CELEX: 32015M7484
Language: en
Date: 2015-06-11 00:00:00
Title: Commission Decision of 11/06/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7484 - PLASTIPAK / APPE) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 11.6.2015

C(2015) 4115 final

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                                        |To the notifying party:                                                |                                                                       |
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Dear Sir/Madam,

Subject:    Case M.7484 - Plastipak/ APPE
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

 0. On 4 May 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation  by
    which undertaking Plastipak Holdings, Inc. ("Plastipak", USA), ultimately controlled by the Goldman Sachs Group, Inc. (USA) and Mr.  William
    C. Young (USA), acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of APPE by way of  purchase  of  shares  and
    assets.[2] Plastipak and APPE are collectively referred to as "Parties".

    THE PARTIES

 0. Plastipak is a manufacturer of rigid plastic packaging containers and PET preforms active throughout the entire  value  chain:  it  recycles
    plastic for the production of raw material (recycled PET resin or "rPET") and produces  virgin  polyethylene  terephthalate  ("PET")  resin,
    manufactures PET preforms and plastic bottles. It is headquartered in the US and has production facilities in Brazil,  US,  Czech  Republic,
    Luxembourg, France, Romania and Italy.

 0. APPE manufactures PET packaging products, principally in the form of PET preforms and PET bottles. APPE also recycles PET material  for  the
    production of recycled PET. APPE has production facilities in the United Kingdom,  Belgium,  Germany,  France,  Spain,  Turkey,  Poland  and
    Morocco. APPE is currently controlled by La Seda de Barcelona ("LSB", Spain), which has been in insolvency proceedings since July 2013.

    THE OPERATION AND THE CONCENTRATION

 0. Following APPE's parent company's financial difficulties and ensuing  insolvency  proceedings,  APPE  was  subject  to  an  auction  process
    organized by an insolvency administrator appointed by the Spanish court. On 5 November 2014, Plastipak was announced as the winning bidder.

 0. Under a Master Share and Asset Purchase Agreement, Plastipak will acquire from LSB the business units of APPE Iberia, APPE France, APPE  UK,
    APPE Deutschland and APPE Benelux together with the related companies APPE Polska and APPE Nordic, a controlling interest in  APPE-CCE  and,
    subject to the confirmation of certain third party financial waivers and merger clearance, APPE Morocco and APPE Turkey. Plastipak  will  by
    the entirety of APPE related shares and assets currently held by LSB.

 0. As a result, Plastipak will acquire full ownership and sole control over APPE.

 0. The proposed Transaction constitutes therefore a concentration within the meaning of Article 3(1)(b).

    EU DIMENSION

 0. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000  million[3]  (Plastipak:  EUR  […]  million;
    APPE: EUR […] million).  Each of them has an EU-wide turnover in excess of EUR 250 million  (Plastipak:  EUR  […]  million;  APPE:  EUR  […]
    million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.[4]

 0. The notified operation therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

ASSESSMENT

 0. There are three distinct stages of the production process in relation to the manufacturing of PET packaging:

    i)           manufacturing of PET resin, a malleable, gas permeable polyester resin which can be produced by combining ethylene  glycol  and
        terephthalic acid, or by recycling PET products;

    ii)    manufacturing of PET preforms from PET resin: PET preforms are tube-shaped containers made from PET resins using a preform  injection
        moulding machine; and

    iii)   manufacturing ("blowing") of empty PET preforms into containers/bottles: this is the final stage of the  PET  packaging  value  chain
        which consists in heating the preforms, stretching and shaping them by using specific moulds  in  stretch  blow  moulding  machines.  The
        resulting transparent containers are used for drinks and liquid foods, as well as for non-food purposes, such as cosmetics,  laundry  and
        homecare products.[5]

 0. Plastipak and APPE are both active at all three stages of the production process. The affected markets arise only in relation to the  market
    for PET preforms.

1 Product market definitions

1 PET resin

 0. In the past, the Commission considered that polyester resins (such as PET) could be categorised into (i) packaging resin (bottle  grade)[6];
    (ii) polyester textile chips (fibre grade); and (iii) film polymer (film grade), but has consistently left open  the  exact  product  market
    definition for polyester resins.[7] On a national level, the UK Competition authority held in Amcor/La Seda that PET resin forms a  distinct
    product market which does not ought to be segmented further.

 0. PET resin can be either "virgin", i.e. directly produced from raw material, or recycled produced from the collection of  used  PET  bottles.
    The Notifying Party argues that virgin PET and rPET are to a large extent substitutable in the manufacturing process of preforms, while  the
    extent to which one or the other is used is driven largely by customer preferences such as bottle design and cost. For instance, rPET  tends
    to be less clear than virgin PET, but can be used for promotion purposes as a sign of commitment to sustainable development. As concerns the
    price, according to the Notifying Party, the ratio between the two tends to vary depending on the cost of raw material for virgin PET resin.
    Customers tend to arbitrage between the two depending on which price is more favourable within the limits of the amount of rPET that can  be
    used without altering the product quality and appearance.

