CELEX: 32014M7162
Language: en
Date: 2014-05-05 00:00:00
Title: Commission Decision of 05/05/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7162 - INEOS / SSG SOLVENTS BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 05.5.2014
C(2014) 3052 final

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|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7162 – INEOS / SSG Solvents Business
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

 1) On 25 March 2014, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation
    by which the undertaking INEOS Investments S.A. (Switzerland), controlled by INEOS Group ("INEOS", Switzerland), hereinafter "the  Notifying
    Party", acquires the solvents business (the 'SSG Solvents Business') of Sasol Solvents Germany GmbH ('SSG', Germany), by way of purchase  of
    assets[2] (hereinafter "the Transaction"). INEOS and SSG are collectively referred to as "the Parties".

THE PARTIES

 2) INEOS is active in the production of a wide range of chemicals, including synthetic ethanol used for industrial purposes, which is  produced
    at its plant in Grangemouth, UK. INEOS is a global manufacturer of petrochemicals, speciality  chemicals  and  oil  products,  operating  51
    manufacturing facilities in 11 countries throughout the world.

 3) SSG Solvents Business is active in the production of a variety of oxygenated solvents, including isopropanol ('IPA'),  methyl  ethyl  ketone
    ('MEK') and synthetic ethanol, as well as certain fine chemicals. SSG Solvents Business consists of two manufacturing facilities, Herne  and
    Moers, both located in Germany. Synthetic ethanol is produced only in Herne.

       THE OPERATION

 4) On 17 December 2013, the Parties signed an Asset Purchase Agreement pursuant to which INEOS Investments S.A. accepted  to  acquire  the  SSG
    Solvents Business, namely the manufacturing plants Herne and Moers, tangible assets, traded receivables,  raw  materials  and  supplies,  IP
    rights and know-how qualified as business with market presence. Therefore, the Transaction constitutes a concentration within the meaning of
    Article 3(1) (b) of the Merger Regulation.

       EU DIMENSION

 5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR  […]  million[3]  (INEOS:  EUR  […]  billion;  SSG
    Solvent Business: EUR […] million). Each of them has an EU-wide turnover in excess of EUR […] million (INEOS: EUR […] billion;  SSG  Solvent
    Business: EUR […] million), and they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same  Member
    State. The notified operation therefore has an EU dimension.

       COMPETITIVE ASSESSMENT

 6) The Transaction creates a horizontal overlap on the market for industrial ethanol, which is an affected market within  the  meaning  of  the
    Merger Regulation. The Transaction also creates several vertical links, in particular between propylene and IPA, IPA and  isopropyl  acetate
    ('IPAC'), ethylene and ethanol, ethanol and e-series glycol ethers, as well as raffinate 2 and  MEK.  Vertically  affected  markets  concern
    propylene upstream and IPA downstream as well as IPA upstream and IPAC downstream.

1 ETHANOL

 7) Ethanol (ethyl alcohol) is a colourless, flammable liquid with a characteristic odour. Ethanol can either  be  produced  synthetically  from
    ethylene, a feedstock which is extracted from crude oil or natural gas, or through fermentation from sugars derived  from  plants  or  other
    agricultural or non-agricultural products.

 8) Ethanol produced synthetically from ethylene is chemically identical to ethanol produced  by  fermentation.  Both  processes  result  in  an
    ethanol-water based product. However, ethanol produced through the fermentation  process  contains  various  impurities  which  have  to  be
    additionally removed in order to achieve the same grades and the same purity as with synthetic ethanol.

 9) There are three main types of ethanol according to its commercial  application:  fuel  ethanol,  potable  ethanol  and  industrial  ethanol.
    Industrial ethanol can be both synthetic and fermentation ethanol, with the latter accounting for 60-70% of the industrial ethanol  produced
    in the EEA. The remainder of industrial ethanol demand is met by synthetic ethanol, which is not used as potable or fuel ethanol.

10) Industrial ethanol is produced in two main grades: hydrous ethanol (96% purity) and  anhydrous  ethanol  (99%  purity).  Typically,  hydrous
    ethanol contains not less than 95.1% and not more than 96.9% ethanol. Anhydrous ethanol contains not less than  99.5%  ethanol,  and  up  to
    99.9%.

