSA, RDA and sizing agents and
         water treatment chemicals. In addition, PolyDADMAC can also be used as a
         coagulant for water purification.
(114)    As regards product market definition, in BASF/CIBA,69 the Commission
         considered a separate market for PolyDADMAC, distinct from the market for
         DADMAC, but eventually left the question open. The Parties agree that
         PolyDADMAC is the narrowest possible market definition, but submit that the
         relevant product market for PolyDADMAC can be left open.
(115)    As regards geographic market definition, the Commission also left open the
         exact scope of the market (EEA-wide or worldwide)70. The Parties submit that
         the relevant market is at least EEA-wide, but can be left open between EEA-
         wide and global
(116)    For the purpose of the present Decision, the Commission considers that the
         manufacture and supply of PolyDADMAC constitutes a separate product
         market. The exact geographic scope of the market can be left open, as no serious
         doubts as to the compatibility of the notified concentration with the internal
         market arise under the narrowest possible EEA-definition.
       4.4.9. Polyethylenimines ("PEI")
(117)    PEI is a polymer which can be used in paper and pulp and water treatment
         chemicals, as well as in other applications (e.g., detergents, adhesives, and
         cosmetics). PEI can also be used for CO2 capture and laboratory biology. BASF
         is the only PEI manufacturer in the EEA.
69 Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009.
70 Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009.
                                                      20
 ---pagebreak--- (118)    According to the Parties, PEI is not an intermediate product and that PEI can be
         either sold by itself or combined with other chemicals as part of a holistic
         customer solution.
(119)    The Commission has not previously assessed the market for PEI. However, in
         BASF/CIBA71, the Commission considered that PEI, as well as other highly
         cationic polymers could be used as a fixation agent and that PEI could also be
         used as an RDA.
(120)    The Parties submit that the relevant upstream market should be determined by
         end-use, whereby the product market definition would include defoamers, RDA,
         WSA, CC (fixation agents) and other water treatment chemicals. However, the
         Parties submit that the exact product market can be left open.
(121)    The Parties submit that the geographic market definition is worldwide.
         According to the results of the market investigation, none of the customers of
         PEI currently source the product from suppliers from outside the EEA.
         According to one customer, they would consider a PEI supplier from outside the
         EEA if a suitable supplier if available72, suggesting that the market is at least
         EEA-wide, but could be worldwide.
(122)    For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of PEI in the EEA.
       4.4.10. 2-Mercaptoethanol ("BME")
(123)    BME is used to produce polyacrylates that are used as inputs for water
         treatment. The major applications of BME are precursors for PVC stabilizers,
         boosters, in corrosion inhibitor formulations for oilfield and gas applications,
         co-monomers for polyurethane based optical lenses, additives for PAN fibres
         and building blocks for agriculture and pharmaceuticals. Solenis uses BME as
         an input in the product of various products, among which industrial water
         treatment chemicals as well as CC, DSA and RDA.
(124)    The Commission has not previously assessed the market for BME. The Parties
         argue that the relevant product market can be left open.
(125)    In relation to the geographic market definition, the Parties submit that, if the
         product market is defined as BME, the geographic scope is worldwide, taking
         into account that all global suppliers serve the EEA market.
(126)    For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of BME in the EEA.
71 Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009.
72 Q.81 of Q2 – questionnaire to competitors in end-chemical products.
                                                          21
 ---pagebreak---          4.4.11. Glyoxal
(127)      Glyoxal is used in the production of textiles, leather, cosmetics, epoxy
           applications, oil and gas, biocides, glyoxylic acid and […]* hardening
           applications In the paper & pulp chemicals, glyoxal is used to produce
           glyoxylated PAM (gPAM), which is mainly used for dray strength and to a
           lesser extend wet strength.
(128)      The Commission has not assessed the market for glyoxal in the past. In the
           absence of past decisional practice, the Parties claim that the product market can
           be defined as including all glyoxal chemical.
(129)      The Parties argue that the market is at least EEA-wide, if not worldwide.
           According to the Parties they can export glyoxal globally and regulatory
           restrictions have minor impact on the glyoxal business. The results of the market
           test were not conclusive on the geographic market definition. Half of the
           customers of Glyoxal participating in the market investigation indicated that
           they currently purchase glyoxal from suppliers outside the EEA, while the other
           half did not73.
(130)      For the purpose of this Decision, the Commission considers that the exact
           product and geographic market definitions can be left open, since the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market even on the narrowest possible market definition, that is to say
           the supply of glyoxal in the EEA.
         4.4.12. Morpholine
(131)      Morpholine is a colourless to yellow liquid chemical that is used in the
           production of corrosion inhibitors, crop protection agents, dyes, optical
           brighteners, pharmaceuticals and rubber chemicals. Morpholine is also used in
           water treatment chemicals. In water treatment, morpoholine can be used to
           neutralise carbonic acid in steam condensate systems
(132)      As regards product market definition, in Huntsman/CIBA, the Commission
           considered that morpholine is substitutable with MOPA, cyclohexylamine and
           DMEA74. In BASF/CIBA,75 the Commission considered a relevant product
           market including all morpholine chemicals but ultimately left the question open.
           The Parties submit that the product market definition can be left open
(133)      As regards geographic market definition, the Commission left the exact scope of
           the market open (EEA-wide or worldwide) in BASF/CIBA. The Parties submit
           that the market for morpholine is worldwide in scope in the absence of
           significant regulatory barriers to prevent transportation and low transport costs.
           The Parties also submit that ultimately the exact geographic scope of the market
           can be left open.
* Should read: “wood”
73 Q.89 of Q2 – questionnaire to competitors in end-chemicals.
74 Case M.4179 – Huntsman/CIBA TE Business, Commission decision of 30 June 2006.
75 Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009.
                                                          22
 ---pagebreak--- (134)    For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of morpholine in the EEA.
       4.4.13. Diethylaminoethanol ("DEAE")
(135)    DEAE is used as neutralizing agent and CO2 scavenger in boiler water. Solenis
         uses DEAE as corrosion inhibitor in boiler applications. DEAE can also be used
         in lubricants, as a building block in the agrochemical, pharmaceutical industries
         and as an additive in paper coatings.
(136)    The Commission has not assessed the market of DEAE in its past decisions. The
         Parties claim that the product market can be defined as including all DEAE
         products. However, the Parties also submit that the exact product market
         definition can be left open.
(137)    The Parties submit that the geographic scope of the DEAE market is worldwide,
         due to low transport costs or other specific trade barriers. [CONFIDENTIAL –
         BASF’s production set-up].
(138)    For the purpose of this Decision, the Commission considers that the exact
         product and geographic market definitions can be left open, since the notified
         concentration does not raise serious doubts as to its compatibility with the
         internal market even on the narrowest possible market definition, that is to say
         the supply of DEAE in the EEA.
       4.4.14. Dimethylaminoethyl acrylate ("DMA3" or "ADAME") / ADAMEQuat
                 ("ADAMEQ")
(139)    In paper and pulp chemicals, ADAME is used in the production of cPAM-based
         RDA, WSA, CC, and water treatment. ADAME can be quaternised to produce
         ADAMEQ for use as a co-monomer in the production of cPAM-based
         chemicals.
(140)    In past decisions,76 the Commission considered ADAME and ADAMEQ to each
         form separate product markets. The Commission also considered the geographic
         scope of both markets to be at least EEA-wide in BASF/CIBA. However, the
         Commission ultimately left open both the product and geographic delineation of
         the market. The Parties submit that the relevant product market for ADAME and
         ADAMEQ can be left open.
(141)    In relation to the geographic market definition, the Parties submit that the
         market has changed since BASF/CIBA and that suppliers of ADAME are now
         active on a global scale. The results of the market investigation seem to indicate
         that the market is global for ADAMEQ, since all of the respondents indicated
         that they purchased from suppliers from outside the EEA77. According to the
76 Case M.5355 – BASF/CIBA, Commission decision of 12 March 2009.
77 Q105 of Q2 - questionnaire to competitors in end-chemicals
                                                          23
 ---pagebreak---            respondents in the questionnaire to suppliers of ADAME, the competition on the
           market takes place on a global level78.
(142)      For the purpose of the present Decision, the Commission considers that the
           manufacture and supply of ADAME and ADAMEQ constitute separate product
           markets, but the market definition can ultimately be left open since even under
           the narrowest product market definition, the transaction does not raise serious
           doubts as to its compatibility with the internal market. In relation to the
           geographic market scope, the Commission considers that the market is likely to
           be EEA-wide, but the exact geographic scope can be left open, as no serious
           doubts as to the compatibility of the notified concentration with the internal
           market arise under the narrowest possible EEA definition.
    5. COMPETITIVE ASSESSMENT
(143)      Article 2 of the Merger Regulation requires the Commission to examine whether
           notified concentrations are to be declared compatible with the internal market,
           by assessing whether they would significantly impede effective competition in
           the internal market or in a substantial part of it.
(144)      The Commission Guidelines on the assessment of horizontal mergers under the
           Council Regulation on the control of concentrations between undertakings 79 (the
           "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 effects
           and coordinated effects.
(145)      Non-coordinated effects may significantly impede effective competition by
           eliminating the competitive constraint imposed by each merging party on the
           other, as a result of which the merged entity would have increased market power
           without resorting to coordinated behaviour. In this 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. According
           to recital (25) of the preamble of the Merger Regulation, a significant
           impediment to effective competition can result from the anticompetitive effects
           of a concentration even if the merged entity would not have a dominant position
           on the market concerned.
(146)      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. Not all of these factors need to be present for significant non-
           coordinated effects to be likely. The list of factors, each of which is not
           necessarily decisive in its own right, is also not an exhaustive list.
78 Q46 of Q3 – questionnaire to suppliers and competitors in raw materials.
79 OJ […]*, 5.2.2004, p. 5.
* Should read: "C31".
                                                            24
 ---pagebreak--- (147)    In addition, the Commission Guidelines on the assessment of non-horizontal
         mergers under the Council Regulation on the control of concentrations between
         undertakings80 (the "Non-Horizontal Merger Guidelines") distinguish between
         two main ways in which vertical mergers may significantly impede effective
         competition, namely input foreclosure and customer foreclosure.
(148)    For a Transaction to raise input foreclosure competition concerns, the merged
         entity must have a significant amount of market power upstream. 81 In assessing
         the likelihood of an anticompetitive input foreclosure strategy, the Commission
         has to examine whether (i) the merged entity would have the ability to
         substantially foreclose access to inputs, (ii) whether it would have the incentive
         to do so, and (iii) whether a foreclosure strategy would have a significant
         detrimental on competition downstream.82
(149)    For a Transaction to raise customer foreclosure competition concerns, it must be
         the case that the vertical merger involves a company which is an important
         customer with a significant degree of market power in the downstream market.83
         In assessing the likelihood of an anticompetitive customer foreclosure scenario,
         the Commission has to examine whether (i) the merged entity would have the
         ability to foreclose access to downstream markets by reducing its purchases
         from its upstream rivals, (ii) whether it would have the incentive to reduce its
         purchases upstream, and (iii) whether a foreclosure strategy would have a
         significant detrimental effect on consumers in the downstream market.84
(150)    BASF DOM and Solenis are both active in the manufacture and sale of
         chemicals that are sold for paper and pulp applications. The Transaction gives
         rise to a number of horizontally affected markets, which are discussed in Section
         5.1 . BASF also supplies raw/intermediate chemicals which are used by Solenis
         and/or its competitors as input for the manufacture of paper and pulp chemicals
         and water treatment chemicals. The Transaction also gives rise to a number of
         vertically affected markets, which are discussed in Section 5.2.
       5.1     Horizontal Analysis
(151)    As a general remark, the Notifying Parties submitted that BASF DOM and
         Solenis are not close competitors in any paper and pulp market segment,
         because they have different business models. On the one hand, BASF DOM is
         particularly focused on product manufacturing, its technologies and production
         processes, but with a low level of customer service. On the other hand, Solenis
         is recognised for its strong market knowledge, technical expertise and customer
         service-based model, which involves frequent customer site visits and service
80 OJ L24, 29.1.2004, p.1
81 Non-horizontal Merger Guidelines, para. 35.
82 Non-horizontal Merger Guidelines, para. 32. Each of these points will be analysed separately although the
   Commission recognises that they are intertwined.
83 Non-horizontal Merger Guidelines, para. 61.
84 Non-horizontal Merger Guidelines, para. 59.
                                                       25
 ---pagebreak---           personnel located in customer’s plants. The notified concentration would bring
          together these different yet complementary business models.85
(152)     The market investigation confirmed the statement of the Parties that their
          business models are fundamentally different.86
        5.1.1. Defoamers for Paper and Pulp Applications
(153)     BASF DOM manufactures and supplies in the EEA fatty acid/alcohol and
          EO/PO defoamers under its Afranil brand. Afranil defoamers are sold into the
          paper and pulp industry. Solenis manufactures and supplies defoamers under the
          following trade names: Advantage, Antispumin, De Airex, Nopcomaster, and
          Protocol. None of these brands are technology-specific and Solenis sells
          defoamers based on different chemistries under the same trade names. Solenis'
          portfolio includes defoamers based on silicone; fatty acid/alcohol; EO/PO; and
          PEG. Solenis either buys the basic component of the defoamer from a third-
          party and then mixes it or it simply resells defoamers from third parties
          ([CONFIDENTIAL]).
(154)     The Notifying Parties submitted that the notified concentration would not give
          rise to competition concerns in a relevant market including defoamers for the
          paper and pulp industry in the EEA.