 0. The market investigation provided indications that, although rPET can replace to some  extent  virgin  PET  in  a  number  of  applications,
    technical and regulatory measures limit[8] the use of recycled PET in preforms.[9] Customers generally confirmed that there is  a  limit  to
    which rPET can be used and that typically preforms for food applications cannot be produced with 100% of rPET[10] as rPET tends to  be  less
    clear.

 0. In any event, the exact product market definition of PET resin can be left open since, under any plausible  product  market  definition,  no
    serious doubts arise as regards the compatibility of the transaction with the internal market in relation to PET resin.

2 PET preforms

 0. There are generally two broad types of PET preforms. Most of the PET preforms are so called  standard  preforms  simply  produced  from  PET
    resin. Standard preforms can be used for the packaging of most products. However, some  products  may  require  additional  protection  from
    external factors such as for instance from oxygen ingress or light in order to extend their  shelf  life  and  preserve  their  quality  and
    appearance. To this end, there needs to be an additional protection added to the preform either in a form of an additive or an extra  layer.
    Preforms with such a protection are referred to as barrier enhanced preforms.

 0. There are broadly three types of enhancement to a standard preform: i) a barrier which will prevent carbon dioxide from leaking out  of  the
    package and degrading the carbonation of beers, sparkling water and carbonated soft drinks (CO2 egress barrier), ii)  a  barrier  preventing
    oxygen from entering into the packaging and degrading its contents, mainly used for juices and sauces (O2 or oxygen  ingress  barrier),  and
    iii) a barrier protecting from exposure to light of sensitive beverages, such as  dairy  products  or  soya  drinks  (UV  or  light  barrier
    protection).

 0. In previous decisions, the Commission distinguished barrier enhanced preforms used for oxygen and  light-sensitive  products  from  standard
    preforms used for products not requiring this kind of  protection.[11]  Standard  and  barrier  enhanced  PET  preforms  were  seen  as  not
    substitutable both from a demand side perspective (since a standard preform cannot be used to fill an oxygen sensitive product) and  from  a
    supply side perspective (standard preforms were seen as commodities  whereas  barrier  enhanced  preforms  needed  specific  technology  not
    available to all suppliers).[12]

 0. The Notifying Party submits that since the last case the market has evolved and that while from demand-side the distinction between standard
    and barrier enhanced preforms is still relevant, from the supply side there is no reason to make such  distinction.  In  this  context,  the
    Notifying Party submits that there are three ways to achieve barrier properties. First, a barrier additive can be blended with the resin  at
    the preform manufacturing stage to produce monolayer barrier preforms. Second, the preform manufacturer may insert a barrier layer  (usually
    nylon) between the PET layers and produce a multilayer barrier preform; this requires special  machinery  capable  of  producing  multilayer
    preforms with significantly more investment. The third option involves coating a standard preform with a barrier material during the  bottle
    blowing stage. The Notifying Party argues that whilst at the time barriers were achieved using multilayer production  technology  which  was
    not available to everyone, nowadays any producer of standard preforms has the ability to produce monolayer barrier  preforms  as  this  only
    requires sourcing an appropriate resin/additive technology to increase barrier performance which is widely available in the market.

 0. The Commission investigated possible segmentations of PET  preforms  into  standard  and  barrier  enhanced  in  the  market  investigation.
    Generally, many customers indicated they use standard performs even for oxygen ingress, CO2 egress or light  sensitive  products.[13]  While
    there is a portion of customers who may prefer using dedicated preforms, the market investigation indeed confirmed that  the  technology  to
    achieve the desired properties is available to all suppliers. Indeed, a significant majority of respondents indicate that most  PET  preform
    suppliers are able to produce all types of preforms with any type of barrier, mentioning inter alia ALPLA, Resilux, PET Verpackungen,  APPE,
    Plastipak, Retal, Logoplaste, Esterform and Gardaplast as possible suppliers of all types  of  preforms.[14]  Customers  also  confirm  that
    barrier enhancement can be achieved at the bottle blowing stage of PET bottle production by coating a standard PET preform with  appropriate
    barrier layer, albeit it is perceived as rather costly.[15]

 0. As concerns the supply-side, the market investigation indicated that there are certain barrier technologies  that  have  been  developed  or
    acquired by preform manufacturers like Plastipak or APPE, and are not necessarily easily accessible to  competitors.[16]  This  concerns  in
    particular oxygen ingress barriers where the Parties seem to own two competing technologies, but also  CO2  egress  barriers.  APPE  owns  a
    barrier material (MonoBlox) which is patent-protected, while Plastipak's technology  used  in  Europe  (Monoxbar)  is  not  patent-protected
    anymore, but is not sold by Plastipak to any third party.

 0. Nevertheless, the market investigation also pointed to the existence of competing technologies: Amosorb which appears to be widely available
    and having comparable characteristics and performance and other oxygen protection technologies available on the market, namely Valspar Valor
    or Invista Polyshield.[17]

 0. Furthermore, the market investigation confirmed that as regards carbonated drinks, applying a barrier on a preform to prevent CO2 egress  is
    not necessary and the same objective may be achieved simply by producing a preform with thicker walls (and an appropriate neck design)[18] –
    this is the reason why Plastipak does not even distinguish internally CO2 preforms from the standard ones.