11) Within the industrial ethanol category there is a range of different end uses: anhydrous ethanol is a higher quality grade and once  it  has
    been "finished", it contains fewer impurities. It can thus be used in applications such as pharmaceuticals, cosmetics and  inks.  The  lower
    "unfinished" 96% ethanol is used for applications, where the content of ethanol and/or impurities is less stringent: automotive screen wash,
    paints, inks, dyes and cosmetics.

1 Product market definition

12) In previous decisions the Commission did not conclude on the market definition for industrial ethanol. However,  the  Commission  considered
    the market for fermentation ethanol as a distinct product market which could be further  subdivided,  based  on  its  different  grades  and
    specific uses, into (i) bio-ethanol for motor fuels, (ii) beverages and (iii) chemicals.[4]

13) In the case at hand, the market investigation confirmed that from the demand side, industrial  ethanol  cannot  be  substituted  with  other
    solvents or chemical products (for example: isopropanol), due to technical specificities and regulatory obstacles.[5]

14) Therefore, for the purpose of the present case, the Commission will analyse the market for industrial ethanol as a separate  product  market
    and will assess the relevance of further subdividing this market based on the following criteria: (i) the feedstock used for the  production
    of industrial ethanol, and (ii) the various grades used in different applications by end customers.

 i. Possible segmentation between fermentation ethanol and synthetic ethanol

15) The Notifying Party submits that the relevant product market should be defined  as  comprising  all  industrial  ethanol,  whether  produced
    synthetically or by fermentation. In particular, the Notifying Party asserts  that  both  fermentation  and  synthetic  ethanol  are  highly
    substitutable and that there is a clear trend since the year 2000 to switch from synthetic to  fermentation  ethanol  for  industrial  uses,
    which has also been encouraged, for environmental reasons, by the public authorities in Europe. In this regard the  Notifying  Party  points
    out that in recent years both the quality and consistency of ethanol produced from agricultural feedstock has improved leading to  increased
    substitutability with synthetic ethanol. A number of major fermentation ethanol producers such  as  Tereos,  France  Alcools,  Silcompa  and
    Hungrana, and Kraul & Wilkening u. Stelling produce industrial ethanol, including anhydrous ethanol with 99% purity.

16) In addition, the Notifying Party submits that customers of industrial ethanol for all industrial  applications  are  in  principle  able  to
    switch between synthetic and fermentation ethanol. A strong indicator for this substitutability is the fact that customers do not specify in
    their tenders' specifications the production method of the  ethanol  demanded,  but  instead  focus  on  the  required  ethanol's  technical
    characteristics such as maximum water content, colour and odour, impurity level, etc.

17) As regards pharmaceuticals applications, the  Notifying  Party  submits  that  historically  pharmaceuticals  companies  predominantly  used
    synthetic ethanol. However, it is submitted that this has significantly changed and currently a number  of  fermentation  ethanol  producers
    supply ethanol that meet the standards established in the pharmaceutical industry, e.g. the European Pharmacopoeia.

18) Finally, the Notifying Party points out that the substitutability of synthetic and fermentation ethanol can be demonstrated by the fact that
    during periods when, as a result of force majeure, outages occurred of synthetically-produced ethanol,  customers  did  not  switch  between
    INEOS and SSG Solvents Business (the only two producers of synthetic ethanol in Europe). According to  the  Notifying  Party,  the  lack  of
    switching between producers of synthetic ethanol indicates that customers  found  it  possible  to  switch  from  synthetically-produced  to
    fermentation-produced ethanol during force majeure events.