(155)     Set forth below are the market shares of the Notifying Parties and their
          competitors in defoamers in the EEA (taking into account sales to end-
          customers by manufacturers and resellers):87
85 See e.g., BASF, BASF and Solenis to join forces by combining paper and water chemicals business, 3 May 2018,
   p.       3,      available        at     https://www.basf.com/documents/corp/en/investor-relations/calendar-and-
   publications/presentations/2018/180503 BASF IR-Slides Solenis.pdf.
86 See Doc ID 237, Minutes from call with competitor, 24 September 2018, para. 11 and Doc ID 116, Minutes from
   call with competitor, 18 September 2018, para. 2.
87 The combined market share of the Notifying Parties does not change significantly if one looks at production
   market shares, i.e., if the sales were attributed to the manufacturers of defoamers and not to the company that
   supplies the end-customer. In that case, the combined market share of the Parties would be [10-20]% and
   significant manufacturers would continue to compete post-Transaction, including Ouvrie, Blackburn, Kolb,
   Kemira, Kurita, and BIM.
                                                             26
 ---pagebreak---                                                            Table 1
                         Defoamers in the EEA used in Paper and Pulp Applications (2017)
                             Supplier                 Sales (EUR million)           Market Share (%)
                     BASF DOM                    [CONFIDENTIAL]                     [5-10]
                     Solenis                     [CONFIDENTIAL]                     [10-20]
                     Combined                    [CONFIDENTIAL]                     [20-30]
                     Blackburn                   [CONFIDENTIAL]                     [10-20]
                     Kemira                      [CONFIDENTIAL]                     [10-20]
                     Kolb                        [CONFIDENTIAL]                     [10-20]
                     BIM                         [CONFIDENTIAL]                     [5-10]
                     Nalco                       [CONFIDENTIAL]                     [0-5]
                     Kurita                      [CONFIDENTIAL]                     [0-5]
                     Ouvrie                      [CONFIDENTIAL]88                   [20-30]
                     Others89                    [CONFIDENTIAL]                     [5-10]
                     Total                       199                                100
                         Source: Form CO
(156)    The Parties' combined share is [20-30]% in defoamers in the EEA in 2017. Post-
         Transaction, the combined entity would continue to face competitive constraints
         from at least 5 competitors with a market share of 5% or more. These
         competitors would be Ouvrie ([20-30]%), Blackburn ([10-20]%), Kemira ([10-
         20]%), Kolb ([10-20]%), and BIM ([5-10]%).
(157)    The Parties do not seem to compete closely in defoamers in the EEA for the
         following reasons. First, they have different business models. For most
         defoamers (for instance, fatty acid/alcohol ones) Solenis purchases the basic
         component and mixes it before reselling the end chemicals to the customer.
         Solenis also resells end chemicals that it sources from third parties. By contrast,
         BASF DOM sells defoamers in which it manufactures itself the basic
         component. Second, the Parties focus on different chemistries of defoamers.
         Approximately [CONFIDENTIAL] of BASF DOM's sales of defoamers in the
         EEA in 2017 represented fatty acid/alcohol based defoamers. Solenis' product
         portfolio is much more diverse in terms of product chemistries.
         [CONFIDENTIAL] of its total sales of defoamers was driven by fatty
         acid/alcohol based products. The defoamers that Solenis typically sells are
         silicone based defoamers.90 Third, as explained above,91 Solenis has a service-
         orientated business model driven by customer intimacy while BASF DOM
         focuses on product manufacturing.
(158)    Finally, the vast majority of informative respondents in the market investigation
         did not raise any competition concerns in relation to defoamers for paper and
         pulp applications in the EEA, during the market investigation. 92
88 Solenis can only estimate the shares of Ouvrie in 2010. Solenis assumes that a comparable (if not higher) figure
   would apply in 2017.
89 Others include Archroma, Buckman, Bluestar, Caffaro, Dow, Elementis, Evonik, Protex International, and
   Wacker-Chemie.
90 Form CO, Table 13.
91 See paras. (151)-(152).
92 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
   competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
   chemical products.
                                                           27
 ---pagebreak--- (159)     In view of the above, taking into account the results of the market investigation
          and all the evidence available to it, the Commission concludes that the notified
          concentration does not raise serious doubts as to its compatibility with the
          internal market with respect to the EEA-wide market for defoamers for paper
          and pulp applications.
(160)     Nor does the notified concentration give rise to competition concerns, if a
          narrower relevant market were defined including only EO/PO based defoamers
          in the EEA for paper and pulp applications. In such a relevant market the
          Parties' combined share would be 15-25%. Post-Transaction, the combined
          entity would face two large rivals with comparable market shares, namely
          Blackburn ([20-30]%) and Nalco ([20-30]%). Other competitors with a market
          share of 5% or more include Kemira ([10-20]%) and Kolb (5-10%).
(161)     The market investigation did not reveal any competition concerns in relation to
          EO/PO defoamers for paper and pulp applications in the EEA.93
(162)     In view of the above, taking into account the results of the market investigation
          and all the evidence available to it, the Commission concludes that the notified
          concentration does not raise serious doubts as to its compatibility with the
          internal market regarding EO/PO defoamers in the EEA for paper and pulp
          applications in the EEA.
        5.1.2. Contaminant Control Agents
(163)     BASF DOM manufactures and supplies CC under the following trade names:
          Catiofast (based on PEI, PVAm, PAm, and polyDADMAC). [CONFIDENTIAL
          – BASF DOM’s business set-up regarding the supply of Catiofast products]. In
          the EEA, BASF DOM also has limited sales of Cedesorb, a bentonite clay.
          Solenis manufactures and supplies the following CC in the EEA: DeTac (based
          on polyvinyl alcohol), Zenix, Renew, Presstige (including surfactants), and
          Infinity (based on polyacrylates).
(164)     The Notifying Parties submitted that the notified concentration would not give
          rise to competition concerns in a relevant market including CC in the EEA.
(165)     Set forth below are the market shares of the Notifying Parties and their
          competitors in CC in the EEA (taking into account sales to end-customers by
          manufacturers and resellers):94
93 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
   competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
   chemical products.
94 The combined market share of the Notifying Parties does not change significantly if one looks at production
   market shares, i.e., if the sales were attributed to the manufacturers of defoamers and not to the company that
   supplies the end-customer. In that case, the combined market share of the Parties would be [10-20]% and
   significant manufacturers would continue to compete post-Transaction, including Luzenac (Imerys), Mondo
   Minerals, SNF, Nalco, Kemira, and Huntsman.
                                                             28
 ---pagebreak---                                                              Table 2
                             CC in the EEA used in Paper and Pulp Applications (2017)
                             Supplier                   Sales (EUR million)        Market Share (%)
                     BASF DOM                      [CONFIDENTIAL]                 [0-5]
                     Solenis                       [CONFIDENTIAL]                 [10-20]
                     Combined                      [CONFIDENTIAL]                 [20-30]
                     Kemira                        [CONFIDENTIAL]                 [5-10]
                     Luzenac (Imerys)              [CONFIDENTIAL]                 [5-10]
                     Mondo Minerals                [CONFIDENTIAL]                 [5-10]
                     Nalco                         [CONFIDENTIAL]                 [5-10]
                     Others95                      [CONFIDENTIAL]                 [40-50]
                     Total                         200                            100
                          Source: Form CO
(166)     The Parties' combined share is [20-30]% in CC in the EEA in 2017. The share
          increment contributed by BASF DOM is [0-5]%. Post-Transaction, the
          combined entity would continue to face competitive constraints from at least 4
          competitors with a market share of 5% or more. These competitors would be
          Kemira ([5-10]%), Luzenac (Imerys) ([5-10]%), Mondo Minerals ([5-10]%),
          and Nalco ([5-10]%).
(167)     The Parties do not seem to compete closely in CC in the EEA. First, BASF
          DOM and Solenis have different business models regarding CCs.96 BASF DOM
          is more focused on product manufacturing while Solenis offers a more service-
          orientated supply model, involving on-site support and solutions tailored to the
          customer's problem. Second, BASF DOM has a product portfolio highly
          specialized in fixation agents. [90-100]% of BASF DOM's total CC sales in the
          EEA in 2017 came from fixation agents. On the contrary, Solenis' portfolio is
          more balanced and includes fixation agents (representing [50-60]% of the total
          sales in the EEA in 2017); dispersion agents (approx. [10-20]%) and adsorption
          agents (approx. [30-40]%).97
(168)     Finally, the vast majority of informative respondents did not raise any
          competition concerns in relation to CC in the EEA, during the market
          investigation. 98
(169)     In view of the above, taking into account the results of the market investigation
          and all the evidence available to it, the Commission concludes that the notified
          concentration does not raise serious doubts as to its compatibility with the
          internal market regarding CC in the EEA.
(170)     Nor does the Transaction give rise to competition concerns, if a narrower
          relevant market were defined including only fixation agents. In such a relevant
          market, the Parties' combined share would be 15-25%. Post-Transaction, the
          combined entity would face 4 large rivals with market shares exceeding 5%,
          namely, Kemira (10-20%), Luzenac (Imerys) (15-25%), Mondo Minerals (15-
95 Others include Archroma, Buckman Laboratories, Caffaro, Kolb, Kurita, Lamirsa, Muenzig, and Protex
   International.
96 See Doc ID 237, Minutes from call with competitor, 24 September 2018, para. 11.
97 For the differences between the three categories, see para. (23) above.
98 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
   competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
   chemical products.
                                                             29
 ---pagebreak---            25%), and Nalco (15-25%). Other competitors include ACAT (0-5%) and
           SNF/Axchem (0-5%).
(171)      The market investigation did not reveal any competition concerns in relation to a
           narrow relevant market for fixation agents in the EEA. 99
(172)      In view of the above, taking into account the results of the market investigation
           and all the evidence available to it, the Commission concludes that the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market regarding a relevant market for fixation agents in the EEA.
         5.1.3. Retention and Drainage Aids
(173)      BASF DOM supplies in the EEA single-polymer RDA under the following trade
           names: Percol (based on PAM); HM Polymin (based on PEI); Polymin VX/VT
           and Xelorex (based on PVAm). BASF DOM also supplies RDA which include
           micro particles under the following trade names: Hydrocol (including cPAM
           and bentonites) and Telioform (including PAM and bentonite).
(174)      Solenis supplies in the EEA single-polymer RDA under the following trade
           names: PerForm SP (based on PAM) and Praestaret (based on polyamines).
           Solenis also supplies RDA which include micro particles, under the brand
           PerForm MP.
(175)      The Notifying Parties submitted that the notified concentration would not give rise
           to competition concerns in a relevant market including all RDA in the EEA.100
(176)      Set forth below are the market shares of the Notifying Parties and their
           competitors in RDA in the EEA (taking into account sales to end-customers by
           manufacturers and resellers):101
                                                              Table 3
                              RDA in the EEA used in Paper and Pulp Applications (2017)
                                 Supplier                Sales (EUR million)       Market Share (%)
                       BASF DOM                        [CONFIDENTIAL]              [10-20]
                       Solenis                         [CONFIDENTIAL]              [10-20]
                       Combined                        [CONFIDENTIAL]              [20-30]
                       Kemira                          [CONFIDENTIAL]              26-38
                       Nalco                           [CONFIDENTIAL]              [10-20]
                       ACAT                            [CONFIDENTIAL]              1-6
                       SNF/Axchem                      [CONFIDENTIAL]              1-6
                       Chupa                           [CONFIDENTIAL]              1-6
                       Others                          [CONFIDENTIAL]              7-30
                       Total                           263                         100
99   See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
100 The Notifying Parties argued that synthetic DSA belongs to the same relevant product market as starch DSA. In
    such a broad market, the combined share of the Parties would be below 20%. For the reasons explained in Section
    4.1.2.a. above, the Commission takes the view that synthetic DSA belong to a separate relevant product market.
101 The combined market share of the Notifying Parties does not change significantly if one looks at production
    market shares, i.e., if the sales were attributed to the manufacturers of RDA and not to the company that supplies
    the end-customer. In that case, the combined market share of the Parties would be [20-30]% and significant
    manufacturers would continue to compete post-Transaction, including SNF, Kemira, and Nalco.
                                                                30
 ---pagebreak--- (177)     The Parties' combined share is [20-30]% in RDA in the EEA in 2017. Post-
          Transaction, the combined entity would continue to face competitive constraints
          from at least 5 competitors with a market share of 5% or more.102 These
          competitors are Kemira (26-38%), Nalco ([10-20]%), and ACAT, SNF/Axchem,
          and Chupa (each with a share of 1-6%).
(178)     The Parties do not seem to compete closely in RDA in the EEA. First, each of
          BASF DOM and Solenis has a different focus in their RDA portfolio. BASF
          DOM mainly supplies PVAm-based and micro particle-based RDA chemistries,
          including bentonites. Solenis is predominantly focused on PAM-based RDA
          (which are more commoditized) and offers a limited number of micro particle-
          based products. Second, each of the Parties targets different types of customers.
          BASF DOM's products increase the strength in the final product, which means
          this undertaking has been targeting large packaging producers for RDA and
          producers of graphical paper. On the other hand, Solenis offers RDA for all
          applications.
(179)     Solenis submitted bidding data regarding RDA in EMEA. Solenis found that it
          has lost to rivals business of approximately EUR [CONFIDENTIAL] million in
          2015-2017 but only approximately [0-20]% of this business was lost to BASF
          DOM. Solenis also estimated that it won from rivals business of approximately
          EUR [CONFIDENTIAL] million in 2015-2017 but approximately [10-30]%
          was won from BASF DOM.103
(180)     In BASF/CIBA, the Commission also found that RDA customers have high
          buyer power, which means they can negotiate lower prices and favourable
          conditions for themselves using sophisticated procurement procedures.104
(181)     Finally, the vast majority of customers and competitors did not raise any
          competition concerns in relation to RDA in the EEA, during the market
          investigation. 105
(182)     In view of the above, taking into account the results of the market investigation
          and all the evidence available to it, the Commission concludes that the
          Transaction does not raise serious doubts as to its compatibility with the internal
          market regarding RDA in the EEA.