 0. It appears that if there are any types of PET preforms that are provided only by a limited number of producers, these  would  be  multilayer
    preforms with oxygen or CO2 egress barrier, as indicated by both customers and competitors.[19] However, there is no overlap in relation  to
    multilayer preforms, as only APPE is active in this segment.

 0. Based on the above, there are strong indications confirming supply-side substitutability between standard and barrier enhanced PET preforms.
    In any event the exact product market definition of PET preforms can be left open since, under any plausible product market  definition,  no
    serious doubts arise as regards the compatibility of the transaction with the internal market in relation to PET preforms.

3 PET bottles

 0. In the past cases dealing with the production machinery used to produce PET packaging, the Commission identified blowing of empty bottles as
    one of the main stages of a typical PET packaging line, necessitating specific equipment, but did not analyse this market in  detail  as  it
    was not the focus of that case.[20]

 0. The Notifying Party notes that PET is just one of a number of different packaging materials used for food, drink or cosmetics, other  common
    materials being high density polyethylene (HDPE), aluminium cans or laminated carton. The Notifying Party accepts however that  PET  bottles
    form a distinct product market from other packaging techniques.

 0. The market investigation confirmed that the users of PET bottles also use other packaging applications  to  sell  their  products.  However,
    although majority of customers indicated they use PET for the same applications as the alternative packaging, such  as  glass,  metal  cans,
    HDPE, laminated carton or aluminium, none of these materials is considered as fully substitutable with PET containers in terms of  cost  and
    performance. PET packaging is significantly cheaper, therefore even 10% increase in price of PET packaging would not incite the customers to
    switch to another form of packaging.  More importantly, switching would require serious modifications in the whole filling chain in order to
    allow for the usage of other packaging materials. Furthermore, some customers indicate that only PET allowed them to achieve a certain shape
    of bottle and other packaging types were considered as suitable for different target customers.[21]

 0. In any event, the exact product market definition of PET bottles can be left open since, under any plausible product market  definition,  no
    serious doubts arise as regards the compatibility of the transaction with the internal market in relation to PET bottles.

                               2 Geographic market definitions

    1. PET resin

 0. In the past the Commission left open whether the relevant product market for PET resin is EEA-wide or  wider.[22]  The  UK  Office  of  Fair
    Trading considered the EU to be the relevant geographic market as regards the PET resin, although in its decision it also discusses  factors
    pointing to a wider market definition such as imports from South Korea, Taiwan and China representing at the time around 10-15% of PET resin
    in Europe.[23]

 0. The Notifying Party submits that the relevant geographic market for PET resin is  at  least  EU-wide.  As  concerns  virgin  PET  resin  the
    Notifying Party refers to significant imports of virgin PET into the EEA from South Korea, the Middle East and other  parts  of  Asia  which
    were confirmed during the market investigation. As concerns rPET resin, the situation is less clear in terms of the level  of  imports  into
    the EEA, however, a significant proportion of customers do purchase rPET resin outside the EEA.

 0. In any event, the exact geographic market definition regarding the PET resin can be left open since under any  plausible  geographic  market
    definition, no serious doubts arise as regards the compatibility of the transaction with the internal market in relation to PET resin.

    2. PET preforms

 0. In its decision in Case COMP/M.2416 Tetra Laval/Sidel, the Commission concluded on the basis of its investigation that the  market  for  PET
    preforms is EEA-wide. According to this decision, all suppliers active throughout the  EEA  were  capable  of  providing  and  provided  PET
    preforms on a cross-border basis.[24]

 0. The Notifying Party submits that this market definition is still valid, arguing that there is significant cross-border trade and  that  both
    Parties sell to customers situated relatively far away from their respective manufacturing sites.

 0. The market investigation in this case provided indications that the market can be narrower, comprising circles of 300 to 400  km[25]  around
    the production plants for standard performs, while barrier enhanced preforms tend to be  transported  over  longer  distance.[26]  Transport
    costs can represent, on average, between 0% to 10% of the final price, depending on the distance between the  preforms  production  facility
    and the customers' bottling plant. This is why suppliers tend to sell their preforms  as  close  to  their  facilities  as  possible.  While
    transport costs do not vary between standard and enhanced preforms, enhanced preforms may economically travel over longer distances, due  to
    their higher value.

 0. Some respondents clarified that in fact the transport distance as such is of little relevance, and that what matters is the ultimate  price.
    For example, in this context, one customer explained that "there would be no geographic limit if the pricing was right and it makes sense to
    do so from a business perspective".[27] Indeed in tenders or request for quotes preform suppliers  are  requested  to  indicate  prices  for
    preforms at the customer’s premises. Preform producers note that there can be lots of arrangements  in  this  respect  –  prices  depend  on
    volumes, distances and the purchasing power of customers. Finally, a significant portion of sales  is  done  on  spot,  outside  contractual
    arrangements, when customers pick up their preforms at the producers plants.[28]

 0. In addition, given that besides the large EEA wide suppliers the substantial portion of the market is served by smaller local suppliers, the
    supply demand dynamics tend to be different across the countries/country clusters in the EEA. This seems to be  also  confirmed  by  varying
    price levels. While large customers with filling plants in two or more Member States indicate  that  they  negotiate  standard  PET  preform
    prices at EEA level, the majority of customers and competitors submitted that price differences for standard preforms exist  between  Member
    States.