19) The Commission notes that, on the basis of the results of the  market  investigation,  Parties'  arguments  are  confirmed.  In  particular,
    customers confirmed the very large degree of substitutability between  synthetic  and  fermentation  ethanol  of  the  same  grade.[6]  Some
    customers indicated that the choice between synthetic and fermentation ethanol is mainly price driven. More than half of the customers  also
    explained that they store synthetic and fermentation ethanol of the same grade in the same storage tanks.[7]

20) Some respondents to the market investigation mentioned that a substitution of synthetic ethanol by fermentation ethanol is either limited or
    even impossible given that fermentation ethanol contains a level of impurities making it unsuitable for their manufacturing process (certain
    pharmaceutical products). Nevertheless, some respondents stated their willingness  to  switch  to  fermentation  ethanol  if  the  price  of
    synthetic ethanol would increase permanently by 5-10%. In addition, those respondents which stated that they would not  be  able  to  switch
    either represent only a small portion of the overall demand for industrial ethanol or are distributors (including  distributors  specialised
    in synthetic ethanol) whose customers would have the ability to switch to fermentation ethanol.

21) Switching from synthetic to fermentation ethanol may in some cases also require the registration of a new formulation of the  pharmaceutical
    product manufactured and to apply for new approvals from the competent authorities. In addition, some  pharmaceutical  companies  emphasised
    the need to go through a complex internal process in order to assess the suitability of the fermentation ethanol for a given application.

22) The Commission observes, following the results of the market investigation, that distributors play an  important  role  in  the  market  for
    industrial ethanol, including anhydrous ethanol.[8] SSG Solvents Business sells […]% of its production of anhydrous ethanol via distributors
    and INEOS […]%. As the producers of ethanol have little visibility regarding  the  customers  served  by  distributors,  it  would  be  very
    difficult for INEOS to enforce a hypothetical price discrimination targeted at those customers for whom switching is more difficult. At  the
    same time, INEOS would not have an incentive to increase prices of anhydrous ethanol to all customers,  as  the  loss  of  volumes  for  the
    application where a switch to fermentation ethanol is easy would largely outweigh possible gains for the applications where  the  switch  is
    more difficult.

23) It is important to note that the customers reporting limited or no substitutability are not representative of a specific market  niche,  but
    rather reflect individual production processes and/or preferences. Indeed, the vast majority of respondents from the pharmaceutical industry
    confirmed to use synthetic ethanol and fermentation ethanol interchangeably.[9] Some reported that they have successfully switched, in  part
    or fully, from synthetic to fermentation ethanol in recent years, to profit from the lower cost of fermentation ethanol  or  to  maintain  a
    suitable number of available suppliers (typically two or three). According to these respondents, the switch did not  prove  problematic.  In
    any event, the pharmaceutical industry represents around [10-20]% of the total demand for industrial ethanol.[10]

24) While the Commission acknowledges that certain pharmaceutical companies are still strongly  linked  to  synthetic  ethanol,  the  Commission
    considers that there is a well-established substitutability between fermentation and synthetic ethanol with the  same  grade  for  the  vast
    majority of customers and for a significant number of applications in which industrial ethanol is used, such as the ink industry,  cosmetics
    and to a certain extent also the pharmaceutical industry. Taking all these elements into account, synthetic and fermentation ethanol  should
    be considered as part of the same product market.

ii. Possible segmentation between hydrous ethanol and anhydrous ethanol

25) The Commission has assessed the possibility to subdivide the market for industrial ethanol  market  based  on  the  various  grades,  namely
    hydrous (minimum 95% of purity) and anhydrous (minimum 99.5% of purity) since each of them is used in specific applications.

26) To produce hydrous ethanol, the ethanol base (produced synthetically or by  fermentation)  is  distilled.  In  order  to  produce  anhydrous
    ethanol, the hydrous ethanol must be dehydrated which requires an additional step in the production process. The dehydration is done by  way
    of molecular sieve drying; a generally available technology which is used widely by ethanol producers.

27) On the basis of the market investigation, the Commission notes that customers distinguish between hydrous and  anhydrous  ethanol.  A  large
    majority of industrial ethanol customers cannot substitute hydrous and anhydrous ethanol in their  applications.[11]  Respondents  clarified
    that applications using anhydrous ethanol require minimisation of the water in the manufacturing process  of  a  given  product;  therefore,
    substitution with hydrous ethanol containing even more water is inappropriate. While  applications  using  hydrous  ethanol  could  in  most
    instances use anhydrous ethanol instead, very little switching actually takes place because of the higher cost of anhydrous ethanol.

