CELEX: 32019M9553
Language: en
Date: 2019-11-25 00:00:00
Title: Commission Decision of 25/11/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9553 - DOMO INVESTMENT GROUP / SOLVAY PERFORMANCE POLYAMIDES BUSINESS IN THE EEA) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                               Brussels, 25.11.2019
                                                               C(2019) 8596 final
                                                                                PUBLIC VERSION
                                                                In the published version of this decision,
                                                                some information has been omitted
                                                                pursuant to Article 17(2) of Council
                                                                Regulation (EC) No 139/2004 concerning
                                                                non-disclosure of business secrets and other
                                                                confidential information. The omissions are
                                                                shown thus […]. Where possible the
                                                                information omitted has been replaced by
                                                                ranges of figures or a general description.
                                                               To the notifying party
Subject:            Case M.9553 - Domo Investment Group/Solvay’s EEA EP and P&I
                    Business
                    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 21 October 2019, the European Commission received notification of a proposed
          concentration pursuant to Article 4 and following a referral pursuant to Article 4(5)
          of the Merger Regulation by which Domo Chemicals GmbH (“Domo”, Germany),
          controlled by Domo Investment Group (“DIG”, Belgium), acquires within the
          meaning of Article 3(1)(b) of the Merger Regulation sole control from Solvay S.A.
          (“Solvay”, Belgium), of the divestment business arising from the Commitments
          attached to the Commission’s decision of 18 January 2019 in case M.8674
          BASF/Solvay's EP and P&I business (the “Divestment Business”) (the
          “Transaction”) declaring the acquisition by BASF SE (“BASF”, Germany) of sole
          control over Solvay’s worldwide polyamide business compatible with the internal
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    OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---          market, subject to conditions and obligations.3 Domo and the Divestment Business
         are designated hereinafter as the 'Parties'.
1.       THE PARTIES AND THE CONCENTRATION
(2)      Domo is a vertically integrated firm, which offers a portfolio of nylon 6
         intermediates, nylon 6 and 6.6 engineering plastics (“EP”), packaging film,
         fertilizers, and distributes petrochemical products. Domo serves the automotive,
         food, medical, pharmaceutical, agricultural, chemicals and electronics industries.
(3)      The Divestment Business is primarily involved in the nylon 6.6 value chain and
         focuses on the manufacturing of nylon 6.6 intermediates, EP, and performance
         fibres. It is also active in the nylon 6 supply chain (producing nylon 6 base polymer
         (“BP”) and EP) to a lesser extent.
(4)      By decision of 18 January 2019 (the “Decision”) based on Article 8(2) of Council
         Regulation (EC) No 139/20042, the Commission declared the operation by which
         BASF acquires sole control of Solvay’s worldwide polyamide business compatible
         with the internal market subject to conditions and obligations (the “Commitments”).
(5)      The Commitments offered by BASF consist in the divestiture to a single suitable
         buyer of the Divestment Business, which includes Solvay's facilities of Belle-Etoile
         and Valence (France), Gorzow (Poland), and Blanes (Spain). It also includes a 49%
         minority interest in a newly-created production joint venture (the “Chalampé JV”).
         BASF will be the owner of the remaining 51% of the Chalampé JV. Assets owned
         by Solvay, including production facilities of KA Oil, nitric acid, adipic acid and AH
         Salt, located on the Chalampé (France) site will be transferred to the Chalampé JV.
         The Commitments also include long-term supply agreements of a key input into the
         nylon 6.6 value chain, adiponitrile (“ADN”), to meet the Divestment Business'
         requirements.4
(6)      By decision of 31 October 2019, based on Section D of the Commitments attached
         to the Decision, the Commission approved Domo as a suitable purchaser of the
         Divestment Business and concluded that the Divestment Business is being sold in a
         manner consistent with the Commitments.
(7)      As a result of the Transaction, Domo will acquire, within the meaning of Article
         3(1)(b) of the Merger Regulation, sole control over the Divestment Business.