 0. As regards barrier enhanced preforms, prices tend to be more homogenous across the EEA according to the market investigation.

 0. In view of the fact that the geographic market may be narrower than EEA wide and in the absence of data at the  level  of  regions/parts  of
    Europe, the Notifying Party  submitted market share data on a national basis, emphasising however that it did not consider this  to  be  the
    adequate level for the assessment of the preform market.

 0. It should be noted that in terms of plant location the Parties’ preform production do not overlap in any country: in the EEA  Plastipak  has
    plants only in Czech Republic, Italy, Luxembourg and Romania, while APPE's plants are located in Belgium, Germany,  France,  Poland,  Spain,
    and the United Kingdom. Thus, by definition, for the Parties’ activities to overlap they must be selling their preforms on  a  cross  border
    basis, which is actually the case, and which indicates that the market is rather broader than national. This is  particularly  the  case  as
    regards the Benelux countries for which considering national markets would not be meaningful.

 0. The Notifying Party contends in particular that considering Benelux or each of the Benelux countries as a relevant geographic market is  too
    narrow since these countries are highly integrated among one another and to a large extent  also  with  their  neighbours.  For  example  as
    regards the Plastipak’s plant in Luxembourg, [40-50]% of the sales to top ten customers (in terms of value) are shipped to companies outside
    Benelux, namely France, Germany and even Greece, and only the remaining [40-50]% is sold to Belgium and the Netherlands. The Notifying Party
    also notes that the average margins earned with preforms in the Benelux overall are not higher  than  in  other  Member  States,  where  the
    Parties have lower markets shares.

 0. The results of the market investigation support the Notifying Party’s submission that as regards the  Benelux  area  the  geographic  market
    should not be considered at the country level but it should at least encompass all the Benelux countries. According to the replies,  in  the
    Benelux the average transport distance for the supply of preforms varies between 300 and 400 km. Moreover, a significant number of customers
    located in Germany purchase preforms from Luxembourg, and for some of them the average transport distance is 500-600 km, partly even more.

 0. Consequently, the Commission will analyse the competitive impact of that transaction at the EEA and at the national or cluster of  countries
    level (in particular for Benelux) at the national levels.

 0. In any event, the exact geographic market definition of PET  preforms  can  be  left  open  since  under  any  plausible  geographic  market
    definition, no serious doubts arise as regards the compatibility of the transaction with the internal market in relation to PET preforms.

 3. PET bottles

 0. In a previous decision, the Commission considered that the scope of the relevant geographic  market  for  the  supply  of  PET  bottles  was
    narrower than the EEA, but left the exact geographic market definition open.

 0. The Notifying Party argues that the relevant geographic market for the supply of PET bottles should be defined at most as national in  scope
    given the typical maximum distance of transport which is 100 kilometres.

 0. The market investigation confirmed that PET bottles are typically transported over much shorter distances than PET preforms, given that they
    are very voluminous and cumbersome to transport, and therefore transport cost are higher.

 0. In any event, the exact geographic market definition in relation to PET bottles can be left open since under any plausible geographic market
    definition (be it narrower than national, national or even  EEA-wide),  no  serious  doubts  arise  as  regards  the  compatibility  of  the
    transaction with the internal market in relation to PET bottles.

3 Competitive assessment

 4. PET resin

 0. The Parties’ activities would overlap only if virgin PET and rPET were considered to be part of the same relevant product  market.  This  is
    because APPE only produces and sells rPET, whereas Plastipak only sells virgin PET on the merchant market, all  its  rPET  production  being
    used internally.

 0. On a combined market including both rPET and virgin PET, the Parties' combined EEA market share is  below  [0-5]%.[29]  Furthermore,  APPE’s
    rPET production is performed in a joint venture with Coca-Cola at its Beaune plant in France. [60-70]%  of  that  rPET  production  is  used
    internally by APPE, while the remaining [30-40]% is largely dedicated to one customer – Coca-Cola and Coca-Cola’s tolled converters.

 0. The market investigation did not reveal any concerns in relation to PET resin market.

 0. Therefore, it is concluded for the purpose of this decision that no serious doubts as regards the compatibility of  the  transaction  within
    the internal market in relation to PET resin market irrespective of the product and geographic market definition.

 5. PET preforms

1 Background on the functioning of the market

Through-the-wall manufacturing and self-manufacturing

 0. There are three basic scenarios of how PET preforms are manufactured and sold to the market. Most of the market is represented by  sales  to
    bottlers/drink producers on a contractual or spot basis. However, some  preform  manufacturers  integrate  part  of  their  production  into
    downstream operations whereby preforms are being blown into bottles by the preform producers themselves at, or  nearby,  customers  premises
    (referred to as "vertical integration" or "through-the-wall"). Typically these operations are dedicated to specific customers and  thus  the
    preforms used in these operations are not available on  the  merchant  PET  preform  market.[30]  The  economics  of  such  through-the-wall
    arrangements are different from normal contracts as the duration of these contracts is typically much longer and the investments  associated
    with such arrangement are shared by the parties to that arrangement. While some of the  PET  preforms  suppliers  such  as  Logoplaste  make
    through-the-wall operations their business model, only around [5-10]% of the Parties’ preform production is used for  such  through-the-wall
    arrangements, thus used captively for the production of bottles.