28) As to the supply side, the  Commission,  taking  into  account  the  results  of  the  market  investigation,  observes  a  high  degree  of
    substitutability. As mentioned in (26) above, the production of anhydrous ethanol requires an additional production  step  (molecular  sieve
    drying). Producers which have invested into this technology are able to switch from producing hydrous ethanol to anhydrous ethanol and  vice
    versa in a reasonable time and without incurring significant costs. For other producers, such a switch is not easily possible in  the  short
    term, as it requires additional capital investments.[12] The market investigation indicated  that  a  significant  number  of  producers  of
    fermentation ethanol have indeed invested in the molecular sieve drying technology and are therefore able  to  switch  between  hydrous  and
    anhydrous ethanol, subject only to production capacity constraints.

29) Based on these elements, the Commission considers that the market for industrial ethanol can be further subdivided into hydrous ethanol  and
    anhydrous ethanol due to limited substitutability from the demand side. Nevertheless, the precise scope of the product market definition can
    be left open for the purpose of the present case since the proposed transaction does not raise serious doubts under either market definition
    as to its compatibility with the internal market.

2 Geographic market definition

30) In previous decisions, the Commission has considered the possible geographic market for ethanol as either Western Europe[13] or the EEA.[14]

31) The Notifying Party submits that the geographic market for industrial ethanol should be defined as EEA-wide given that the major  industrial
    ethanol producers supply customers across the EEA and that the transport costs for industrial ethanol typically account for only […]% of the
    average sale price in Europe.

32) Considering the results of the market investigation, the Commission notes that the vast majority of suppliers deliver industrial ethanol  to
    customers at regional level, e.g.  North  Western  Europe  ("NWE")  comprising  Belgium,  Denmark,  France,  Germany,  Ireland,  Luxembourg,
    Netherlands, Norway, Sweden and the UK. The market investigation also revealed that customers purchase anhydrous ethanol in a perimeter of a
    certain radius from their manufacturing plant or of a warehouse.

33) Moreover, on the basis of the market investigation, the Commission observes different purchasing pattern  regarding  hydrous  and  anhydrous
    industrial ethanol. Customers buying anhydrous ethanol source the necessary volumes within a certain radius from the  production  plant.  On
    average, anhydrous ethanol is typically transported between 400 km and 1000 km, mainly by truck.[15] The radius is higher for larger  orders
    supplied either to big customers or to distributors; in this case ethanol  is  generally  transported  by  vessel  due  to  lower  transport
    cost.[16] In contrast, customers purchasing hydrous ethanol often source from producers located anywhere  in  the  EEA,  or  even  globally,
    albeit via a trader located in the EEA.[17]

34) In addition, some customers mentioned certain barriers limiting the direct import of industrial ethanol from third countries, such as import
    duties and the need to comply with certain national regulations, e.g. licences requirements since  ethanol  is  a  flammable  good.[18]  One
    ethanol customer pointed out that the reliance on vessel deliveries from outside the EU  would  render  the  purchaser  more  vulnerable  to
    disruption.[19]

35) Based on the result of the market investigation, the Commission considers that  the  market  for  anhydrous  industrial  ethanol  should  be
    regarded as regional, e.g. North Western Europe, whereas the market for hydrous ethanol could be considered as EEA-wide.

36) Ultimately, the precise scope of the geographic market definition of industrial ethanol (which comprises both hydrous and anhydrous ethanol)
    can be left open since the transaction does not raise serious doubts under either geographic market definition as to its compatibility  with
    the internal market.

3 Competitive Assessment

37) INEOS and SSG Solvents Business are the only EEA producers of synthetic ethanol. INEOS' facility is  located  in  Grangemouth,  UK  and  SSG
    Solvents Business' ethanol plant is in Herne, Germany.