2.       EU DIMENSION
(8)      The Transaction does not satisfy the turnover thresholds set out in Articles 1(2) or
         1(3) Merger Regulation. However, it does meet the national thresholds for
3   Publication in the Official Journal of the European Union No C 361, 25.10.2019, p. 9.
4   The only producer of ADN in the EEA is Butachimie, a joint venture between Solvay (to be replaced by
    BASF following the Decision) and Invista. Under the Commitments, BASF committed to (i) assign to the
    purchaser of the Divestment Business a long term agreement for the supply of ADN negotiated with a
    third party, as well as to (ii) enter into a separate agreement to supply directly the purchaser of the
    Divestment Business with ADN. As a result, the Divestment Business will have access on a long-term
    basis to a sufficient amount of ADN as it did as part of the Solvay group.
                                                           2
 ---pagebreak---        notification or reviewability under the merger control laws of five EU Member
       States: Austria, Germany, Poland, Romania and Slovakia. The Transaction is
       deemed to have Union dimension and is notified to the Commission on the basis of
       Article 4(5) EUMR given that (i) on 16 September 2019 Domo informed the
       Commission by means of a reasoned submission that the concentration should be
       examined by the Commission; and (ii) by 9 October 2019 no Member State has
       expressed its disagreement vis-à-vis the Commission reviewing the concentration.
3.     RELEVANT MARKETS
(9)    The main nexus of the Transaction are nylon products, and more precisely PA 6 and
       PA 6.6 (where PA stands for polyamide, a synonym of nylon) products. PA 6 and
       PA 6.6 are produced as base polymers (PA 6 BP and PA 6.6 BP), which are then
       transformed into one of three types of downstream products: (i) engineering plastics
       (PA 6 EP and PA 6.6 EP), (ii) performance fibres (PA 6 PF and PA 6.6 PF), or (iii)
       films (PA 6 and PA 6.6 films).
(10)   PA 6 BP and PA 6.6 BP are each manufactured through different processes using
       different production equipment and inputs.5
(11)   PA 6 EP and PA 6.6 EP are used in a wide number of end use applications in the
       automotive (e.g. engine parts), electronics (e.g. plastic parts in appliances), and
       construction (e.g. window frames) industries.
(12)   PA 6 and PA 6.6 PF are mainly used for clothing and carpeting.
(13)   PA 6 and PA 6.6 films are used for film for food packaging.
(14)   Domo is vertically integrated in the PA 6 value chain with limited activities in PA
       6.6, while the Divestment Business is primarily active in the PA 6.6 value chain with
       limited activities in PA 6. In the Decision, the Commission concluded that PA 6 BP
       and PA 6.6 BP constitute distinct product markets.6 The Commission also found that
       PA 6 EP and PA 6.6 EP are different product markets.7 Therefore, the product
       portfolios of the Parties are largely complementary and the Transaction only leads to
       limited overlaps.
(15)   Domo and the Divestment Business’ activities overlap in a number of products in the
       PA 6 and PA 6.6 value chain. However, the Parties’ combined market share only
       exceeds 20% in the EEA market for PA 6.6 EP. Therefore, only one horizontally
       affected market arises.
(16)   There are also a number of vertical relationships between Domo and the Divestment
       Business. However, they only lead to one affected market in relation to Domo and
       the Divestment Business’ PA 6 BP activities (upstream) and Domo’s PA 6 Film
       activities (downstream).
(17)   The present decision only discusses affected markets, as outlined above.
5   Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 244 et seq.
6   Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 260.
7   Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 309.
                                                   3
 ---pagebreak--- 3.1.   PA 6 BP
3.1.1. Introduction
(18)   PA 6 BP is a medium performance polyamide which belongs to the family of
       aliphatic polyamides.
(19)   PA 6 BP is made from the ring opening polymerisation of caprolactam.
(20)   PA 6 BP is predominantly used for the production of PA 6 PF (including textile and
       carpet), EP and films for food packaging.
3.1.2. Product market definition
(21)   In case M.8674 BASF/Solvay's EP and P&I business, the Commission concluded
       that PA 6 BP constitutes a separate and standalone product market.8
(22)   The Notifying Party concurs with the Commission’s decisional practice as regards
       PA 6 BP.