 0. Similarly, a number of big producers of beverages, such as Nestlé, Coca-Cola, Danone and Crystaline have internalised part of their  preform
    demand and integrated upstream into the preform production through "self-manufacturing".

 0. Neither the preforms produced in vertical integration nor the preforms produced by self-manufacturers are available on the merchant  market,
    since they are produced exclusively for specific customers and as such can be considered captive. However, the Notifying Party  argues  that
    vertically integrated preform production should be taken into account in the  competitive  assessment,  in  particular  because  some  large
    preform suppliers have a commercial policy of gaining preform customers by offering them through-the-wall  contracts.  The  Notifying  Party
    argues that this phenomenon should be perceived as a feature of competition in  the  preform  market  rather  than  a  factor  which  limits
    competition.

 0. Consequently, to cover the different possible scenarios, all the EEA data regarding market shares is provided for (i) total production, (ii)
    total production excluding self-manufacturing, and (iii) total production excluding self-manufacturing and vertical integration (see table 1
    with regard to all preforms, standard as well as barrier enhanced preforms). Since the Parties tend to be less  vertically  integrated  than
    their competitors (on average [5-10]% as opposed to [10-20]% for the  other  preform  suppliers,  according  to  the  Parties),  the  market
    excluding self-manufacturing and the vertically integrated production is the narrowest plausible market and  the  worst  case  scenario  for
    analysing the competitive position of the Parties post transaction.

Customer switching

 0. As concerns customer switching, generally speaking the market investigation provided indications that  switching  is  easy,  which  is  also
    evidenced by the Parties’ data. While there may be some obstacles which one may encounter when switching to an unknown supplier  related  to
    the necessity of testing in order to approve the product and there may be customer inertia in particular  as  concerns  customers  who  have
    bespoke shapes of preforms and bottles, a big majority of customers, in particular those who buy significant volumes  of  preforms  actually
    multisource and regularly switch between suppliers according to the price conditions offered. They tend to have at least one major  supplier
    and often smaller back-up suppliers among others to mitigate the risk of supply. When a customer has several suppliers  approved,  switching
    is significantly easier, as it does not require additional testing and there is no delay related to the approval procedure while  they  hire
    additional suppliers.

Buyer power

 0. Buyer power seems to be a feature of this market, in particular in view of the  existence  of  large  customers.  Indeed,  Parties'  largest
    customers such as […] (representing [10-20]% of Plastipak's sales in 2014) or […]  (representing around [10-20] % of  APPE's  sales  in  the
    last five years) have ability to exercise pressure on their suppliers which is reflected in their relative bargaining strength.

 0. The responses to the market investigation confirmed that it is a common practice for large customers to  "threaten"  the  preform  suppliers
    with the possibility of moving to self-manufacturing, switching  large  volumes  to  other  suppliers  or  investing  in  "through-the-wall"
    operations.

 0. As concerns the ability of large customers to self-manufacture, the Notifying Party explained that  an  injection  machine  with  an  annual
    capacity of 150-300 million preforms cost approximately EUR 2-3 million. Since large customers’ needs vary from 200 to 800 million  preforms
    p.a. it may be cost effective for them to internalise the preform production. Replies to the market investigation support  this  submission:
    smaller customers explain that the volume of their needs would not justify  investment  required  for  equipment  necessary  to  internalize
    preform production. Medium-sized and large customers, however, indicate  that  either  they  are  already  partially  active  in  the  self-
    manufacturing of preforms or they are regularly considering the competitiveness of such a solution. Finally, competitors of the Parties also
    observe this tendency, one of the major international preform producers explained in the  context  of  the  market  investigation:  "We  are
    permanently under the threat that medium to big size customers make the decision  to  change  to  self-manufacturing.  For  sure  this  puts
    pressure on prices, as no preform supplier can afford to lose such big contracts"[31].

 0. As regards the “through-the-wall” arrangements, the market investigation confirms the  Notifying  Party’  submission  that  certain  preform
    suppliers have developed a business strategy based on strong links  with  customers  and  set  up  through-the-wall  arrangements  close  to
    customers’ premises to which they deliver PET preforms. Customers confirmed that both the Parties as well as other preform  producers  could
    potentially be a partner for setting up "through-the-wall" facilities. In this respect neither of the  Parties  would  have  any  particular
    advantage as compared to other preform suppliers.[32]

 0. It therefore appears that for  larger  customers  all  the  options  are  available  including  "through-the-wall"  arrangements  and  self-
    manufacturing of PET preforms, since they have sufficient scale to justify the associated investment. Conversely, smaller  customers,  whose
    scale would not allow for such investment, are more dependent on merchant sales. However, they have a number  of  alternative  suppliers  as
    they can and do turn to smaller scale local suppliers who offer competitive prices.