(183)     Nor does the notified concentration give rise to competition concerns, if distinct
          relevant product markets are identified for (i) single-polymer RDA; (ii) multi-
          polymer RDA; and (iii) micro particle RDA:
          The Parties' combined share in single-polymer RDA is estimated at
             approximately 20-35%. Post-Transaction, the combined entity would continue
             to face competitive constraints from large RDA players, such as Kemira (20-
             30%), Nalco ([10-20]%), ACAT, SNF/Axchem, and Chupa (each [5-10]%).
102 Taking the highest end of the market share range provided for ACAT, SNF/Axchem, and Chupa.
103 Form CO, Table 27.
104 See case M.5355 - BASF/CIBA, Commission decision of 12 March 2009, para. 86.
105  See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
                                                            31
 ---pagebreak---                All of these players have wide product portfolios including both single-
               polymer and multi-polymer RDA;
          The Parties’ combined share in multi-polymer RDA is estimated at
               approximately [20-30]%. Post-Transaction, the combined entity would
               continue to face competitive constraints from large RDA players, such as
               Kemira (20-30%), Nalco (15-25%), ACAT, SNF/Axchem, and Chupa (each
               [5-10]%). All of these players have wide product portfolios including both
               single-polymer and multi-polymer RDA;
          The Parties’ combined share in micro particle RDA is estimated at
               approximately 20-35%. In RDA including micro particles, Solenis is not an
               important player. Post-Transaction, the combined entity would continue to
               face competitive constraints from large RDA players, such as Kemira (25-
               35%), Nalco (10-20%) and also from ACAT, SNF/Axchem, and Chupa (each
               [0-5]%).
(184)       The market investigation did not reveal any competition concerns in relation to
            single-polymer, multi-polymer or micro particle RDA in the EEA. 106
(185)       In view of the above, taking into account the results of the market investigation
            and all the evidence available to it, the Commission concludes that the notified
            concentration does not raise serious doubts as to its compatibility with the
            internal market regarding single-polymer, multi-polymer or micro particle RDA
            in the EEA.
         5.1.4. Synthetic Dry Strength Agents
(186)       BASF DOM manufactures and supplies in the EEA Xelorex, a PVAm-based
            chemical that can be used among other things as a DSA and Luredur Plus, a
            synthetic DSA based on gPAM.107 BASF DOM also manufactures Lupamin, a
            PVAm-based DSA that is purchased by resellers who react it and then sell it
            further to customers in the paper and pulp industry. Solenis offers synthetic
            DSA in the EEA under its Hercobond brand family. Solenis manufactures and
            supplies cPAM-based, aPAM-based, and gPAM-based DSA. Solenis also
            manufactures and supplies PAE resins which can be used as DSA, although they
            are primarily used as a wet strength additive. Finally, Solenis resells PVAm-
            based chemicals and also cellulose enzymes and CMC as DSA.
(187)       The Notifying Parties submitted that the notified concentration would not give
            rise to competition concerns in a relevant market including only synthetic DSA
            in the EEA.108
106 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
107 BASF supplies Luredur gPAM in the EEA based on prepolymer produced in BASF's production plant in
    [CONFIDENTIAL].
108 The Notifying Parties argued that synthetic DSA belongs to the same relevant product market as starch DSA. In
    such a broad market, the combined share of the Parties would be below 20%. For the reasons explained in paras.
    (32)ff. above, the Commission takes the view that synthetic DSA belong to a separate relevant product market.
                                                             32
 ---pagebreak--- (188)      Set forth below are the market shares of the Notifying Parties and their
           competitors in synthetic DSA in the EEA (taking into account sales to end-
           customers by manufacturers and resellers):109
                                                               Table 4
                         Synthetic DSA in the EEA used in Paper and Pulp Applications (2017)
                                 Supplier                  Sales (EUR million)          Market Share (%)
                       BASF DOM                        [CONFIDENTIAL]110                [20-30]
                       Solenis                         [CONFIDENTIAL]                   [10-20]
                       Combined                        [CONFIDENTIAL]                   [30-40]
                       Kemira                          [CONFIDENTIAL]                   [10-20]
                       ACAT                            [CONFIDENTIAL]                   [10-20]
                       Buckman                         [CONFIDENTIAL]                   [5-10]
                       SNF/Axchem                      [CONFIDENTIAL]                   [5-10]
                       Nalco                           [CONFIDENTIAL]                   [0-5]
                       Mare                            [CONFIDENTIAL]                   [0-5]
                       Others                          [CONFIDENTIAL]                   [10-20]
                       Total                           84                               100
                             Source: Form CO
(189)      The Parties' combined share is [30-40]% in synthetic DSA in the EEA in 2017.
           Post-Transaction, the combined entity would continue to face competitive
           constraints from at least 4 competitors with a market share of 5% or more. These
           competitors would Kemira ([10-20]%), ACAT ([10-20]%), Buckman ([5-10]%),
           and SNF/Axchem ([5-10]%).
(190)      The Parties do not seem to compete closely in terms of chemistries included in
           the product portfolio. First, the focus of BASF DOM and Solenis is on different
           types of synthetic DSA. Approximately [CONFIDENTIAL] of BASF DOM's
           total sales of synthetic DSA in the EEA in 2017 represented PVAm-based DSA.
           Solenis' product portfolio is much more diverse in terms of product chemistries.
           Only [CONFIDENTIAL]% of its total sales of synthetic DSA was driven by
           PVAm-based products. The remaining synthetic DSA sales concern mainly
           PAM-based products ([CONFIDENTIAL]%), PAE resin-based products
           ([CONFIDENTIAL]%) and gPAM-based products ([CONFIDENTIAL]%).111
           Second, as explained above,112 Solenis has a service-orientated business model
           driven by customer intimacy while BASF DOM focuses on product
           manufacturing.
(191)      The market investigation confirmed the position of the Notifying Parties that the
           notified concentration would not give rise to competition concerns in synthetic
           DSA in the EEA. In more detail:
          The market investigation confirmed the argument of the Notifying Parties that
               there is excess capacity in synthetic DSA. All the competitors that responded
109 The combined market share of the Notifying Parties does not change significantly if one looks at production
    market shares, i.e., if the sales were attributed to the manufacturers of synthetic DSA and not to the company that
    supplies the end-customer. In that case, the combined market share of the Parties would be [30-40]% and
    significant manufacturers would continue to compete post-Transaction, including SNF, Kemira, Nalco, and Mare.
110 According to the Notifying Parties, this includes all BASF DOM sales of PVAm-based chemicals, even if they are
    not specifically for DSA. As a result, the Notifying Parties argue that the share of BASF DOM (and the combined
    share of the Parties) is overstated.
111 See Form CO, Table 46.
112 See paras. (151)-(152).
                                                                 33
 ---pagebreak---               to the Commission's market investigation confirmed that there are no capacity
              constraints in synthetic DSA.113 As one competitor put it, "free capacity is not
              an issue" in synthetic DSA.114 Thus, it would not be possible for any
              manufacturer to raise DSA prices without losing business.
          The market investigation showed that the combined entity would continue to
              compete with several players in synthetic DSA post-Transaction. The
              majority of responsive customers confirmed that several strong rivals would
              continue exerting competitive constraints on the combined entity. More than
              75% of responsive customers stated that post-merger, the number of players
              in synthetic DSA would be sufficient to guarantee competitive prices.115
          The market investigation confirmed the position of the Notifying Parties that
              paper and pulp customers using synthetic DSA have countervailing buyer
              power. The majority of responsive customers also do not expect the
              Transaction to have a meaningful effect on their company's bargaining
              position vis-à-vis synthetic DSA suppliers.116 In addition, the majority of
              customers stated that they purchase synthetic DSA from more than one
              suppliers in the EEA. The key reasons for a multi-sourcing strategy are (i) to
              ensure security of supply and (ii) to gain leverage in price negotiations.117
              None of the responsive customers stated that they purchase synthetic DSA
              only from BASF DOM and Solenis.118
          The market investigation suggested that it is not difficult, timely, or costly for
              the customers to switch from one synthetic DSA to another. Several
              customers explained that prior to switching, it is necessary to conduct
              laboratory trials and paper mill trials with the new synthetic DSA they are
              planning to use. The total cost of these trials is estimated at less than EUR 1
              million and the total timing required is less than 12 months.119
(192)      In view of the above, taking into account the results of the market investigation
           and all the evidence available to it, the Commission concludes that the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market regarding synthetic DSA in the EEA.
         5.1.5. Wet Strength Agents
(193)      BASF DOM manufactures and supplies in the EEA WSA under the Luresin AF
           and Urecoll brand names. Luresin AF is PVAm-based and is used to increase
           wet strength in all types of paper. The Urecoll range is a formaldehyde-based
           amino resin range. It is used in specialty grade paper. Solenis supplies a PAE-
113 Q6.1 and Q16 of Q2 - questionnaire to competitors in end chemical products and/or customers of raw materials /
    intermediates.
114 Q16 of Q2 - questionnaire to competitors in end chemical products and/or customers of raw materials /
    intermediates.
115 Q27 of Q1 – questionnaire to customers of end chemical products.
116 Q28 of Q1 - questionnaire to customers of end chemical products.
117 Q8 of Q1 - questionnaire to customers of end chemical products.
118 Q7 of Q1 - questionnaire to customers of end chemical products.
119 See Doc ID 669, Minutes from call with customer, 23 November 2018, para. 5 and Doc ID 657, Minutes from call
    with customer, 21 November 2018, para. 4.
                                                            34
 ---pagebreak---            based product under the trademark Kymene. Solenis manufactures most of the
           WSA it supplies in the EEA and sources the rest from third-parties.
(194)      The Notifying Parties submitted that the notified concentration would not give
           rise to competition concerns in a relevant market including WSA in the EEA.
(195)      Set forth below are the market shares of the Notifying Parties and their
           competitors in WSA in the EEA (taking into account sales to end-customers by
           manufacturers and resellers):120
                                                              Table 5
                             WSA in the EEA used in Paper and Pulp Applications (2017)
                                 Supplier                Sales (EUR million)        Market Share (%)
                       BASF DOM                        [CONFIDENTIAL]               [0-5]
                       Solenis                         [CONFIDENTIAL]               [20-30]
                       Combined                        [CONFIDENTIAL]               [20-30]
                       Mare                            [CONFIDENTIAL]               [10-20]
                       Kemira                          [CONFIDENTIAL]               [10-20]
                       Kurita                          [CONFIDENTIAL]               [10-20]
                       Melamin                         [CONFIDENTIAL]               [0-5]
                       Mapril                          [CONFIDENTIAL]               [0-5]
                       Others                          [CONFIDENTIAL]               [20-30]
                       Total                           150                          100
                             Source: Form CO
(196)      The Parties' combined share is [20-30]% in WSA in the EEA in 2017. The share
           increment contributed by BASF DOM is [0-5]%. Post-Transaction, the
           combined entity would continue to face competitive constraints from at least 3
           competitors with a market share of 5% or more. These competitors would Mare
           ([10-20]%), Kemira ([10-20]%), and Kurita ([10-20]%).
(197)      The Parties do not seem to compete closely in WSA in the EEA for the
           following reasons. First, they focus on different chemistries of WSA. BASF
           DOM supplies WSA based on PVAm and amino resins, while Solenis supplies
           WSA based on PAE. Second, BASF DOM only serves [very few] customers in
           the EEA who are [CONFIDENTIAL] active in niche applications (e.g.,
           laminates). Solenis is the largest player today and supplies WSA for tissue/towel
           and packaging products.
(198)      The Notifying Parties added that there is spare capacity in WSA, meaning that
           customers could always switch to other producers of WSA in case of output
           constraints or price increases by the merged entity. One of the main competitors
           confirmed this during the market investigation.121
120 The combined market share of the Notifying Parties does not change significantly if one looks at production
    market shares, i.e., if the sales were attributed to the manufacturers of synthetic DSA and not to the company that
    supplies the end-customer. In that case, the combined market share of the Parties would be [10-20]% and
    significant manufacturers would continue to compete post-Transaction, including Mare, Kurita, Kemira, Melamin,
    and Mapril.
121 See Doc ID 237, Minutes from call with competitor, 24 September 2018, para. 24.
                                                                35
 ---pagebreak--- (199)      Finally, the market investigation did not reveal any competition concerns in
           relation to WSA in the EEA. 122
(200)      In view of the above, taking into account the results of the market investigation
           and all the evidence available to it, the Commission concludes that the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market regarding WSA in the EEA for paper and pulp applications.123
         5.1.6. Sizing Agents
(201)      BASF DOM manufactures and supplies in the EEA styrene-acrylate based
           surface sizing agents under the trade name Basoplast. Solenis supplies both
           internal and surface sizing agents. Regarding internal agents, Solenis
           manufactures and supplies AKD emulsions and Rosin sizing agents. Solenis also
           resells an ASA as an internal sizing agent. Solenis sells its internal sizing agents
           under the trade names Aquapel and Prequel. As for surface agents, Solenis
           resells a styrene-acrylate emulsion and it also blends its own product (a
           combination of AKD and liquid dimer emulsion). Solenis also manufactures and
           supplies a minimal amount of styrene maleic anhydride. Solenis sells its surface
           sizing agents under the trade name Scripset.