38) The Notifying Party estimates the total size of the market for industrial ethanol in the EEA  at  […]kt.  According  to  the  Parties'  best
    estimates, their combined market shares on the market for industrial ethanol in 2013 are approximately [20-30]% in volume  and  [20-30]%  in
    value (with an increment of [5-10]%) in the EEA. The Notifying Party estimates, furthermore, that both Parties' market shares have  steadily
    declined since 2010 both in relative and absolute terms. Their submission shows that the Parties' combined market shares have decreased from
    [30-40]% in 2010 to [20-30]% in 2013.

39) The Notifying Party explains that the steady decline of INEOS' and SSG Solvents Business' market shares is part of an overall trend  towards
    reduced consumption of synthetic and increased use of fermentation ethanol. They  further  explain  that  this  trend  is  due  to  (i)  the
    escalation of the oil prices over the last ten years which also drove the price of the ethylene feedstock  up,  which  in  turn  forced  the
    customers to seek alternatives and (ii) the introduction of renewable fuels legislation in the EU and US in the early 2000s which lead to  a
    significant increase in the production of new capacity for fermentation ethanol. This capacity allowed the fermentation ethanol producers to
    increase their presence also in the industrial ethanol sector. In addition, as a result of the technical progress during  the  recent  years
    (molecular sieving), the fermentation ethanol producers are capable to produce anhydrous ethanol in a more cost-effective way  than  in  the
    past.

40) The Notifying Party submits that the Parties face competition from a large number of strong competitors such as Tereos (with an  EEA  market
    share of [10-20]% in value), Alcogroup ([10-20]%), France Alcools ([5-10]%) and Cargill ([0-5]%), which all produce a full range of  hydrous
    and anhydrous ethanol grades for use across all industrial segments. The Notifying Party also points out that ethanol  rectifiers,[20]  such
    as KWST, Rysen Alcools and Silcompa are increasing their competitive pressure on the Parties.

41) On a narrower segmentation for anhydrous ethanol, the Parties' combined market shares in value are [20-30]% in the EEA  and  [20-30]%  on  a
    Western Europe[21] market facing strong competition from essentially the same companies as on the wider EEA market for  industrial  ethanol.
    Even assuming a narrower geographic market definition, namely North Western Europe[22], the Parties' combined market shares will not  exceed
    [20-30]%.

42) The Parties predominantly produce anhydrous ethanol: in 2012, Ineos sold […] kt of anhydrous ethanol and only […] kt of hydrous ethanol; SSG
    Solvents Business had sales in 2012 of […] kt of anhydrous ethanol and […] kt of hydrous ethanol. Accordingly, their presence on the  market
    for hydrous ethanol is very limited and this market is dominated by producers of fermentation  ethanol.  Furthermore,  the  Notifying  Party
    points out that distributors of industrial ethanol exert significant competitive pressure on synthetic ethanol  producers  as  they  usually
    supply also fermentation ethanol. In addition, some distributors are also producing their own industrial  ethanol.  Distribution  agreements
    are not exclusive and distributors often undercut industrial ethanol producers' direct sales.

43) The Notifying Party submits that industrial ethanol customers are highly price-sensitive. In view of the substitutability for  both  hydrous
    and anhydrous ethanol grades, customers can and do easily switch suppliers putting  pressure  on  the  prices.  The  supply  agreements  are
    predominantly short to medium term; therefore the customers can put suppliers under pressure  with  each  other  on  a  regular  basis.  The
    Notifying Party further states that the industrial ethanol market is characterised by a significant overcapacity,  estimated  at  […]%  EEA-
    wide. Despite this fact, Cargill has announced to open a […]kt production plant for industrial ethanol (fermentation ethanol) in Germany  in
    2015. The new plant will produce hydrous and anhydrous ethanol destined for the German and European beverage,  cosmetic  and  pharmaceutical
    industries.

44) Finally, the Parties submit that in November 2013, given the challenging market conditions in Europe for the producers of synthetic ethanol,
    SSG announced that it would close down its ethanol facility in Europe. SSG's decision was based on a thorough assessment  of  its  strategic
    options regarding its underperforming solvents business. […] Still according to the Parties, the rationale for INEOS  to  buy  SSG  Solvents
    Business is that INEOS can extend its benefit of backward integration into ethylene, the  most  significant  input  for  the  production  of
    ethanol, to the SSG Solvents Business which is currently dependent on third party suppliers of ethylene. It is further submitted that  INEOS
    buys the SSG Solvents Business in order to complement its existing portfolio of solvent products and benefit from backward integration  also
    in the other products currently produced by SSG (for which INEOS produces feedstock).