 0. The fact that customers have the ability to exercise pressure on suppliers is also evidenced in some  Plastipak's  internal  documents.  For
    example, a Plastipak’s sales manager explains the relative bargaining power of customers as follows:  “PET  preform  and  PET  bottle  is  a
    market, where the power is in the hands of buyers; Potential customer could choose producer of preforms  very  quickly;  Every  producer  of
    preforms is quickly replaceable; Some of potential customers want to start own production of preforms.”[33]

Tolling arrangements

 0. While typically a PET preform customer pays one price for the PET preform, some customers prefer to procure PET resin independently from the
    PET preform manufacturer to improve their cost structure. This is commonly referred to in the market as tolling.  There  are  two  types  of
    tolling, hard tolling and soft tolling. In case of hard tolling the customer sources PET  resin  directly  from  a  resin  manufacturer  and
    delivers it to the PET preform manufacturer. In such situation the customer pays the preform supplier only for the conversion of  the  resin
    into a PET preform. Conversely, soft tolling relates to an arrangement between a customer and a PET preform manufacturer whereby  the  price
    for PET resin is negotiated separately from the price of the conversion of the resin into a preform.

 0. From a commercial point of view, APPE and Plastipak do not have the same practice as regards tolling arrangements. APPE at  present  accepts
    this kind of arrangements, while Plastipak does not. While the situation post-merger is unclear, the market investigation  did  not  provide
    any indications that the removal of tolling option would be problematic for customers. This is  mainly  because  most  tolling  arrangements
    concern large customers who have a degree of buyer power  and  are  ready  to  switch  to  alternative  solutions  (other  suppliers,  self-
    manufacturing, etc.) should they not reach a satisfactory outcome in relation to a PET preform price.

2 Market structure

    EEA market

 0. Table 1 below presents the position of the Parties and their competitors for all types of PET preforms, i.e. standard preforms and any types
    of barrier enhanced preforms combined, at the EEA level.

      Table 1 - Estimated EEA shares of all PET preforms (2014)[34]
|Company                 |Total production             |Total production excluding   |Total production excluding       |
|                        |                             |self-manufacturing           |self-manufacturing and vertical  |
|                        |                             |                             |integration                      |
|                   |Billion units           |% share                              |Billion units                            |
|                                                                                                                            |
|Plastipak                                                                                                                   |
|Plastipak          |[…]              |[5-10]                 |[…]                    |
|Plastipak          |[30-40]%         |[40-50]%               |[0-5]%                 |
|APPE               |[10-20]%         |[20-30]%               |[0-5]%                 |
|Combined           |[40-50]%         |[60-70]%               |[5-10]%                |

      Source: Parties' submission.

 0. As shown in Table 3 above, the Parties have a very strong presence in Benelux, where the combined market share is estimated at  [40-50]%  as
    regards all types of preforms and [60-70]% as regards standard preforms

 0. These high market shares appear to be driven by the fact that Plastipak has one of its major plants in Luxembourg and APPE has  a  plant  in
    Belgium. At the same time, the Commission notes that also Resilux has a preform plant in Belgium, Alpla – one plant in Belgium  and  one  in
    the Netherlands and Logoplaste a plant in the Netherlands. Customers could therefore switch to other preform producers easily.

 0. In general it appears that the Parties’ market shares in the Benelux countries overstate their actual importance in this area, since  it  is
    unlikely that the other players mentioned in the preceding paragraph, similarly important and equally present across the whole EEA (as shown
    by the results of the market investigation and analysed in the other parts of this decision), would not be able to sell preforms to  Benelux
    customers. It shows in addition that many preform suppliers consider the Benelux area as attractive and they supply from this area not  only
    the customers located nearby, but to a large extent customers located in the neighbouring countries, namely Germany and France.

 0. The analysis of the Parties’ data reporting switching events, which indicate the percentage of contracts lost or won to competitors for each
    of the Parties’ production site between 2011 and 2014[38] confirms that other suppliers are equally present in the area. Considering  APPE's
    Belgian site, no loss or win was identified as gained from or lost to Plastipak. Indeed, […]% of APPE's Belgian site  losses  benefited  the
    local supplier Plasco, […]% Retal and […]% Resilux (the remaining 23% could not be attributed to specific suppliers). Similarly, […]% of its
    wins were taken from Resilux, […]% from Constar and […]% from Petainer.

 0. Considering Plastipak's site in Luxembourg, a portion of its wins was taken from APPE (15%). Nevertheless, this site also won large  volumes
    from other competitors, in particular Alpla ([…]%) and Retal ([…]%), as well as Pet Verpackungen ([…]%) and Resilux  ([…]%);  the  remaining
    volumes could not be attributed to specific suppliers. In addition, only a small portion of its losses benefited  APPE  (only  […]%),  while
    Retal won […]% of these losses, Alpla […]% and Putoksnis […]% ([…]% of these lost volumes were transferred to customers who opted for  self-
    manufacturing and the remaining […]% could not be attributed to specific suppliers).

 0. This indicates that customers in the Benelux area have much more options that the market shares may suggest.

 0. Therefore, it is concluded for the purpose of this decision that no serious doubts as regards the  compatibility  of  the  transaction  with
    internal market arise in relation to PET preforms in Benelux.