(202)      The Notifying Parties submitted that the notified concentration would not give
           rise to competition concerns in a relevant market including sizing agents in the
           EEA.
(203)      Set forth below are the market shares of the Notifying Parties and their
           competitors in sizing agents in the EEA (taking into account sales to end-
           customers by manufacturers and resellers):124
122 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
123 Nor does the notified concentration give rise to competition concerns, if distinct relevant product markets are
    identified for PAE resin WSA; glyoxal-based resin WSA; amino resin-based WSA; and PVAm resin-based WSA.
    The Parties’ activities would not overlap in any of these relevant product markets, as in 2017, Solenis only
    supplied PAE resin-based WSA in the EEA and BASF DOM only supplied amino resin-based and PVAm-based
    WSA. See Form CO, Table 52.
124 The combined market share of the Notifying Parties does not change significantly if one looks at production
    market shares, i.e., if the sales were attributed to the manufacturers of synthetic DSA and not to the company that
    supplies the end-customer. In that case, the combined market share of the Parties would be [20-30]% and
    significant manufacturers would continue to compete post-Transaction, including Kemira, Mare, Dixie, Bercen,
    Kurita, and Melamin.
                                                                36
 ---pagebreak---                                                             Table 6
                            Sizing Agents in the EEA used in Paper and Pulp Applications (2017)
                              Supplier                Sales (EUR million)              Market Share (%)
                      BASF DOM                  [CONFIDENTIAL]                         [0-5]
                      Solenis                   [CONFIDENTIAL]                         [20-30]
                      Combined                  [CONFIDENTIAL]                         [30-40]
                      Kemira                    [CONFIDENTIAL]                         [30-40]
                      Mare                      [CONFIDENTIAL]                         [10-20]
                      Kurita                    [CONFIDENTIAL]                         [5-10]
                      Sellukem                  [CONFIDENTIAL]                         [0-5]
                      BIM Kemi                  [CONFIDENTIAL]                         [0-5]
                      SNF/Axchem                [CONFIDENTIAL]                         [0-5]
                      Vertellus                 [CONFIDENTIAL]                         [0-5]
                      Others                    [CONFIDENTIAL]                         [10-20]
                      Total                     approximately 150                      100
                          Source: Form CO
(204)     The Parties' combined share is [30-40]% in sizing agents in the EEA in 2017.
          The share increment contributed by BASF DOM is [0-5]%. Post-Transaction,
          the combined entity would continue to face competitive constraints from at least
          3 competitors with a market share of 5% or more. These competitors would be
          Kemira ([30-40]%), Mare ([10-20]%), and Kurita ([5-10]%).
(205)     The Parties do not seem to compete closely in sizing agents in the EEA. BASF
          DOM exited internal sizing agents in 2014, while [a large share] of Solenis'
          turnover is derived from sales of internal sizing agents. Conversely, the focus of
          the BASF DOM business is on surface sizing agents, where Solenis only resells
          one product that it sources by [CONFIDENTIAL].
(206)     Finally, the market investigation did not reveal any competition concerns in
          relation to sizing agents in the EEA. 125
(207)     In view of the above, taking into account the results of the market investigation
          and all the evidence available to it, the Commission concludes that the
          Transaction does not raise serious doubts as to its compatibility with the internal
          market regarding sizing agents in the EEA for paper and pulp applications.
(208)     Nor does the notified concentration give rise to competition concerns, if distinct
          relevant market were defined for internal sizing agents in the EEA or for surface
          sizing agents in the EEA. BASF DOM is not active in internal sizing agents. In
          surface sizing agents in the EEA, the Parties' combined share would be lower,
          namely [20-30]%. The share increment contributed by Solenis is [5-10]%. Post-
          Transaction, the combined entity would face three large rivals, namely Kurita
          ([20-30]%), Kemira ([20-30]%), and Mare ([5-10]%).
(209)     The Parties do not seem to compete closely in surface sizing agents in the EEA.
          BASF DOM only supplies surface sizing agents containing styrene acrylate
          (“SAE”). [CONFIDENTIAL – BASF DOM manufacturing process]. In contrast,
          Solenis’ surface sizing agent offering focuses on alkyl ketene dimer (“AKD”)
125 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
                                                         37
 ---pagebreak---            emulsions.126 AKD is an internal (not surface) sizing agent. Solenis
           [CONFIDENTIAL] and sells the blended product as a surface sizing agent
           alternative to SAE.
(210)      The market investigation did not reveal any competition concerns in relation to
           surface sizing agents in the EEA.127
(211)      In view of the above, taking into account the results of the market investigation
           and all the evidence available to it, the Commission concludes that the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market regarding surface sizing agents in the EEA.
         5.1.7. PAM-based Chemicals
(212)      BASF DOM supplies in the EEA PAM-based chemicals under the following
           trade names Catiofast (used as a CC), Luredur (used as DSA) and Percol,
           Organopol, and Telioform (used as RDA). Solenis supplies in the EEA PAM-
           based chemicals under the following trade names: PerForm, Novus, Polysan,
           Purachem, Hercules, Nopcofloc, Reten, and Stockopam (used as RDA), and
           Hercobond (used as DSA).
(213)      The Notifying Parties submitted that the notified concentration would not give
           rise to competition concerns in a relevant market including PAM-based
           chemicals in the EEA.
(214)      Set forth below are the market shares of the Notifying Parties and their
           competitors in PAM-based chemicals in the EEA (taking into account sales to
           end-customers by manufacturers and resellers):128
                                                           Table 7
                             PAM-based Chemicals in the EEA used in Paper and Pulp
                                                    Applications (2017)
                               Supplier              Sales (EUR million)       Market Share (%)
                      BASF DOM                      [CONFIDENTIAL]             [10-20]
                      Solenis                       [CONFIDENTIAL]             [10-20]
                      Combined                      [CONFIDENTIAL]             [20-30]
                      SNF                           [CONFIDENTIAL]             [30-40]%
                      Kemira                        [CONFIDENTIAL]             20-30%
                      ACAT                          [CONFIDENTIAL]             0-5%
                      Nalco                         [CONFIDENTIAL]             5-10%
                      Others                        [CONFIDENTIAL]             0-10%
                      Total                         213                        100
                           Source: Form CO
126 Solenis also supplies SAE-containing surface sizing agents, which represented approximately
    [CONFIDENTIAL]% of its surface sizing agent sales in the EEA in 2017. Solenis purchases SAE from Kemira.
127 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
128 According to the Notifying Parties, their combined market share would likely be lower if one looks at production
    market shares, i.e., if the sales were attributed to the manufacturers of PAM-based chemicals and not to the
    company that supplies the end-customer. Solenis sources from third parties PAM-based chemicals which
    correspond to more than [CONFIDENTIAL]% of its total sales. BASF DOM sources from third parties PAM-
    based chemicals which correspond to [CONFIDENTIAL]% of its total sales.
                                                             38
 ---pagebreak--- (215)      The Parties' combined share is [20-30]% in PAM-based chemicals in the EEA in
           2017. Post-Transaction, the combined entity would continue to face competitive
           constraints from several rivals with market shares exceeding 5%, such as SNF
           ([30-40]%) and Kemira (20-30%). Other competitors include Nalco (5-10%)
           and ACAT (0-5%).
(216)      The Parties do not seem to compete closely in PAM-based chemicals in the
           EEA. As explained above,129 Solenis has a service-orientated business model
           driven by customer intimacy while BASF DOM focuses on product
           manufacturing. [CONFIDENTIAL].130 [CONFIDENTIAL – information
           regarding internal BASF strategic documents].131 [CONFIDENTIAL –
           information           regarding          internal       BASF         strategic        documents].132
           [CONFIDENTIAL – information regarding internal BASF strategic
           documents].133
(217)      Finally, the market investigation did not reveal any competition concerns in
           relation to PAM-based chemicals in the EEA.134
(218)      In view of the above, taking into account the results of the market investigation
           and all the evidence available to it, the Commission concludes that the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market regarding PAM-based chemicals in the EEA for paper and pulp
           applications.
         5.1.8. cPAM-based Chemicals
(219)      BASF DOM supplies in the EEA cPAM-based chemicals under the following
           trade names: Catiofast (as CC) and Organopol and Percol (used as RDA).
           Solenis supplies in the EEA cPAM-based chemicals under the following trade
           names: Hercobond (as DSA) and Novus, Polysan, Purachem, and PerForm
           (used as RDA).
(220)       The Notifying Parties submitted that the notified concentration does not give
           rise to competition concerns in a relevant market including cPAM-based
           chemicals in the EEA.
(221)      Set forth below are the market shares of the Notifying Parties and their
           competitors in cPAM-based chemicals in the EEA (taking into account sales to
           end-customers by manufacturers and resellers):135
129 See paras. (151)-(152).
130 [CONFIDENTIAL].
131 [CONFIDENTIAL].
132 [CONFIDENTIAL].
133 [CONFIDENTIAL].
134 See Q69-Q71 of Q1 questionnaire to customers of end chemical products and Q.10 of Q2 - questionnaire to
    competitors in end chemical products and Q118-Q120 of Q2 questionnaire to questionnaire to competitors in end
    chemical products.
135 According to the Notifying Parties, their combined market share would likely be lower if one looks at production
    market shares, i.e., if the sales were attributed to the manufacturers of cPAM-based chemicals and not to the
    company that supplies the end-customer. Solenis sources from third parties cPAM-based chemicals which
    correspond to [CONFIDENTIAL]% of its total sales. BASF DOM sources from third parties cPAM-based
    chemicals which correspond to [CONFIDENTIAL]% of its total sales.
                                                              39
 ---pagebreak---                                                         Table 8
                           cPAM-based Chemicals in the EEA used in Paper and Pulp
                                                  Applications (2017)
                              Supplier             Sales (EUR million)      Market Share (%)
                      BASF DOM                    [CONFIDENTIAL]            [20-30]
                      Solenis                     [CONFIDENTIAL]            [10-20]
                      Combined                    [CONFIDENTIAL]            [30-40]
                      Kemira                      [CONFIDENTIAL]            [30-40]
                      Others                      [CONFIDENTIAL]            [20-30]
                      Total                       119                       100
                          Source: Form CO
(222)     The Parties' combined share is [30-40]% in cPAM-based chemicals in the EEA
          in 2017. Post-Transaction, the combined entity would continue to face
          competitive constraints from Kemira which would have equivalent market
          power as the merged entity. Market investigation participants also identified
          SNF, Buckman, and Nalco as important competitors in cPAM-based chemicals
          in the EEA.136
(223)     The market investigation confirmed the position of the Notifying Parties that the
          Transaction does not give rise to competition concerns in cPAM-based
          chemicals in the EEA. In more detail:
                  The market investigation showed that the combined entity would continue
                   to compete with several players in cPAM-based chemicals in the EEA
                   post-Transaction. The majority of responsive customers confirmed that
                   several strong rivals would continue exerting competitive constraints on
                   the combined entity. More than 75% of responsive customers stated that
                   post-merger, the number of players in cPAM-based chemicals would be
                   sufficient to guarantee competitive prices.137
                  In addition, the market investigation suggested that switching between
                   suppliers of cPAM-based chemicals is not difficult.138 Indeed, 31% of the
                   responsive customers stated that they have switched supplier of cPAM-
                   based chemicals in the past 3 years. At least two of the rivals of the
                   suppliers would have excess capacity in cPAM-based chemicals post-
                   Transaction.139 The vast majority of customers stated that they are not
                   aware of any capacity constraints in cPAM-based chemicals in the
                   EEA.140 Thus, it would not be possible for any manufacturer to raise
                   cPAM-based chemicals prices without losing business.
                  Finally, the market investigation indicated that the majority of customers
                   expect no or a positive impact of the Transaction on the supply of cPAM-
                   based chemicals in the EEA.141
136 Q60.4 of questionnaire Q1 to customers of end chemical products.
137 Q65 of questionnaire Q1 to customers of end chemical products.
138 Q63 of questionnaire Q1 to customers of end chemical products.
139 Q6.1 and Q16 of questionnaire Q2 to competitors in end chemical products and/or customers of raw materials /
    intermediates.
140 Q55 of questionnaire Q1 to customers of end chemical products.
141 Q68 of questionnaire Q1 to customers of end chemical products.
                                                           40
 ---pagebreak--- (224)      In view of the above, taking into account the results of the market investigation
           and all the evidence available to it, the Commission concludes that the notified
           concentration does not raise serious doubts as to its compatibility with the
           internal market regarding cPAM-based chemicals in the EEA.
         5.2. Non-Horizontal Analysis
(225)      The Transaction gives rise to vertical links between the upstream supply of
           raw/intermediate chemicals by BASF and the downstream manufacture and
           supply of paper and water treatment chemicals by Solenis.
(226)      These actual and potential vertical links give rise to the following vertically
           affected markets:142
                                                 Table 9
                              VERTICALLY AFFECTED MARKETS - OVERVIEW
                   Upstream Products                                   Downstream Products
DMAPA (Dimethylaminopropylamine)                       cPAM-based RDA, WSA, CC, water treatment
DETA (Diethylenetriamine)                              DSA, WSA, sizing
AEEA (Amino ethyl ethanol amine)                       RDA, DSA, CC, water treatment
                                                       cPAM-based RDA, WSA, CC, water treatment
AA (Adipic Acid)
                                                       PAE-based WSA and DSA
PVAm (Polyvinylamine)                                  DSA, RDA, WSA, CC
Non-ionic surfactants (alkoxylates)                    Defoamers, DSA, RDA, CC, water treatment
Anionic surfactants (sulfates/sulfonates)              Defoamer, DSA, RDA, CC, sizing, water treatment
EDTA (Edetic acid)                                     water treatment
PolyDADMAC (Poly-diallyldimethylammonium-chloride)     DSA, RDA, CC, sizing, water treatment
                                                       CC (fixation agents), Defoamers, RDA, WSA, water
PEI (Polyethyleneimine)
                                                       treatment
BME (2-Mercaptoethanol)                                water treatment
Glyoxal                                                gPAM-based DSA and WSA
Morpholine                                             water treatment
DEAE (Diethylaminoethanol)                             water treatment
ADAME (Dimethylaminoethyl acrylate) /ADAME Quat        cPAM-based RDA, WSA, CC, water treatment
         5.2.1. DMAPA (upstream) and CC, RDA, WSA, and water treatment chemicals
                   (downstream)
(227)      DMAPA is an intermediate commodity chemical used in various applications,
           including in particular personal care products (like shampoo and body wash). In
           the paper and water treatment industry, DMAPA is used to produce cPAM,
           which is turn used as an input for the manufacture of CC, RDA, DSA and water
           treatment chemicals.