45) The market investigation confirmed that, whilst INEOS and Sasol are close competitors, customers can source at least a substantial  part  of
    their demand for industrial ethanol, including anhydrous one, from other suppliers which have sufficient spare capacity.[23]  In  fact,  the
    vast majority of industrial ethanol customers are multi-sourcing mainly due to security of supply reasons in order to be  able  to  mitigate
    the risk in case of shortage or to negotiate better contractual conditions.[24]

46) Overall, since Sasol publicly announced its plan to close the Herne production plant, customers do not consider that the  transaction  would
    have a major impact on competition, since the market structure will not deteriorate compared to the situation in which that plan for closure
    would be implemented.[25] Some customers using synthetic ethanol have started considering  an  alternative  supply  source  of  fermentation
    ethanol.[26] Some customers also indicated that, provided the  Herne  plant  will  continue  operating,  the  Transaction  will  ensure  two
    production points for synthetic ethanol in the EEA and therefore will be positive from the point of view of security of supply.  The  market
    investigation confirmed that there is currently an overcapacity on the market for both hydrous  and  anhydrous  industrial  ethanol.[27]  In
    addition, one competitor, Cargill Deutschland GmbH, is currently building up a new production plant for industrial ethanol  in  Germany  for
    hydrous and anhydrous ethanol (see (43)).

47) Furthermore, the majority of the industrial ethanol customers (including the customers from the pharmaceutical sector that had stated not to
    be able to switch between synthetic and fermentation ethanol) do not consider that the proposed transaction would lead to a  price  increase
    for anhydrous ethanol. They emphasised the competitive pressure exercised by the fermentation ethanol producers which will  lead  to  stable
    prices or to price decreases for anhydrous ethanol. This opinion is shared by the majority of competitors. While some  competitors  did  not
    exclude possible price increases, they did not provide concrete elements that could support such price movement.[28]

48) The Commission considers that INEOS will face strong competition from fermentation ethanol producers active across the EEA, and would not be
    able to raise prices unilaterally for its customers. As regards certain pharmaceutical companies which are unable  to  substitute  synthetic
    with fermentation ethanol, the Commission considers that INEOS would not have the ability or incentive to enter into a price  discrimination
    strategy towards them. In fact, the market investigation revealed that distributors play an important role  in  the  market  for  industrial
    ethanol, including anhydrous ethanol.[29] Therefore, it would be very difficult for INEOS to enforce hypothetical price  discrimination  for
    the volumes sold through distributors. At the same time, INEOS would not have an incentive to increase prices of anhydrous  ethanol  to  all
    customers, as the loss of volumes for the application where a switch to fermentation ethanol is easy would largely outweigh  possible  gains
    for the applications where the switch is more difficult.

49) In the light of the above, the Transaction does not lead to serious doubts as to its compatibility with the internal market  concerning  the
    market for industrial ethanol and its respective sub-segments in North Western Europe and the EEA respectively.

2 Vertical links

1  Product and geographic market definition

   IPA

50) IPA is a colourless flammable compound manufactured from the combination of water and propylene. IPA is used  in  a  variety  of  commercial
    applications as a solvent or chemical intermediate, disinfectant, cleaner and as a fuel additive for gasoline.

51) In a previous decision,[30] the Commission has considered that IPA  constitutes  a  distinct  product  market  as  it  cannot  generally  be
    substituted with other solvents. The Notifying Party does not object to this product market definition.

52) In a previous decision, the Commission has considered that the relevant geographic market for IPA is at least EEA-wide  or  possibly  world-
    wide.[31] The Notifying Party agrees with this geographic market definition.

53) For the purpose of the present case, it is not necessary to decide upon the exact geographic market definition since  the  transaction  does
    not give rise to serious doubts as to its compatibility with the internal market even on the narrowest level, which in the case at  hand  is
    EEA-wide market.