    France, Spain, Germany

 0. Table 4 provides market share data regarding national markets other than Benelux, where affected markets arise.

    Table 4 - Estimated national market shares of PET preforms, for all types of preforms (2014), for countries where there is  an  overlap  and
    the Parties' combined market share exceeds 20%:
|                  |All types of preforms    |Standard preforms        |Barrier enhanced |
|                  |France      |Spain       |France      |Spain       |Germany          |
|Plastipak         |[0-5]%      |[0-5]%      |[0-5]%      |[0-5]%      |[5-10]%          |
|APPE              |[20-30]%    |[20-30]%    |[10-20]%    |[10-20]%    |[10-20]%         |
|Combined          |[20-30]%    |[20-30]%    |[20-30]%    |[20-30]%    |[20-30]%         |

      Source: Parties' submission

 0. As shown in the table above, the Parties' market shares in these countries are below or only slightly above [20-30]% while the market  share
    increments are low, in particular in Spain and France. Moreover, the Parties' main competitors namely Alpla, Retal, Logoplaste  and  Resilux
    are present in all three countries or in neighbouring countries and thus will continue to exert competitive pressure on  the  merged  entity
    post-Transaction.

 0. It is therefore concluded for the purpose of this decision that no serious doubts as regards the compatibility of the transaction  with  the
    internal market arise in relation to PET preforms in France, Spain and Germany.

    Conclusion on PET preforms

 0. Therefore, it is concluded for the purpose of this decision that no serious doubts as regards the compatibility of the transaction with  the
    internal market arise in relation to PET preforms market irrespective of the product and geographic definition.

    6. PET bottles

 0. If the relevant geographic market for bottles were to be national or narrower in scope, the Parties' bottle manufacturing activities do  not
    overlap, given that APPE produces bottles in the UK, Belgium, Germany and Spain, while  Plastipak  produces  bottles  in  Italy,  the  Czech
    Republic and Romania.

 0. Only if the relevant market for PET bottles were to be wider than national in scope, the Parties’ activities would overlap.  It  is  however
    noted that in general the Parties are less present in the  bottling  activities  than  their  competitors.  As  explained  above,  they  use
    approximately [5-10]% of their preform production internally to supply downstream PET bottle production  process  within  the  framework  of
    "through-the-wall" arrangements, while for example ALPLA (the largest PET preform producer) or Logoplaste have much  larger  part  of  their
    preform production vertically integrated into the downstream production of bottles. Consequently, other preform producers are more important
    players in the production of bottles than the Parties.

 0. Furthermore, the market investigation did not reveal any concerns in relation to PET bottles.

 0. Therefore, it is concluded for the purpose of this decision that no serious doubts as regards the compatibility of the transaction with  the
    internal market arise in relation to PET bottles market irrespective of the product and geographic definition.

    7. Vertical links

 0. The Notifying Party also submits that there are two vertical relationships between the Parties' activities: i) between the manufacturing and
    supply of PET resin and the manufacturing and supply of PET preforms, ii) between the manufacturing and  supply  of  PET  preforms  and  the
    manufacturing and supply of PET bottles, both Parties being present at all these production stages.

3 PET resin and PET preforms

 0. As regards the vertical relationship between PET resin and PET preforms, the upstream products concerned are more  particularly  virgin  PET
    resin for Plastipak (as its production of rPET resin is used internally) and rPET resin for APPE, and the downstream market  is  the  market
    for PET preform in which both Parties are active.

 0. Since the Parties’ position as regard the supply of PET resin is insignificant the transaction does not pose risk for input  foreclosure  in
    this respect.

 0. Customer foreclosure could potentially arise, should Plastipak or APPE be important customers of PET resin and stop  buying  it  from  other
    suppliers. Given that APPE has a virgin PET resin consumption of circa […]kt, and Plastipak's total PET resin capacity available for sale on
    the open market is only about […]kt, Plastipak will be able to supply at most less than […]% of APPE  requirements.  Therefore,  post-merger
    APPE will still need to purchase the vast majority of its virgin PET resin requirements from third party  suppliers.  Conversely,  Plastipak
    produces rPET in its Luxembourg plant and vertically integrates […] the rPET produced. APPE could only sell rPET to Plastipak from its joint
    venture with Coca-Cola. However, as […]% of the production is used internally by APPE and the remainder is sold to Coca-Cola and Coca-Cola's
    tolled resin converters, Plastipak will have to continue to buy the rPET from other suppliers. Therefore, customer foreclosure  is  unlikely
    to arise as a result of the transaction.

4 PET preforms and PET bottles

 0. As regards the vertical relationship between PET preforms and PET bottles (both Parties being present on both markets),  both  Parties  sell
    [above 90]% of their respective PET production to third party customers and vertically integrate the remaining [0-10]% into their PET bottle
    productions.

 0. Input foreclosure could arise, should Plastipak or APPE  stop  supplying  their  customers  with  PET  preforms  and  have  the  ability  to
    substantially restrict access to these inputs. However, in light of the Parties' combined market share on the market for PET  preforms,  the
    merged entity would not have the ability to engage in input foreclosure behaviour.

 0. As a result, no serious doubts arise due to vertical relationships between the Parties' activities  as  regards  the  compatibility  of  the
    transaction within the internal market.

    CONCLUSION

 0. 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)
Věrá JOUROVÁ
Member of the Commission

-----------------------
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ⰶㄠ⸲㔰㈮㄰ⰵ瀠‮⸸ȍठ吉ember 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 156, 12.05.2015, p. 8.