(23)   The evidence in the Commission's file has not provided any indication which would
       suggest that departing from the Commission’s decisional practice would be adequate
       and therefore this product market definition is retained for the purposes of this
       Decision.
3.1.3. Geographic market definition
(24)   In case M.8674 BASF/Solvay's EP and P&I business, the Commission concluded
       that the PA 6.6 BP market is EEA-wide in scope in scope and left open the
       geographic market definition for PA 6 BP.9
(25)   The Notifying Party submits that the PA 6 BP market is EEA-wide in scope.
(26)   The evidence in the Commission's file has not provided any indication that the
       geographic scope of the market proposed by the Notifying Party is not appropriate
       and therefore this geographic market definition is retained for the purposes of this
       Decision.
3.1.4. Conclusion on market definition for PA 6 BP
(27)   For the purposes of the present decision, the Commission considers that the market
       for PA 6 BP constitutes a separate market which is EEA-wide in scope.
3.2.   PA 6 film
3.2.1. Introduction
(28)   PA 6 BP can notably be processed into films, which are either bi-axially oriented
       polyamide films (“BOPA”) or non-oriented cast polyamide films (“CAST”). BOPA
       film is produced by cast-extruding PA 6 BP into film, which is then horizontally and
8   Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 252 et seq.
9   Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 277 et seq.
                                                   4
 ---pagebreak---         vertically stretched. CAST film is produced by cast-extruding PA 6 BP into film
        with no further stretching being involved.
(29)    Customers of PA 6 film use these films for the production of standard flexible
        packaging materials for consumer goods. This involves significant further
        processing, for example the lamination with other materials (polyethylene, ethylene-
        vinyl acetate, polyethylene terephthalate, cast polypropylene, aluminium foil or
        paper). Packaging based on PA 6 film is mainly used where a good gas and aroma
        barrier is required. This is for example the case for food and pharmaceutical
        products.
3.2.2. Product market definition
(30)    The Commission has so far not specifically analysed the product market for PA 6
        film.10
(31)    Domo submits that the PA 6 film market forms a distinct product market and that no
        further segmentation is appropriate.
(32)    Whether the market for PA 6 film constitutes a standalone separate market or should
        be further segmented into BOPA and CAST can be left open as the Transaction will
        leave effective competition unaffected under any alternative definition of the
        relevant market.
3.2.3. Geographic market definition
(33)    The Commission has so far not specifically analysed the geographic market for PA 6
        film.
(34)    Domo submits that PA 6 film is worldwide, as suppliers offer the product globally.
(35)    The precise definition of the relevant geographic market can be left open as to
        whether it is EEA-wide or worldwide in scope, as the Transaction will leave
        effective competition unaffected under any alternative definition of the relevant
        market.
3.2.4. Conclusion on market definition for PA 6 film
(36)    The precise product and geographic market definitions can be left open as the
        Transaction will leave effective competition unaffected under any alternative
        definition of the product and geographic market.
3.3.    PA 6.6 EP
3.3.1. Introduction
(37)    PA 6.6 EP belongs to the group of engineering plastics. These have been developed
        in the 1960s and 1970s to replace materials like metal, alloys, wood and glass.
        Compared to those materials, engineering plastics are often lighter and easier to
10   The Commission examined the PA 6 EP and PA 6.6 EP markets, as well as the PA 6.6 PF market in Case
    M.8674 – BASF/Solvay's EP and P&I business, but it did not examine the market for PA 6 film.
                                                       5
 ---pagebreak---        process into complex shapes. Their qualities make them suitable for diverse industry
       segments, i.e., transportation/automotive, industrial and consumer products and
       construction.
(38)   Engineering plastics are produced in a polymerisation process by mixing molten
       base polymer (PA 6 BP for PA 6 EP and PA 6.6 BP for PA 6.6 EP) with additional
       ingredients such as additives (e.g. flame retardants), stabilisers (e.g. to improve
       resistance against heat or UV light) and various fillers from minerals to fibres. These
       additional ingredients are, depending on the intended field of application, added for
       stiffness, strength, impact or other performance features such as thermal or electrical
       conductivity. After this compounding step, they are sold to customers in form of
       granules. Customers process the granules into the final product form by using
       processes like injection moulding, blow moulding or extrusion.
3.3.2. Product market definition
(39)   In case M.8674 BASF/Solvay's EP and P&I business, the Commission concluded
       that PA 6.6 EP constitutes a separate and standalone product market.11
(40)   The Notifying Party concurs with the Commission’s decisional practice as regards
       PA 6.6 EP.
(41)   The evidence in the Commission's file has not provided any indication which would
       suggest that departing from the Commission’s decisional practice would be adequate
       and therefore this product market definition is retained for the purposes of this
       Decision.
3.3.3. Geographic market definition
(42)   In case M.8674 BASF/Solvay's EP and P&I business, the Commission concluded
       that the PA 6.6 EP market is EEA-wide in scope.12
(43)   The Notifying Party concurs with the Commission’s decisional practice as regards
       PA 6.6 EP.
(44)   The evidence in the Commission's file has not provided any indication which would
       suggest that departing from the Commission’s decisional practice would be adequate
       and therefore this geographic market definition is retained for the purposes of this
       Decision.
3.3.4. Conclusion on market definition for PA 6.6 EP
(45)   For the purposes of the present decision, the Commission considers that the EEA-
       wide market for PA 6.6 EP constitutes a relevant market.
11  Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 292 et seq.
12  Commission Decision in Case M.8674 – BASF/Solvay's EP and P&I business, para. 310 et seq.
                                                   6
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---        Divestment Business is not active in the merchant market pre-Transaction and needs
       all of its limited production for captive use. Second, the combined market shares of
       the Parties in the PA 6 BP market (based on consumption shares) are relatively low
       ([10-20]%) and the increment brought by the Divestment Business is limited ([0-
       5]%). Third, there is a significant number of other well-established PA 6 BP
       suppliers active on the merchant market and from which rival PA 6 film
       manufacturers could source PA 6 BP such as BASF, DSM Groupo Azoty, Lanxess
       or UBE.
(56)   The incentives of the merged entity to foreclose the access by PA 6 film competitors'
       access to PA 6 BP will not materially change since Domo was already vertically
       integrated and the Divestment Business is not active in the PA 6 film market.
       Therefore, there is no increment of market shares in the downstream market.
       Moreover, the Divestment Business only has a market share of [0-5]% in the
       downstream PA 6 EP market (with sales of [quantities sold] kts) and is not active in
       PA 6 PF. Therefore, [quantities sold and sales strategy].
4.2.3. Customer foreclosure
(57)   The ability of the merged entity to foreclose access of PA 6 BP suppliers to a
       sufficient base of customers will not change significantly as result of the
       Transaction. First, the distinction between BOPA and CAST is not relevant for a
       customer foreclosure strategy, as the PA 6 BP is the same for both products. If the
       assessment is carried out on the basis of the plausible PA 6 film market as a whole,
       instead of a narrower plausible CAST market, there is no affected market as Domo
       has a moderate market share of [20-30]% on the downstream PA 6 film market and
       the Divestment Business is not active in this market. Second, Domo is not an
       important customer of PA 6 BP and [sales strategy]. In fact, Domo [quantities sold
       and sales strategy]. Third, the increment brought about by the Divestment Business
       in terms of PA 6 BP market share is very limited and [sales strategy]. Consequently,
       [quantities sold and sales strategy]. Finally, PA 6 film is only a minor end-
       application of PA 6 BP (total market of [40-50] kts) as PA 6 BP is predominantly
       used for the production of PA 6 EP (total market of [400-500] kts). PA 6 PF
       producers also need to purchase PA 6 BP. The incentives of the merged entity to
       foreclose access of PA 6 BP suppliers to a sufficient base of PA 6 films customers
       will not materially change since Domo was already vertically integrated and has
       [quantities sold and sales strategy].
4.2.4. Conclusion
(58)   The Commission therefore concludes that the Transaction does not raise serious
       doubts as to its compatibility with the internal market as a result of vertical effects
       arising from vertical links between the upstream market for PA 6 BP in the EEA and
       the downstream market for PA 6 film in the EEA.
                                                 10
 ---pagebreak--- 5.   CONCLUSION
(59) 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
                                              11