   Propylene

54) Propylene is a gaseous olefin used as raw material for the production of a  number  of  important  basic  petrochemical  products  including
    polypropylene.

55) In previous decisions, the Commission has considered that propylene constitutes a separate  products  market  from  other  olefins.[32]  The
    Notifying Party does not object to this product market definition.

56) In previous decisions, the Commission has considered that the relevant geographic market is at  least  Western  European  and  possibly  EEA-
    wide.[33] The Notifying Party agrees with this geographic market definition.

57) For the purpose of the present case, it is not necessary to decide upon the exact geographic market definition since  the  transaction  does
    not give rise to serious doubts as to its compatibility with the internal market even on the narrowest definition.

   IPAC

58) Isopropyl acetate also called "IPAC" is the product of esterification of acetic acid and IPA. IPAC is a clear, colourless liquid used  as  a
    solvent in chemical processes for wide range of industries including coating, cosmetics, food flavourings and inks.

59) The Commission has previously examined other forms of acetate esters than IPAC.[34] When defining the product market,  the  Commission  took
    into account the type of application in which a given ester is used as well as the feedstock for its production. The Notifying Party submits
    that IPAC constitutes a distinct product market. Due to its specific characteristics and uses, the Commission considers that IPAC should  be
    considered as a distinct product market; however the precise scope of the product market definition can be left open for the purpose of  the
    present case.

60) As regards the geographic market definition, the Notifying Party submits that it is at least EEA-wide; since  there  is  substantial  cross-
    border trade and transport costs are not significant. In previous decisions the Commission considered the geographic market for other  forms
    of acetate esters to be EEA-wide.[35]

61) For the purpose of the present case, it is not necessary to decide upon the exact geographic market definition since  the  transaction  does
    not give rise to serious doubts as to its compatibility with the internal market even on the narrowest definition, which in the case at hand
    is an EEA-wide market.

2 Competitive assessment

   Propylene and IPA

62) Propylene is an input in the production of IPA and therefore the two products are vertically linked. INEOS  produces  propylene,  while  SSG
    Solvents Business produces IPA.

63) The proposed Transaction gives rise to an affected vertical relationship as SSG Solvents Business has an estimated [30-40]% market share  on
    the downstream market for IPA on an EEA basis. INEOS' estimated market share for  the  upstream  propylene  is  [0-5]%  in  Western  Europe.
    Furthermore, the Notifying Party submits that SSG Solvents Business' demand for propylene accounts for less than [0-5]% of propylene  demand
    in the EEA. Given the minimal market share in the upstream market and the  minimal  amount  of  propylene  purchased  by  the  SSG  Solvents
    Business, the Transaction would not give rise to either input or customer foreclosure concerns.

   IPA and IPAC

64) IPA is an input for the production of IPAC and therefore these product markets are vertically related. SSG Solvents Business  produces  IPA,
    whereas INEOS produces IPAC.

65) This vertical link is an affected market as SSG Solvents Business has an estimated [30-40]% market share on the upstream market for  IPA  on
    an EEA-wide market. If the market is considered as worldwide, SSG Solvents Business' market share will be [5-10]%.

66)  The Notifying Party submits that SSG Solvents Business' faces strong competition from other IPA producers such as Shell (with an EEA market
    share of [30-40]%), Exxon ([20-30]%) and Novapex ([10-20]%). The last entered the market in 2010 and  announced  its  plans  to  double  its
    production capacity in 2012.

67) Therefore the IPAC producers will continue to have broad access to IPA and their input will not be foreclosed post transaction.

68) INEOS' market share on the downstream IPAC market is [10-20]%. INEOS's demand for IPA accounts for less than [0-5]% of the IPA demand in the
    EEA and thus also no risk of customer foreclosure arises.

69) Therefore, the proposed transaction does not give rise to serious doubts regarding its compatibility with the internal market as regards the
    vertical links created on the market for IPA and IPAC.