[3]         Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional  Notice  (OJ
C 95, 16.4.2008, p. 1).
[4]   The turnover figures for Plastipak include Goldman Sachs' world-wide and EU wide turnovers respectively.
[5]   Case No COMP/M.2843 – Amcor/Schmalbach-Lubeca, Commission decision of 28 June 2002.

[6]   Both Plastipak and APPE only produce bottle grade PET resin.

[7]   See Case No COMP/M.1538 - Dupont/Sabanci, Commission decision of 24 November 1999;  Case COMP/M.2628 - Koch/Kosa,  Commission  decision  of
12 November 2001;  Case COMP/M.5760 - Lotte Group/Artenius UK Ltd, Commission decision of 19 March 2010,  paragraph 9 and Case No  COMP/M.6184  –
Indorama/Sinterama/Trevira, Commission decision of 9 June 2011, paragraph 11.

[8]   In some EU Member States rPET use appears to be capped (to 25%, Spain and 50% (Italy). Also there  are  apprehensions  on  the  ability  to
control the presence of certain indesirable substances or contaminants, often varying from country to country.

[9]   Replies to question 62, Questionnaire 1- customers.

[10]  Replies to question 62, Questionnaire 1- customers.

[11]  Case No COMP/M.2416 - Tetra Laval/Sidel, Commission decision of 30 October 2001, paragraphs 205-206.

[12]  Case No. COMP/M.2416 - Tetra Laval/Sidel, Commission decision of 30 October 2001, paragraph 45.

[13]  Replies to question 10, Questionnaire 1- customers.

[14]  Replies to question 12, Questionnaire 1 - customers and Questionnaire 2 – competitors.

[15]  Replies to question, 16 Questionnaire 1 - customers and replies to question 11, Questionnaire 2 – competitors.

[16]  Replies to question 15, Questionnaire 2- competitors.

[17]  Replies to question 10, Questionnaire 2- competitors.

[18]  Agreed minutes of a telephone conference on 3 March 2015 with a large international drinks producer, paragraph 12.

[19]  Replies to question 13, Questionnaire 1- customers and replies to question 13, Questionnaire 2 – competitors.

[20]  Case No. COMP/M.2416 - Tetra Laval/Sidel , Commission decision of 13 January 2003, paragraph 22.
[21]  Replies to questions 6, 7 and 8, Questionnaire 1 - customers.

[22]  Case COMP/M.5760 - Lotte Group/Artenius UK Ltd, Commission decision of 19 March 2010, paragraph 8.

[23]  OFT decision of 4 October 2007 - Anticipated acquisition by La Seda de Barcelona S.A of Amcor PET Packaging Europe, paragraph 15.

[24]  Case COMP/M.2416 decision of 30 October 2001, paragraph 211; confirmed in Case COMP/M.2416 – Tetra Laval/Sidel, Commission decision  of  13
January 2003, paragraph 54.

[25]  It has to be noted however that shorter and/or significantly longer distances are also recorded for certain customer relationships.

[26]  Replies to question 19, Questionnaire 1- customers.

[27]  Reply to question 19, Questionnaire 1 – customers.

[28]  Replies to question 23-24, Questionnaire 2 – competitors, replies to question 24, Questionnaire 1 – customers.

[29]  The Parties' combined share of production including the Parties' and their competitors' captive supplies of virgin and recycled  PET  would
    amount to approximately [5-10]% in the EEA.

[30]  Each Plastipak and APPE use approximately [5-10]% of  their  preform  production  internally  to  supply  its  own  downstream  PET  bottle
    production process, while some of their competitors, for example Logoplaste (to the largest extent) or ALPLA, choose  to  have  much  larger
    part of their preform production vertically integrated into the downstream production of bottles.

[31]  Replies to question 39, Questionnaire 2 – competitors.

[32]        Replies to question 55, Questionnaire 1 – customers.

[33]  Internal document of Plastipak: "Competitive Analysis (the impact on the Czech Republic and on the Slovakia)", 28.07.2014, page 8.

[34]  The data is provided on a volume basis (number of preforms produced). The Notifying Party argues that comparing  revenue  data  of  various
PET producers would not provide a meaningful picture. It explains that some producers accept  so  called  hard-tolling  arrangements,  where  the
preform customers purchase the PET resin on their own and pay the preform producer only for the conversion of  the  PET  resin  into  a  preform.
Since the resin is the most valuable part of the preform (approximately 70% of the value), comparing revenue data of various PET producers  would
overestimate the market share of those who do not have tolling  arrangements  and  underestimate  the  share  of  those  who  have  hard  tolling
contracts.
[35]  Calculation by the case team, based on the share of vertical integration of other players (excluding  self-manufacturers)  with  regard  to
all types of PET preforms, as submitted by the Notifying Party (table 1).

[36]  Internal documents of APPE: Dairy sector market overview (Dairy sector D1 290415).

[37]  The analysis covers 80% of the top customers of each Party (in volume).
[38]  The methodology consisted in identifying annual fluctuations in unit sales larger than 5  million  units,  primarily  sales  conducted  via
contracts as the Parties could not identify with certainty most switches that occured in theit spot business.

-----------------------
 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