(228)      BASF is active in the production of DMAPA. Solenis is BASF’s only DMAPA
           customer active in the downstream affected markets.
142 Where the individual or combined market share of the Parties is 30% or more in the upstream and/or the
     downstream market.
                                                       41
 ---pagebreak--- (229)    Solenis does not produce DMAPA but sources it on the merchant market mainly
         from BASF, but also, to a much more limited extent, from third party suppliers
         (namely [CONFIDENTIAL]).
(230)    The table below provides an overview of the vertical relationship between
         BASF and Solenis in relation to DMAPA and of the competitive landscape in
         the upstream EEA market.
                                            Table 10
                       UPSTREAM                                   DOWNSTREAM
                 BASF's market                                    BASF's main   Solenis' main
  Products                        Main competitors      Products
                      share                                        customer       supplier
                                  Eastman [10-20]%     cPAM-
                   Worldwide       Solvay [10-20]%     based
                    [50-60]%    Shandong [0-5]-[5-10]% RDA,
DMAPA                              Huntsman [0-5]%               Solenis (100%) BASF (>90%)
                                                       WSA,
                      EEA         Eastman [15-25]%     CC, water
                    [55-65]%      Huntsman [10-20]%    treatment
Source: BASF's estimates
         Input Foreclosure
(231)    The Commission considers that, despite the high market share of BASF on the
         upstream market for DMAPA in the EEA, the notified concentration does not
         raise any risks of input foreclosure since, pre-Transaction, BASF does not sell
         DMAPA to any customers active in the paper and water treatment industry other
         than Solenis. Therefore, no downstream rival could be foreclosed post-
         Transaction. Moreover, the Commission also notes that (i) alternative input can
         be used in the production of cPAM (such as ADAME/ADAMEQ) and (ii)
         alternative technologies compete with cPAM based chemicals in the
         downstream affected markets (e.g. cPAM based DSA compete with synthetic
         DSA based on other chemistries). Also, BASF faces two meaningful
         competitors in the EEA market for DMAPA (i.e. Eastman and Huntsman).
         Finally, the Commission notes that BASF is already vertically integrated pre-
         Transaction.
         Customer Foreclosure
(232)    The Commission considers that the notified concentration does not raise any
         risks of customer foreclosure in relation to the EEA supply of DMAPA since the
         demand that could potentially be foreclosed is minimal. The fact that Solenis is
         not an important source of demand for upstream competitors is corroborated by
         several elements. First, Solenis already sources most of its DMAPA
         requirements from BASF pre-Transaction. In 2017, less than 10% of Solenis'
         purchases of DMAPA were sourced from third parties. Second, DMAPA is used
         as an input in various applications. Therefore, sales to customers active in paper
         and water treatment chemicals only account for a fraction of the industry-wide
         capacity in the EEA (e.g. less than [0-20]% of BASF total capacity and around
         [20-40]% of its non-captive production in the EEA). Finally, in all the
         downstream affected markets, Solenis' market share is below 30% (see
         Section 5.1).
                                                   42
 ---pagebreak--- Conclusion
(233)     In light of the above and in view of the results of the market investigation and of
          all the evidence available to it, 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 DMAPA
          (upstream) and the manufacture and supply of CC, RDA, WSA, and water
          treatment chemicals (downstream).
        5.2.2. DETA (upstream) and DSA, WSA, and sizing agents (downstream)
(234)     DETA is an intermediate commodity chemical used in various applications (e.g.
          corrosion inhibitors, asphalt additives, detergent). In the paper industry, DETA
          is used as an input for the manufacture of DSA, WSA, and sizing agents.
(235)     BASF is active in the production of DETA, which it sells to several customers
          active in the downstream affected markets, including [CONFIDENTIAL].
(236)     Solenis does not produce DETA but sources it on the merchant market from
          various suppliers, namely [CONFIDENTIAL].
(237)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to DETA and of the competitive landscape in the
          upstream EEA market.
                                                    Table 11
                    UPSTREAM                                              DOWNSTREAM
            BASF's market                                                BASF's main       Solenis' main
Products                          Main competitors          Products
                 share                                                    customer           supplier
                                    Dow [20-30]%
               Worldwide          Huntsman [15-25]%
                                    Toso [10-20]%
               [10-20]%                                    DSA,            Solenis             BASF
                                  Delamine [10-20]%
DETA                                Akzo [10-20]%          WSA,      ([CONFIDENTIAL]%) ([CONFIDENTIAL]%)
                                                           sizing      [CONFIDENTIAL]    [CONFIDENTIAL]
                                  Delamine [30-40]%
                 EEA
                                    Dow [20-30]%
               [10-20]%             Akzo [20-30]%
Source: BASF's estimates
Input Foreclosure
(238)     The Commission considers that the notified concentration is unlikely to raise
          any risks of input foreclosure since BASF's market share on the upstream
          market for the supply of DETA is well below 30%143, both at EEA and global
          levels. Moreover, BASF faces several strong upstream competitors (such as
          Dow Chemical, Huntsman, Delamine, and AkzoNobel), with similar or higher
          market shares. Therefore, BASF's market power is unlikely to be sufficient to
          have a significant influence on the supply of DETA. Finally, the Commission
          also notes that BASF is already vertically integrated pre-Transaction.
143 See Non-Horizontal Merger Guidelines, para. 25.
                                                         43
 ---pagebreak--- Customer Foreclosure
(239)     The Commission considers that the notified concentration is unlikely to raise
          any risks of customer foreclosure in relation to the EEA supply of DETA for the
          following reasons. First, the Commission notes that DETA is used as an input in
          various applications and not only in the paper industry. According to the Parties,
          Solenis' total demand of DETA (i.e. [CONFIDENTIAL] kilotons) accounts for a
          minor share of the industry-wide capacity (less than [CONFIDENTIAL]% at
          EEA level). Moreover, the demand that could be foreclosed is further reduced
          by the fact that, pre-Transaction, BASF is already Solenis' largest supplier of
          DETA (accounting for [CONFIDENTIAL]% of its total requirements in 2017).
          It follows that, according to the Parties' estimates, only [10-20]% of the total
          demand sourced on the EEA merchant market could potentially be foreclosed.
          Third, in all the downstream affected markets, Solenis' market share is below
          30% (comprised between [10-20]% and [20-30]%) (see Section 5.1). Finally, the
          market investigation revealed no substantiated competition concerns from
          upstream competitors.144
Conclusion
(240)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, 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 DETA
          (upstream) and the manufacture and supply of DSA, WSA, and sizing agents
          (downstream).
        5.2.3. AEEA (upstream) and CC, RDA, DSA, and water treatment chemicals
                 (downstream)
(241)     AEEA is an intermediate commodity chemical used in various applications (e.g.
          epoxy hardeners, fuel additives, fabric softeners, etc.). In the paper and water
          treatment industry, AEEA is used as an input for the manufacture of CC, DSA,
          RDA, and water treatment chemicals.
(242)     BASF is active in the production of AEEA. BASF's sales of AEEA to customers
          active in the downstream affected markets are limited and account for around
          [5-10]% of its total capacity.
(243)     Solenis does not manufacture AEEA but procures it on the merchant market. In
          the EEA, Solenis sources AEEA from [CONFIDENTIAL].
(244)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to AEEA and of the competitive landscape in the
          upstream EEA market.
144 See Q13 of questionnaire Q3 to suppliers and competitors in raw materials.
                                                            44
 ---pagebreak---                                                     Table 12
                     UPSTREAM                                              DOWNSTREAM
                                                                        BASF's
            BASF's market
Products                          Main competitors            Products   main    Solenis' main supplier
                 share
                                                                       customer
                                 Huntsman [20-30]%
              Worldwide
                                    Akzo [20-30]%            RDA,                   [CONFIDENTIAL]
               [20-30]%                                      DSA, CC,
 AEEA                               Dow [15-25]%                          n.a.            BASF
                                                             water
                 EEA                Akzo 55-65%              treatment           ([CONFIDENTIAL]%)
              [15-25]%             Dow [15-25]%
Source: BASF's estimates
Input Foreclosure
(245)     The Commission considers that the notified concentration is unlikely to raise
          any risks of input foreclosure since BASF's market share on the upstream
          market for the supply of AEEA is well below 30%145, both at EEA and global
          levels. Moreover, BASF faces several strong upstream competitors (such as
          Huntsman, Dow Chemical, and AkzoNobel), with similar or higher market
          shares. Therefore, BASF's market power is unlikely to be sufficient to have a
          significant influence on the supply of AEEA. Finally, the Commission also
          notes that BASF is already vertically integrated pre-Transaction.
Customer Foreclosure
(246)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the supply of AEEA since the
          demand that could potentially be foreclosed is minimal. In this respect, the
          Commission notes that Solenis already sources a large part of its AEEA
          requirements from BASF pre-Transaction ([CONFIDENTIAL]%). The residual
          demand that could potentially be foreclosed is marginal: [CONFIDENTIAL] in
          2017 in the EEA which, according to the Parties, account for less than [0-5]% of
          the industry-wide capacity and less than [0-5]% of the total demand sourced on
          the EEA merchant market. Moreover, in all the downstream affected markets,
          Solenis' market share is below 30% (see Section 5.1).
Conclusion
(247)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, 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 AEEA
          (upstream) and the manufacture and supply of RDA, DSA, CC, and water
          treatment chemicals (downstream).
         5.2.4. Adipic Acid (upstream) and CC, RDA, DSA, and water treatment
                 chemicals (downstream)
(248)     Adipic acid is an intermediate commodity chemical, which as multiple
          downstream applications including in the automotive, textile, and electronic
145 See Non-Horizontal Merger Guidelines, para. 25.
                                                          45
 ---pagebreak---           industries. Adipic acid is also used, to a minor extent, in the paper and water
          treatment industry to produce cPAM and PAE resins for use as WSA, DSA,
          RDA, CC, and water treatment chemicals.
(249)     BASF is active in the production of adipic acid. BASF sells adipic acid to [very
          few] customers active in the downstream affected markets: Solenis,
          [CONFIDENTIAL].
(250)     Solenis does not produce adipic acid but sources it on the merchant market
          [CONFIDENTIAL].
(251)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to adipic acid and of the competitive landscape in
          the upstream EEA market.
                                                      Table 13
                    UPSTREAM                                                  DOWNSTREAM
                      BASF's                                                      BASF's main       Solenis' main
   Products                           Main competitors         Products
                  market share                                                      customer          supplier
                                      Shadon Haiti [10-
                                      20]%
                    Worldwide                             cPAM-based
                                      Investa [10-20]%    RDA, WSA, CC,        Solenis ([50-60]%)
Adipic Acid          [10-20]%                                                                     [CONFIDENTIAL]
                                      Asced [5-10]%       water treatment      [CONFIDENTIAL]
("AA")146                                                                                          BASF ([40-50]%)
                                      Radici [5-10]%      PAE-based WSA
                       EEA            Radici [30-40]%     and DSA
                     [40-50]%         Lanxess [10-20]%
Source: BASF's estimates
Input Foreclosure
(252)     The notified concentration does not raise input foreclosure concerns with respect
          to the supply of adipic acid to customers active in the paper and water treatment
          for the following reasons. Customers active in paper and water treatment
          chemicals only account for a minor fraction of the total demand for adipic acid,
          which is confirmed by the market investigation.147 In particular, the quantities of
          adipic acid sold by BASF, in 2017, in the EEA, to customers active in the
          downstream affected market were very limited: [CONFIDENTIAL] In other
          words, in the EEA, BASF could only potentially foreclose [very few]
          downstream rivals (namely [CONFIDENTIAL]). The volumes that these [very
          few] companies would need to source from alternative suppliers would be
          modest, that is to say [CONFIDENTIAL] kilotons representing less than [0-5]%
          of the total demand sourced on the EEA merchant market. It is very unlikely that
          upstream competitors would not have the capacity to supply such limited
          volumes to [CONFIDENTIAL]. In this respect, the Commission notes that, on
          the upstream market, BASF competes with several competitors: at worldwide
          level, BASF has a limited market share well below 30% ([10-20]%), and faces
          several players (Shadon Haiti, Invest, Asced, Radici); in the EEA, BASF has
          higher market share ([40-50]%) but faces two meaningful competitors (Radici
146 With respect to adipic acid, BASF's includes Solvay so as to take into account BASF's proposed acquisition of
    Solvay's nylon business ('see case M.8674, BASF/Solvay's EP and P&T Business).
147 See Q16.1 of questionnaire Q3 to suppliers of and competitors in raw materials.
                                                            46
 ---pagebreak---           and Lanxess). The Commission also notes that BASF is already vertically
          integrated pre-Transaction. Finally, the market investigation revealed no
          substantiated competition concerns from downstream competitors.148
Customer Foreclosure
(253)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the EEA supply of adipic acid since
          the demand that could potentially be foreclosed is minimal. As already
          mentioned, the market investigation confirmed the Parties’ claim that customers
          active in paper and water treatment chemicals only account for a minor fraction
          of the total demand for adipic acid.149 Moreover, Solenis already sources a large
          part of its adipic acid requirements from BASF pre-Transaction ([40-50]%).
          Therefore, the demand that could potentially be foreclosed is minimal, i.e. less
          than [0-5]% of the total demand sourced on the EEA merchant market. Also, in
          all the downstream affected markets, Solenis’ market share is below 30% (see
          Section 5.1). Finally, upstream competitors consider that Solenis is not a large
          enough buyer to raise customer foreclosure concerns in the adipic acid market150
          and, therefore, did not express any competition concerns in relation to this
          market.151
Conclusion
(254)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, 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 adipic acid
          (upstream) and the manufacture and supply of CC, RDA, DSA, and water
          treatment chemicals (downstream).
             5.2.5.      PVAm (upstream) and CC, RDA, DSA, WSA (downstream)
(255)     In the paper industry, PVAm is used an input for the manufacture of CC, RDA,
          DSA and WSA.
(256)     BASF is active in the production of PVAm. BASF sells PVAm directly to end-
          customers but also to Solenis.
(257)     Solenis does not produce PVAm but sources it on the merchant market
          exclusively from BASF, and [CONFIDENTIAL] before reselling it to end-
          customers (under the trade name Hercobon 6300).
(258)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to PVAm and of the competitive landscape in the
          upstream EEA market.
148 See Q69 of questionnaire Q2 to competitors in end chemical products.
149 See Q16.1 of questionnaire Q3 to suppliers of and competitors in raw materials.
150 See Q21 of questionnaire Q3 to suppliers of and competitors in raw materials.
151 See Q22 of questionnaire Q3 to suppliers of and competitors in raw materials.
                                                            47
 ---pagebreak---                                               Table 14
                   UPSTREAM                                       DOWNSTREAM
                BASF’s market                                       BASF’s main Solenis’ main
  Products                       Main competitors      Products
                  share (EEA)                                        customer     supplier
                                       SNF         DSA, RDA, WSA,     Solenis       BASF
PVAm                [60-70]%
                                       Acat        CC                (c. 100%)     (100%)
Source: BASF's estimates
Input Foreclosure
(259)    The Commission considers that, despite the high market share of BASF on the
         upstream market for PVAm in the EEA, the notified concentration does not raise
         any risks of input foreclosure since BASF’s sales to competitors active in the
         downstream affected markets are negligible pre-Transaction. Therefore, no
         downstream rival could be foreclosed post-Transaction. Moreover, the
         Commission also notes that alternative technologies compete with PVAm based
         chemicals in the downstream affected markets (e.g. PVAm based DSA compete
         with synthetic DSA based on other chemistries – see Section 4.3.1). Finally, the
         Commission also notes that BASF is already vertically integrated pre-
         Transaction.
Customer Foreclosure
(260)    The Commission considers that the notified concentration does not raise any
         risks of customer foreclosure in relation to the EEA supply of PVAm since pre-
         Transaction, BASF is Solenis’ exclusive PVAm supplier. In other words, the
         demand that could potentially be foreclosed is null.
Conclusion
(261)    In light of the above, and in view of the results of the market investigation and
         of all the evidence available to it, 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 PVAm
         (upstream) and the manufacture and supply of CC, RDA, DSA, and WSA
         (downstream).
            5.2.6.      Non-ionic surfactants (upstream) and defoamers, CC, RDA, DSA,
                        sizing agents, and water treatment chemicals (downstream)
(262)    Non-ionic surfactants are intermediate commodity chemicals used in various
         applications, such as detergents, cleaners, and personal care products. The most
         important synthetic class of non-ionic surfactants are alkoxylates. In the paper
         and water treatment industry, non-ionic surfactants are used to produce
         defoamers, DSA, RDA, CC and water treatment chemicals.
(263)    BASF is active in the production of non-ionic surfactants. In the EEA, BASF
         sells alkoxylates to several customers active in the paper and water chemical
         industry, including [CONFIDENTIAL].
(264)    Solenis does not manufacture alkoxylates [CONFIDENTIAL]. Solenis sources
         alkoxylates on the merchant market from many suppliers including
         [CONFIDENTIAL].
                                                    48
 ---pagebreak--- (265)      The table below provides an overview of the vertical relationship between
           BASF and Solenis in relation to non-ionic surfactants and of the competitive
           landscape in the upstream EEA market.
                                                      Table 15
                     UPSTREAM                                                   DOWNSTREAM
                      BASF’s                                                      BASF’s main        Solenis’ main
   Products                          Main competitors            Products
                   market share                                                    customer             supplier
                                      Oxiteno [5-10]%
                    Worldwide           Shell [5-10]%
Non-ionic            [10-20]%         Clariant [5-10]%
                                       Sasol [5-10]%       Defoamers, DSA,
Surfactants                                                RDA, CC, water              n.a.       [CONFIDENTIAL]
                                       Sasol [10-20]%      treatment
(alkoxylates)           EEA             Kolb [5-10]%
                     [20-30]%         Clariant [5-10]%
                                       Ineos [5-10]%
Source: BASF’s estimates
Input Foreclosure
(266)      The Commission considers that the notified concentration is unlikely to raise
           any risks of input foreclosure since BASF’s market share on the upstream
           market for the supply of alkoxylates is well below 30%152, both at EEA and
           global levels. Moreover, the competitive landscape is rather fragmented, BASF
           facing many competitors both globally and in the EEA (such as Sasol, Kolb,
           Clarian, Ineos, etc.), which is confirmed by the market investigation.153
           Therefore, BASF’s market power is unlikely to be sufficient to have a
           significant influence on the supply of alkoxylates. Finally, the Commission also
           notes that BASF is already vertically integrated pre-Transaction.
Customer Foreclosure
(267)      The Commission considers that the notified concentration does not raise any
           risks of customer foreclosure in relation to the EEA supply of alkoxylates since
           the demand that could potentially be foreclosed is minimal. As already
           mentioned, alkoxylates are used in various applications, including in particular
           detergents, cleaners, and personal care products. Customers active in paper and
           water treatment chemicals only account for a limited fraction of the total
           demand for alkoxylates. In particular, according to the Parties’ estimates
           Solenis’ purchases accounts for less than [0-5]% of the industry wide capacity in
           the EEA and less than [0-5]% of the total demand sourced on the EEA merchant
           market. The demand that could potentially be foreclosed is therefore very
           modest, which is confirmed by the market investigation.154 Also, in all the
           downstream affected markets, Solenis’ market share is below 30% (see Section
           5.1). Finally, the market investigation revealed no substantiated competition
           concerns from upstream competitors.155
152  See Non-Horizontal Merger Guidelines, para. 25.
153  See Q29 of questionnaire Q3 to suppliers and competitors in raw materials.
154  See notably Q25.1, Q26.2, and Q30 of questionnaire Q3 to suppliers and competitors in raw materials.
155  See Q31 of questionnaire Q3 to suppliers and competitors in raw materials.
                                                             49
 ---pagebreak--- Conclusion
(268)       In light of the above, and in view of the results of the market investigation and
            of all the evidence available to it, 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 Non-ionic
            surfactants (upstream) and the manufacture and supply CC, RDA, DSA, sizing
            agents, and water treatment chemicals (downstream).
               5.2.7.    Anionic surfactants (upstream) and defoamers, CC, RDA, DSA,
                         sizing agents, and water treatment chemicals (downstream)
(269)       Anionic surfactants are intermediate commodity chemicals used in various
            applications. The great majority of anionic surfactants is used in household
            detergent markets (for instance, laundry detergents, dishwashing products,
            household and industrial cleaners, etc.). In the paper and water treatment
            industry, anionic surfactants are used to produce defoamers, DSA, RDA, CC,
            sizing agents and water treatment chemicals. The Parties' activities overlap only
            with respect to sulfates and sulfonates, which constitute the bulk of anionic
            surfactants (ca 90%).
(270)       BASF is active in the production of sulfates and sulfonates, which it supplies to
            several customers active in paper and water treatment (namely
            [CONFIDENTIAL]) but these sales accounts for a negligible portion of its total
            capacity (less than [CONFIDENTIAL]%).
(271)       Solenis does not manufacture sulfates and sulfonates but sources them on the
            merchant market from several suppliers (such as[CONFIDENTIAL]). Solenis
            uses sulfates/sulfonates to produce CC.
(272)       The table below provides an overview of the vertical relationship between
            BASF and Solenis in relation to anionic surfactants and of the competitive
            landscape in the upstream EEA market.
                                                 Table 16
                  UPSTREAM                                          DOWNSTREAM
                    BASF's            Main                           BASF's main   Solenis' main
  Products                                           Products
                 market share      competitors                        customer       supplier
                                 Stepan [50-60]%
                  worldwide       Sasol [10-20]%
Anionic            [30-40]%      Galaxy [5-10]%
surfactants                      Innospec [0-5]% Defoamer, DSA,
                                                 RDA, CC, sizing, [CONFIDENTIAL] [CONFIDENTIAL]
(sulfates/                        Sasol [20-30]% water treatment
sulfonates)          EEA         Stepan [10-20]%
                   [40-50]%     Innospec [5-10]%
                                 Galaxy [5-10]%
Source: BASF's estimates
Input Foreclosure
(273)       The Commission considers that the notified concentration is unlikely to raise
            any risks of input foreclosure in relation to the supply of sulfates/sulfonates for
            the following reasons. Customers active in paper and water treatment chemicals
                                                        50
 ---pagebreak---            only account for a limited fraction of the total demand for sulfates/sulfonates,
           which is confirmed by the market investigation.156 In particular, the quantities of
           sulfates/sulfonates sold by BASF, in 2017, in the EEA, to customers active in
           the downstream affected market were very limited: [CONFIDENTIAL] tons,
           that is to say less than [0-5]% of the total EEA capacity and less than [0-5]% of
           the total demand sourced on the EEA merchant market. Therefore, the volumes
           that could potentially be foreclosed are modest and it is very unlikely that
           upstream competitors would not have the capacity to supply such limited
           volumes. In this respect, the Commission notes that, on the upstream market,
           BASF competes with many credible competitors both globally and in the EEA
           (e.g. Sasol, Stephan, Innospec, Galaxy, Kao, Cepsa, etc.), which is confirmed by
           Solenis’ current sourcing and by the market investigation. 157 Moreover, the
           Commission also notes that is already vertically integrated pre-Transaction and
           that the combined entity would have a modest position in most downstream
           affected markets (share below 30%  see Section 5.1), facing competition by
           several rivals, which would make any foreclosure strategy unprofitable. Finally,
           the the market investigation revealed no substantiated competition concerns
           from downstream competitors.158
Customer Foreclosure
(274)      The Commission considers that the notified concentration does not raise any
           risks of customer foreclosure in relation to the EEA supply of sulfates and
           sulfonates since the demand that could potentially be foreclosed is minimal. As
           already mentioned, the great majority of sulfates and sulfonates is used in
           household detergent markets. Customers active in paper and water treatment
           chemicals only account for a limited fraction of the total upstream demand. 159 In
           particular, according to the Parties’ estimates Solenis’ purchases
           ([CONFIDENTIAL] tons in 2017) accounts for less than [0-5]% of the industry
           wide capacity in the EEA. The demand that could potentially be foreclosed is
           therefore modest, which is confirmed by the market investigation.160 Also, [a
           large share] of Solenis’s sulfates/sulfonates purchases go into the CC
           downstream market, where Solenis’ market share is well below 30% (between
           [10-20]% and [20-30]%  see Section 5.1). Finally, the market investigation
           revealed no substantiated competition concerns from upstream competitors.161
Conclusion
(275)      In light of the above, and in view of the results of the market investigation and
           of all the evidence available to it, 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 anionic
           surfactants (upstream) and the manufacture and supply CC, RDA, DSA, sizing
           agents, and water treatment chemicals (downstream).
156 See notably Q34.1 and Q36 of questionnaire Q3 to suppliers and competitors in raw materials.
157 See Q95, Q96 and Q99 of questionnaire Q2 to competitors in end chemical products and Q38 of questionnaire Q3
    to suppliers and competitors in raw materials.
158 See Q 101 of questionnaire Q2 to competitors in end chemical products.
159 See notably Q34.1 and 36 of questionnaire Q3 to suppliers and competitors in raw materials.
160 See notably Q35.2 and Q39 of questionnaire Q3 to suppliers and competitors in raw materials.
161 See Q40 of questionnaire Q3 to suppliers and competitors in raw materials.
                                                            51
 ---pagebreak---              5.2.8.     EDTA (upstream) and water treatment chemicals (downstream)
(276)     EDTA is an intermediate commodity chemical used in various applications
          including water treatment chemicals but also laundry detergents, soap, textile
          processing, etc.
(277)     BASF is active in the production of EDTA. It sells EDTA and derivative
          products under the trade names Trilon, EDETA and Basosolve which serve the
          home-care, industrial & institutional cleaning, laundry, agricultural, personal
          care, textile, leather and oil industries. BASF also sells volumes of EDTA to
          several customers active in paper and water treatment industry, including
          Solenis.
(278)     Solenis does not produce EDTA internally but sources it on the merchant market
          from BASF only. Solenis uses EDTA to manufacture products for boiler
          applications sold under the tradename Amertrol.
(279)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to EDTA and of the competitive landscape in the
          upstream EEA market.
                                                    Table 17
                   UPSTREAM                                           DOWNSTREAM
                 BASF's market                                          BASF's main Solenis' main
   Products                        Main competitors          Products
                      share                                              customer     supplier
                   worldwide         Akzo [10-20]%
                                     Dow [10-20]%
                    [20-30]%      JackChem [20-30]% Water treatment
EDTA                                                                        n.a.    BASF (100%)
                                     Akzo [20-30]%       chemicals
                       EEA
                                     Dow [20-30]%
                    [30-40]%      JackChem [10-20]%
Source: BASF's estimates
Input Foreclosure
(280)     The Commission considers that the notified concentration is unlikely to raise
          any risks of input foreclosure since BASF's market share on the upstream
          market for the supply of EDTA does not exceed 30%162, both at EEA and global
          levels. Moreover, BASF faces several strong upstream competitors (such as
          Dow Chemical, AkzoNobel, and JackChem), with market shares above 15%.
          Therefore, BASF's market power is unlikely to be sufficient to have a significant
          influence on the supply of EDTA. Finally, the Commission also notes that
          BASF is already vertically integrated pre-Transaction.
Customer Foreclosure
(281)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the EEA supply of EDTA since pre-
          Transaction, BASF is Solenis' exclusive EDTA supplier. In other words, the
          demand that could potentially be foreclosed is null.
162 See Non-horizontal Merger Guidelines, para. 25.
                                                          52
 ---pagebreak--- Conclusion
(282)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, 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 EDTA
          (upstream) and the manufacture and supply water treatment chemicals
          (downstream).
             5.2.9.     PolyDADMAC (upstream) and CC, RDA, DSA, sizing agents, and
                        water treatment chemicals (downstream)
(283)     In the paper and water treatment industry, PolyDADMAC is used to produce
          CC, RDA, DSA, sizing agents, and water treatment chemicals.
(284)     BASF is no longer active in the production of this intermediate commodity
          chemical163 and only resells PolyDADMAC purchased from third parties (such
          as [CONFIDENTIAL]) for resale.
(285)     Solenis does not produce PolyDADMAC but procures it on the merchant market
          mainly from BASF and [CONFIDENTIAL]. Solenis uses PolyDADMAC to
          produce water treatment chemicals, sizing agents, and CC.
(286)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to PolyDADMAC and of the competitive
          landscape in the upstream EEA market.
                                                    Table 18
                    UPSTREAM                                             DOWNSTREAM
                                                                              BASF's
                 BASF's market                                                               Solenis' main
   Products                        Main competitors           Products          main
                      share                                                                     supplier
                                                                             customer
                    worldwide
                                     SNF [40-50]%
                 [5-10]% (resale
                                    Ecolab [30-40]%      DSA, RDA, CC,                     BASF ([40-50]%)
                       only)
PolyDADMAC                                               sizing, water           n.a.
                       EEA                               treatment
                                     SNF [50-60]%                                          [CONFIDENTIAL]
                  [0-5]% (resale
                                      Ecolab [0-5]%
                       only)
Source: BASF's estimates
Input Foreclosure
(287)     The Commission considers that the notified concentration is unlikely to raise
          any risks of input foreclosure since BASF's market share on the upstream
          market for the supply of PolyDADMAC is below 10%164, both at EEA and
          global levels. BASF faces several upstream competitors, including in particular
          SNF and Ecolab, which have market shares similar to or significantly higher
          than BASF. Moreover, BASF is a mere reseller, with no production capabilities,
          relying on competitors for its PolyDADMAC sourcing. Therefore, BASF is
163 BASF closed its PolyDADMAC manufacturing capacities, which were located in the EEA, the US, and Australia.
164 See Non-horizontal Merger Guidelines, para. 25.
                                                           53
 ---pagebreak---            unlikely to have the ability and sufficient market power to significantly
           influence the supply of PolyDADMAC.
Customer Foreclosure
(288)      The Commission considers that Solenis is not a large enough buyer to raise any
           risks of customer foreclosure in relation to the EEA supply of PolyDADMAC.
           In 2017, Solenis' total purchases of PolyDADMAC amounted to
           [CONFIDENTIAL] tons and less than EUR [CONFIDENTIAL], [40-50]% of
           which being sourced from BASF. Therefore, the demand that could potentially
           be foreclosed is marginal, that is to say less than [0-5]% of the total demand
           sourced on the EEA merchant market. Also, the Commission notes that, in all
           the downstream affected markets, Solenis' market share is below 30% (see
           Section 5.1).
Conclusion
(289)      In light of the above, and in view of the results of the market investigation and
           of all the evidence available to it, 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
           PolyDADMAC (upstream) and the manufacture and supply CC, RDA, DSA,
           sizing agents, and water treatment chemicals (downstream).
              5.2.10. PEI (upstream) and defoamers, CC, RDA, sizing agents, and water
                         treatment chemicals (downstream)
(290)      PEI, a polymer which can be used to produce paper and water treatment
           chemicals, as well as in other applications (e.g., detergent adhesives and
           cosmetics).
(291)      BASF is active in the production of PEI. BASF is the only manufacturer of PEI
           in the EEA. It sells PEI to only [very few] customers active in the paper and
           water treatment industry, namely Solenis [CONFIDENTIAL].
(292)      Solenis does not produce PEI but sources it on the merchant market. In 2017, in
           the EEA, Solenis sourced all its PEI requirements from BASF.
(293)      The table below provides an overview of the vertical relationship between
           BASF and Solenis in relation to PEI and of the competitive landscape in the
           upstream EEA market.
                                               Table 19
                 UPSTREAM                                            DOWNSTREAM
                                                                                         Solenis'
                   BASF's           Main
  Products                                        Products          BASF's main customer   main
                market share     competitors
                                                                                         supplier
                 worldwide     Nippon Shokubai CC        (fixation
                  [70-80]%        [20-30]%     agents),
                                                                                           BASF
PEI                                            Defoamers,          Solenis[CONFIDENTIAL]
                    EEA        Nippon Shokubai                                            (100%)
                                               RDA,         WSA,
                 [90-100]%         [0-5]%      water treatment
Source: BASF's estimates
                                                       54
 ---pagebreak--- Input Foreclosure
(294)     The Commission considers that the notified concentration is unlikely to raise
          any risks of input foreclosure in relation to the supply of PEI for several reasons.
          First, BASF only sells very limited quantities of PEI to Solenis and other
          customers active in the downstream affected markets ([CONFIDENTIAL]
          kilotons in the EEA in 2017, that is to say, [5-10]% of BASF's EEA capacity).
          Second, the JV would have a modest position in all downstream affected
          markets (shares below 30%) facing competition (i) from several rivals, but also
          (ii) from alternative technologies competing with PEI (e.g. PEI CC compete
          with CC based on other chemistries), which is corroborated by the limited
          volumes of PEI sold by BASF to customers active in the paper and water
          treatment industry. This would make any foreclosure strategy unprofitable.
          Finally, the Commission also notes that, pre-Transaction, BASF is already
          vertically integrated and that the market investigation revealed no substantiated
          competition concerns from downstream competitors.165
Customer Foreclosure
(295)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the supply of PEI since, pre-
          Transaction, BASF is Solenis' exclusive supplier in the EEA. In other words, the
          demand that could potentially be foreclosed is null.
Conclusion
(296)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, 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 PEI
          (upstream) and the manufacture and supply defoamers, CC, RDA, sizing agents,
          and water treatment chemicals (downstream).
        5.2.11 BME (upstream) and water treatment chemicals (downstream)
(297)     BME is used for various applications, including the oil and gas, agriculture,
          pharmaceutical, and optical industries. BME can also be used to produce
          polyacrylates, which are inputs for water treatment chemicals.
(298)     BASF is active in the manufacture of BME. In the EEA, Solenis is BASF's only
          BME customer active in the paper and water treatment industry.
(299)     Solenis does not produce in-house BME but sources it on the merchant market
          mainly from BASF.
(300)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to BME and of the competitive landscape in the
          upstream EEA market.
165 See Q85 of questionnaire Q2 to competitors in end chemical products.
                                                           55
 ---pagebreak---                                               Table 20
                   UPSTREAM                                        DOWNSTREAM
                BASF's market                                         BASF's main    Solenis' main
  Products                     Main competitors        Products
                     share                                             customer        supplier
                   worldwide    Sunion [40-50]%
                   [40-50]%    Chevron [10-20]%    Water treatment
                                                                     Solenis (100%) BASF ([90-100]%
BME                  EEA       Chevron [20-30]%    chemicals
                   [50-60]%     Sunion [10-20]%
Source: BASF's estimates
Input Foreclosure
(301)    The Commission considers that the notified concentration does not raise any
         risks of customer foreclosure in relation to the supply of BME since, pre-
         Transaction, BASF does not supply BME to any of Solenis' competitors on the
         downstream vertically affected markets. Therefore, the demand that could
         potentially be foreclosed is null. Moreover, alternative input can be used in the
         production of polyacrylates, such as mercaptopropionic acid (3-MPA), which
         Solenis is currently used for the same purpose as BME. Finally, The
         Commission also notes that in the downstream affected markets, the JV's market
         share is below 20% and that BASF is already vertically integrated pre-
         Transaction.
Customer Foreclosure
(302)    The Commission considers that the notified concentration does not raise any
         risks of customer foreclosure in relation to the supply of BME in the EEA since
         Solenis is not an important source of demand for upstream competitors. In fact,
         customers active in water treatment chemicals are not a major source of demand
         for BME. For instance, in 2017, only [0-5]% of BASF's total production of
         BME was sold to customers active in the downstream affected markets.
         Moreover, Solenis already sources the vast majority of its BME requirements
         from BASF pre-Transaction ([90-100]%) and has market shares well below 20%
         in the downstream affected markets. It follows that the demand that could
         potentially be foreclosed is minimal.
Conclusion
(303)    In light of the above, and in view of the results of the market investigation and
         of all the evidence available to it, 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 BME
         (upstream) and the manufacture and supply of water treatment chemicals
         (downstream).
        5.2.12. Glyoxal (upstream) and DSA, WSA (downstream)
(304)    Glyoxal is used for various applications, including textiles, leather, cosmetics,
         oil and gas, etc. In the paper industry, glyoxal is used to produce gPAM, which
         is in turned used to produce synthetic DSA and, to a more limited extent, WSA.
(305)    BASF is active in the production of glyoxal and sells it to several customers
         active in the paper industry, namely Solenis, [CONFIDENTIAL].
                                                    56
 ---pagebreak--- (306)     Solenis does not manufacture glyoxal but sources from BASF.
(307)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to glyoxal and of the competitive landscape in the
          upstream EEA market.
                                                     Table 21
                   UPSTREAM                                              DOWNSTREAM
                     BASF's                                                BASF's main  Solenis' main
  Products                          Main competitors          Products
                 market share                                               customer      supplier
                                   Weyl Chem [0-5]%
                   worldwide
                                  Chinese suppliers [70-
                    [20-30]%
                                          80]%           gPAM-based          Solenis,
Glyoxal                                                                                 BASF (100%)
                                  Weyl Chem [10-20]% DSA and WSA         [CONFIDENTIAL]
                      EEA
                                  Chinese suppliers [20-
                    [60-70]%
                                          30]%
Source: BASF's estimates
Input Foreclosure
(308)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the supply of glyoxal for the
          following reasons. First, on the upstream market, BASF has several competitors
          (notably from China), both at EEA and global levels. Moreover, at worldwide
          level, BASF's market share is well below 30%.166 Second, BASF sells very
          limited quantities of glyoxal to Solenis and other customers active in the
          downstream affected market: [CONFIDENTIAL] kilotons in the EEA in 2017,
          that is to say [0-5]% of BASF's total capacity. Third, on the downstream
          affected markets, the Parties have a moderate position facing several rivals (see
          Sections 5.1.4 and 5.1.5). In addition, alternative technologies compete with
          gPAM based chemicals in the downstream affected markets: according to the
          Parties' estimates, gPAM accounts for less than 10% of the synthetic DSA and
          about 11% of the WSA supplied in the EEA. The above would make any
          foreclosure strategy unprofitable. Finally, the Commission also notes that BASF
          is already vertically integrated pre-Transaction and that the market investigation
          revealed no substantiated competition concerns from downstream
          competitors.167
Customer Foreclosure
(309)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the supply of glyoxal since, pre-
          Transaction, BASF is Solenis' exclusive supplier in the EEA. In other words, the
          demand that could potentially be foreclosed is null.
Conclusion
(310)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, the Commission concludes that the notified
166 See Non-horizontal Merger Guidelines, para. 25.
167 See Q93 of questionnaire Q2 to competitors in end chemical products.
                                                           57
 ---pagebreak---           concentration does not raise serious doubts as to its compatibility with the
          internal market in relation to the vertical link between the supply of Glyoxal
          (upstream) and the manufacture and supply of DSA and WSA (downstream).
        5.2.13. Morpholine (upstream) and water treatment chemicals (downstream)
(311)     Morpholine is a chemical used for various applications, including corrosion
          inhibitors, crop protection agents, dyes, optical brighteners, pharmaceuticals,
          etc. It is also used as an input in water treatment chemicals.
(312)     BASF is active in the production of morpholine. In the EEA, BASF sells
          morpholine to mainly one customer active in the water treatment industry,
          namely Solenis.
(313)     Solenis uses morpholine to produce water treatment chemicals for use in boilers.
          It does not manufacture morpholine in-house but sources on the merchant
          market almost exclusively from BASF.
(314)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to morpholine and of the competitive landscape in
          the upstream EEA market.
                                               Table 22
                        UPSTREAM                                    DOWNSTREAM
                 BASF's market                                      BASF's main  Solenis' main
  Products                            Main competitors     Products
                      share                                            customer    supplier
                                     Huntsman [25-35]%
                    worldwide
                                     Chongqing 10-20%    Water
                    [20-30]%                                            Solenis      BASF
Morpholine                             Balaji 10-20%     treatment
                                                         chemicals   ([90-100]%)  (ca 100%)
                      EEA
                                     Huntsman [50-60]%
                    [30-40]%
Source: BASF's estimates
Input Foreclosure
(315)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the supply of morpholine since the
          demand that could potentially be foreclosed is quasi null. In 2017, Solenis
          accounted for [90-100]% of BASF's sales of morpholine to customers active in
          the downstream affected markets (BASF supplied negligible amount to one
          downstream rival, namely Synthron). In any event, customers active in water
          treatment chemicals only account for a limited fraction of the total demand for
          morpholine. Moreover, on the upstream market, both at worldwide and EEA
          levels, BASF has moderate market shares (comprised between 23% and 40%)
          and faces a larger competitor (Huntsman). Finally, the Commission also notes
          that the JV's market share on the downstream affected markets is well below
          20% and that BASF is already vertically integrated pre-Transaction.
Customer Foreclosure
(316)     The Commission considers that the notified concentration does not raise any
          risks of customer foreclosure in relation to the supply of morpholine since, pre-
          Transaction, Solenis sources morpholine almost exclusively from BASF, that is
                                                     58
 ---pagebreak---           to say [ca 100]% of its requirements in the EEA. In other words, the demand
          that could potentially be foreclosed is quasi null.
Conclusion
(317)     In light of the above, and in view of the results of the market investigation and
          of all the evidence available to it, 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 Morpholine
          (upstream) and the manufacture and supply of water treatment chemicals
          (downstream).
        5.2.14. DEAE (upstream) and water treatment chemicals (downstream)
(318)     DEAE is a chemical used for various applications. It is notably used as a
          neutralizing amine for industrial coating, an intermediate for various surfactants,
          and an input in water treatment chemicals.
(319)     BASF is active in the production of DEAE. BASF only sells DEAE to two
          customers active in the water treatment industry, namely Solenis and
          [CONFIDENTIAL].
(320)     Solenis uses DEAE in water treatment as corrosion inhibitor in boiler
          applications. It does not manufacture DEAE in-house but sources on the
          merchant market exclusively from BASF.
(321)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to DEAE and of the competitive landscape in the
          upstream EEA market.
                                               Table 23
                 UPSTREAM                                      DOWNSTREAM
                                                                                      Solenis'
                BASF's market        Main
  Products                                          Products  BASF's main customer     main
                     share       competitors
                                                                                     supplier
                  worldwide    Eastman 60-70%
                   [10-20]%     Sterling 5-10%   Water          Solenis ([60-70]%) BASF
DEAE                                             treatment
                     EEA       Eastman 40-50%                  [CONFIDENTIAL]      (100%)
                                                 chemicals
                    50-60%      Sterling 5-10%
Source: BASF's estimates
Input Foreclosure
(322)     The notified concentration does not raise input foreclosure concerns with respect
          to the supply of DEAE to customers active in the paper and water treatment for
          the following reasons. Customers active in paper and water treatment chemicals
          only account for a minor fraction of the total demand for DEAE. In particular, in
          the EEA, in 2017, other than Solenis, BASF only sold DEAE a limited amount
          of DEAE ([CONFIDENTIAL]) to one customer active in the downstream
          affected market (namely [CONFIDENTIAL]). In other words, in the EEA,
          BASF could only potentially foreclose one downstream rival and the volumes
          that this company would need to source from alternative suppliers would be
          very modest. It is very unlikely that upstream competitors would not have the
                                                     59
 ---pagebreak---            capacity to supply such limited volumes to [CONFIDENTIAL]. In this respect,
           the Commission notes that, on the upstream market, BASF competes with
           several competitors, including in particular Eastman, which has significant
           market shares at worldwide and EEA comprised between 40% and 70%).
           Moreover, the combined entity would have a modest position in the downstream
           markets (shares below 20%) facing competition by several rivals. This would
           make any foreclosure strategy unprofitable. Finally, the Commission also notes
           that BASF is already vertically integrated pre-Transaction.
Customer Foreclosure
(323)      The Commission considers that the notified concentration does not raise any
           risks of customer foreclosure in relation to the supply of DEAE since, pre-
           Transaction, BASF is Solenis' exclusive supplier in the EEA. In other words, the
           demand that could potentially be foreclosed is null.
Conclusion
(324)      In light of the above, and in view of the results of the market investigation and
           of all the evidence available to it, 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 DEAE
           (upstream) and the manufacture and supply of water treatment chemicals
           (downstream).
         5.2.15. ADAME/ADAMEQ (upstream) and CC, RDA, WSA, and water treatment
                  chemicals (downstream)
(325)      ADAME (also known as DMA3) is a chemical intermediate which is nearly
           always quaternised to produce ADAMEQ (also known as DMA3Q), for use as a
           co-monomer in the production cPAM, which is in turn used as an input in RDA,
           WSA, CC, and water treatment chemicals.
(326)      BASF produces ADAME but only for captive use. BASF's production capacity
           in the EEA is currently insufficient to meet BASF DOM's internal demand,
           which therefore requires BASF DOM to import and purchase ADAME from
           third parties. BASF manufactures ADAME (for captive use only) at its plant in
           [CONFIDENTIAL], as well as its plant in Nanjing (China) which is part of a
           joint venture with SINOPEC.168 BASF also owns ADAME production assets at
           its plant located in [CONFIDENTIAL]. However, pursuant to a tolling
           agreement concluded with SCL in 2009, in the context of the commitments in
           case M.5355 – BASF/CIBA169, the entire ADAME capacity in
           [CONFIDENTIAL] belongs to SCL. Under the above commitments, the tolling
           agreement had [CONFIDENTIAL] duration and was due to expire in
168 [CONFIDENTIAL].
169 In case M.5355, the Commission found that BASF's acquisition of sole control over CIBA would raise serious
    doubts in the EEA market for ADAME due to the reduction in the number of competitors from three to two. In
    order to address this concern, the commitments annexed to the clearance decision dated 12 March 2009 in case
    M.5355 – BASF/CIBA provided for the divestiture of the ADAME production assets located in BASF's
    Ludwigshafen plant (in Germany) to a new entrant. However, at the request of BASF and the remedy taker (SCL),
    the above commitments were subsequently modified to the effect that BASF could retain the legal ownership of
    the ADAME production assets and conclude a tolling agreement with SCL (see Commission decision dated 12
    October 2009).
                                                          60
 ---pagebreak---           [CONFIDENTIAL]. However, [CONFIDENTIAL] the tolling agreement, which
          was therefore automatically extended until at least [CONFIDENTIAL].
          [CONFIDENIAL].
(327)     BASF is also active in the production of ADAMEQ, [CONFIDENTIAL –
          information regarding BASF’s production]. [CONFIDENTIAL – BASF’s
          ADAMEQ customers and volumes sold in 2017].
(328)     Solenis does not manufacture in-house ADAME but sources it on the merchant
          market from [CONFIDENTIAL]. In 2016/2017, Solenis also purchased a
          limited amount of ADAMEQ on the merchant market, exclusively from BASF.
(329)     The table below provides an overview of the vertical relationship between
          BASF and Solenis in relation to ADAME/ADAMEQ and of the competitive
          landscape in the upstream EEA market.
                                                    Table 24
                 UPSTREAM                                             DOWNSTREAM
                   BASF's            Main                              BASF's main        Solenis' main
  Products                                              Products
               market share       competitors                            customer           supplier
                 Wordlwide
                               Arkema ([70-80]%)
                0% (captive
                                SCL ([20-30]%)
                  use only)
ADAME                                                  ADAMEQ        (captive use only) [CONFIDENTIAL]
                    EEA
                               Arkema ([70-80]%)
                0% (captive
                                SCL ([20-30]%)
                  use only)
                 worldwide
                                      n.a.
                  [20-30]%
                                                    cPAM-based
ADAMEQ              EEA                             RDA, WSA, CC,   [CONFIDENTIAL]        BASF (100%)
                      [20-            SNF           water treatment
                      30]%          Arkema
Source: BASF's estimates
Input Foreclosure
(330)     As regards the supply of ADAME, the Commission considers that the notified
          concentration is unlikely to raise any risks of input foreclosure since BASF is
          not active on the upstream merchant market in the EEA. Moreover, in terms of
          capacity, BASF's share in the EEA is below 30%170 (i.e. [20-30]% at its
          [CONFIDENTIAL] plant in [CONFIDENTIAL]), facing three alternative
          manufacturers, namely Arkema ([40-50]%)171, Kemira ([10-20]%), and SCL
          ([10-20]%). In this respect, the Commission notes that, under the above-
          mentioned tolling agreement entered into between BASF and SCL, the entire
          ADAME capacity at [CONFIDENTIAL] belongs to SCL, and therefore cannot
          be foreclosed by BASF, at least until [CONFIDENTIAL] and potentially
          beyond if SCL decides to do so. [CONFIDENTIAL].
(331)     [CONFIDENTIAL] This is corroborated by one internal document of BASF.
170 See Non-horizontal Merger Guidelines, para. 25.
171 [CONFIDENTIAL].
                                                           61
 ---pagebreak--- (332)      As regards the supply of ADAMEQ, the Commission considers that the notified
           concentration is unlikely to raise any risks of input foreclosure since BASF's
           market share on the upstream market is below 30%172 Both at EEA and global
           level. BASF also faces two strong competitors, namely SNF and Arkema.
           Moreover, the Commission also notes that (i) alternative input can be used in the
           production of cPAM (such as DMAPA) and (ii) alternative technologies
           compete with cPAM based chemicals in the downstream affected markets (e.g.
           cPAM based DSA compete with synthetic DSA based on other chemistries).
           The above would make any foreclosure strategy unrealistic and unprofitable.
           Finally, the Commission notes that BASF is already vertically integrated pre-
           Transaction.
Customer Foreclosure
(333)      As regards the supply of ADAME, although, the EEA customer base appears
           rather consolidated, with a limited number of significant customers (including
           Solenis), the Commission considers that the Transaction does not raise any risks
           of customer foreclosure.
(334)      First, the Parties would not have the ability to implement a customer foreclosure
           strategy since the JV would not have sufficient in-house capacity to internalise
           the volumes currently sourced by Solenis from [CONFIDENTIAL]. Indeed,
           […]* ADAME production capacity transferred to the JV is the production
           capacity located in [CONFIDENTIAL] (around [CONFIDENTIAL] kilotons per
           year) which, already pre-Transaction, is insufficient to fully meet the internal
           demand of BASF DOM (around[CONFIDENTIAL] kilotons a year). In fact, in
           2017, BASF DOM was required to import and purchase from third parties
           around[CONFIDENTIAL] kilotons of ADAME.
(335)      Moreover, BASF (excluding BASF DOM) would not have ADAME production
           capacity in the EEA. Indeed, as already mentioned, the entire ADAME capacity
           at [CONFIDENTIAL] belongs to SCL and not to BASF, at least until
           [CONFIDENTIAL]. Outside the EEA, BASF's only ADAME production
           capacity is in the Nanjing plant (in China) which has currently no spare
           capacity.173 Moreover, this Nanjing plant is operated under a joint venture with a
           third party (SINOPEC) and will not be part of the JV. Given the involvement of
           a third party, it is unlikely that the Chinese joint venture would supply ADAME
           to the JV (combining BASF DOM and Solenis) at [CONFIDENTIAL] . Indeed,
           since the JV is jointly controlled by Solenis, it would have to negotiate, with the
           Chinese joint-venture, supply terms and conditions on the same basis as any
           other third party customers. In addition, importing into the EEA ADAME
           produced in the Chinese joint venture would entail higher logistic and
           transportation costs (close to [0-20]% according to the Parties' estimates), as
           well as higher risks in terms of supply reliability, which would make a
           foreclosure significantly less profitable and thus less likely.
* Should read: “the only”
172 See Non-horizontal Merger Guidelines, para. 25.
173 See the Notifying Parties' response to RFI 6, question 5.
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 ---pagebreak--- (336)      Second, although the customer base is rather consolidated, […]* the Parties,
           Solenis' total demand […]** for less than 20% of the total upstream ADAME
           merchant market in the EEA and even less at worldwide level ([10-20]%),
           which would also undermine the Parties' ability to implement a customer
           foreclosure strategy. Furthermore, the fact that, in the downstream affected
           markets, cPAM based chemicals compete with chemicals based on other
           chemistries and that Solenis' market shares are below 30% (see Section 5.1)
           would also make a customer foreclosure less profitable and thus less likely.
(337)      Finally, the Commission notes that, even if the Parties had the ability and
           incentives to implement a customer foreclosure strategy, which in light of the
           above considerations appears unlikely, it is unclear whether it would have a
           significant detrimental effect on end-customers on the downstream affected
           markets as it would allow the Parties to internalise pre-existing double mark-
           ups.174
(338)      As regards the supply of ADAMEQ, the notified concentration does not raise
           any risks of customer foreclosure since, pre-Transaction, BASF is Solenis'
           exclusive supplier in the EEA. In other words, the demand that could potentially
           be foreclosed is null.
Conclusion
(339)      In light of the above, and in view of the results of the market investigation and
           of all the evidence available to it, 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
           ADAME/ADAMEQ (upstream) and the manufacture and supply of CC, RDA,
           WSA, and water treatment chemicals (downstream).
6.       CONCLUSION
(340)      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
                                                        Member of the Commission
* Should read: “according to”
** Should read: “accounts”
174 See Non-horizontal Merger Guidelines, para. 13.
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