       CONCLUSION

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

For the Commission

(signed)
Joaquin ALMUNIA
Vice-President

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.
[2]   Publication in the Official Journal of the European Union No C 97/07 2.4.2014, p. 12.
[3]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
C95, 16.04.2008, p 1).
[4]   Case No COMP/M.5846 Shell/Cosan/JV, para. 10. See also Case No COMP/M.4798 BP/Associated British Foods/JV, para 12,  where  the  Commission
distinguished fermentation ethanol from synthetic ethanol. In these decisions, the Commission has used the term  "bio-ethanol"  for  fermentation
ethanol.
[5]   Replies to question 9 of questionnaire M.7162 - Q2 – customers.
[6]   Replies to question 11 of questionnaire M.7162 - Q2 – customers.
[7]   Replies to question 12 of questionnaire M.7162 - Q2 – customers.
[8]   Replies to question 34 and 34.1 of questionnaire M.7162 – Q1 –competitors.
[9]   Replies to question 11 of questionnaire M.7162 – Q2 –customers.

[10]  "The Global Market for Industrial Ethanol", Report by LMC International, 2013, p.17.

[11]  Replies to questions 5 – 8, and 10 of questionnaire M.7162 - Q2 – customers.
[12]  Replies to question 8 of questionnaire M.7162 – Q1 – competitors.
[13]  Case No COMP/M.2533 BP/E.ON, para.87.
[14]  Case No COMP/M.4005 INEOS/Innovene, para. 63. See also Case No COMP/M.4798  BP/Associated  British  Foods.JV,  32,  where  however  in  the
context of bio-ethanol for fuel the Commission considered also a possible national market.
[15]  Replies to questions 11-12 and 14 of questionnaire M.7162 – Q1 – competitors.
[16]  Replies to question 12 of questionnaire M.7162- Q1-competitors.

[17]  Replies to questions 16-17 of questionnaire M.7162 – Q2 – customers, Non-confidential minutes of conference call with Brenntag.
[18]  Replies to question 19 of questionnaire M.7162 – Q2 –customers.
[19]  Reply of Novo Nordisk A/S to question 19 of questionnaire M.7162 – Q2 – customers.
[20]  Rectifiers process low-grade ethanol (usually sourced from third party suppliers, such as importers) into higher-grade  ethanol  (typically
for industrial applications) using additional temperature-controlled distillation.

[21]  For the purposes of this decision Western Europe comprises Belgium, Denmark, France, Germany,  Ireland,  Luxembourg,  Netherlands,  Norway,
Sweden, UK, Austria, Finland, Italy, Portugal and Spain.

[22]  For a definition of NWE, see (32).

[23]  Replies to question 29 of questionnaire M.7162 – Q2 –customers.
[24]  Replies to question 34 and 34.1 of questionnaire M.7162 – Q2 –customers.
[25]  Replies to question 37 of questionnaire M.7162 – Q2 –customers.
[26]  Non-confidential minutes of conference calls with BASF and Bayer.
[27]  Replies to question 17 of questionnaire M.7162 – Q1 –competitors.
[28]  Replies to question 31 of questionnaire M.7162 – Q1 –competitors.
[29]  Replies to question 34 and 34.1 of questionnaire M.7162 – Q1 –competitors
[30]  Case No COMP/M.2269 Sasol/Condea, para. 9.
[31]  Case No COMP/M.2269 Sasol/Condea, para. 14.
[32]  Case No COMP/M.5424 Dow/Rohm and Haas, para. 90; Case  No  COMP/M.4926  Basell/Berre  L'Etang  Refinary,  para.  14;  Case  no  COMP/M.4848
Basell/Lyondell, para. 14.
[33]  Case No COMP/M.5424 Dow/Rohm and Haas, para. 90; Case No COMP/M.4848 Basell/Lyondell, para. 14.
[34]  Case No COMP/M.6778 Advent International Corporation / Cytec's resin Business, Case No COMP/M.4005 INEOS/Innovene paras 19 and 21.

[35]  Case No COMP/M.6778 Advent International Corporation / Cytec's resin Business, Case No COMP/M.4005-INEOS/Innovene.

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

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE