CELEX: 32013M7019
Language: en
Date: 2013-12-12 00:00:00
Title: Commission Decision of 12/12/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.7019 - TRIMET / EDF / NEWCO) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 12.12.2013
                                        C(2013) 9404 final

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

Subject:    Case No COMP/M.7019 - TRIMET/ EDF/ NEWCO
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 8 November 2013, the European Commission received a notification of a proposed concentration  pursuant  to  Article  4  of  the  Merger
       Regulation by which the TRIMET group (“TRIMET”, Germany) and Electricité de France S.A. (“EDF”, France) acquire  joint  control  over  two
       aluminium production facilities of the Rio Tinto Alcan Group ("Rio Tinto Alcan", United Kingdom) by way of purchase of shares in a special
       purpose vehicle ("NEWCO", France)[2].

       THE PARTIES

    2) TRIMET is manufacturer of aluminium products based in Germany. It produces various kinds  of  primary  and  secondary  aluminium  products
       including extrusion billets, rolling ingots, re-melting ingots, liquid aluminium and die-cast  parts.  The  group  also  trades  aluminium
       products and scraps as well as copper products.

    3) EDF is active in the generation and wholesale of electricity and in the transmission, distribution and retail supply  of  electricity,  as
       well as in the provision of other electricity-related services, in France and in other countries. EDF is also active, to a lesser  extent,
       in the natural gas retail and wholesale markets.

    4) Rio Tinto Alcan owns and operates two production plants which constitute NewCo. NewCo's production sites  are  located  in  Saint-Jean-de-
       Maurienne (Savoie) and Castelsarrasin (Tarn-et-Garonne), France. These plants manufacture mainly aluminium wire rod  for  the  electrical,
       mechanical and welding industries.

       THE OPERATION

    5) According to an agreement between the parties (hereafter "the Term Sheet") the transaction will be executed in  three  steps.  First,  RTA
       will create a NewCo as a special purpose vehicle to which it will contribute the two production facilities. Then, TRIMET will acquire 100%
       of the shares of NewCo. Finally, EDF, TRIMET and NewCo enter into a supply agreement (the “Supply Agreement”).

    6) According to the Supply Agreement, EDF will supply electricity to NewCo for 10 years with a free opt-out option after 5 years.[3]

    7) At the signing of the Supply Agreement, EDF will acquire 35% of the share capital and voting rights of NewCo.

       THE CONCENTRATION

    8) The acquisition of 100% of the share capital and voting rights  of  the  NewCo  by  TRIMET  merely  constitutes  the  first  step  of  the
       Transaction, which will ultimately lead to the acquisition of joint control by TRIMET and EDF over the two production sites. In accordance
       with the Consolidated Jurisdictional Notice of the Commission, the Transaction thus constitutes a single concentration[4].

    9) As a result of the whole transaction, TRIMET and EDF will respectively hold 65% and 35% of the share capital  and  voting  rights  of  the
       NewCo.

   10) The board of directors of NewCo will be composed of three members, two of which will be appointed by TRIMET and  the  third  one  will  be
       appointed by EDF.

   11) According to the Term Sheet, EDF has a veto right with regard to the adoption of decisions concerning reserved matters of NewCo  (that  is
       approval of the 10 year business plan, implementation of the business plan, annual budget and financial decisions involving more than  EUR
       5 million).

   12) In view of the above, the Commission concludes that TRIMET and EDF will exercise joint control over NewCo.

   13) The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

   14) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (TRIMET: EUR 1 343  million;  EDF:
       EUR 72 729 million; NewCo: EUR […] million).[5]

   15) Two of them have an EU-wide turnover in excess of EUR 250 million (TRIMET: EUR […] million; EDF: EUR […] million; NewCo: EUR […] million),
       but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

   16) The notified operation therefore has an EU dimension according to Article 2(1) of the Merger Regulation.

       COMPETITIVE ASSESSMENT

   17) The proposed transaction mainly concerns the aluminium and electricity sectors in France.

1 Market Definition

      Aluminium

   18) Trimet and NewCo are both producers of primary aluminium products. Besides, Trimet produces secondary aluminium  products.  NewCo  is  not
       active in the production of secondary aluminium products.

   19) In its previous decisions, the Commission has distinguished between primary aluminium products (i.e. produced  by  smelting  alumina)  and
       secondary aluminium products (i.e. produced by re-melting and reconverting used aluminium products)[6].

       Primary Aluminium

   20) With regard to primary aluminium, the Commission considered that there are three relevant  product  markets  with  respect  the  level  of
       purity, namely (i) low-purity aluminium (i.e. with an aluminium content below 99.5%),  (ii)  standard  primary  aluminium  (i.e.  with  an
       aluminium purity of 99.5 % to 99.9%) and (iii) high-purity aluminium (i.e. with a purity of above 99.9%)[7].

   21) According to a previous Commission decision, standard primary aluminium may be further segmented into  (i)  standard  ingots/T-bars,  (ii)
       extrusion billets, (iii) rolling slabs, (iv) wire rod and (v) foundry alloys[8].

   22) The Parties submit that most primary aluminium producers are able to supply primary products under different forms, and therefore a single
       market for standard primary aluminium covering all forms should be considered.

   23) The question whether the various forms of standard primary aluminium mentioned above constitute separate markets can be left  open,  since
       the proposed transaction does not give rise to competition concerns under any alternative product market definition.

   24) As to the geographic scope, it should be noted that primary aluminium is a commodity traded and  transported  at  a  worldwide  level  and
       quoted on a global exchange, the London Metal Exchange (hereafter “LME”)[9].

   25) In view of the above, and in line with the previous Commission decision making practice[10], the various markets for primary aluminium are
       considered as worldwide in scope.

       Secondary Aluminium

   26) In past decisions, the Commission indicated that secondary aluminium is a distinct market from primary aluminium[11].

   27) The Parties submit that this market definition might no longer be  relevant  since  secondary  aluminium  products  compete  with  primary
       products to a significant extent and in several end-use applications, such as cast alloys for various die-cast automotive applications.

   28) The Parties therefore submit that secondary aluminium and primary aluminium are parts of the same relevant market.

   29) However, for the purpose of the transaction the precise product market definition may be left open since only  TRIMET  produces  secondary
       aluminium products and the transaction would not give rise to any competition concerns on either basis.

   30) As to the geographic scope and in line with its previous Commission  decision  making  practice[12]  the  various  markets  for  secondary
       aluminium are considered as worldwide in scope.

       Retail Supply of Electricity

   31) EDF is active in the retail supply of electricity on all levels including the supply of electricity to  large  industrial  and  commercial
       customers such as the target.

   32) In its previous decision making practice, the Commission identified two different product markets for retail supply of electricity  namely
       (i) the market for retail supply of electricity to large industrial and commercial customers that are connected to  the  high  and  medium
       voltage grid and (ii) the market for retail supply of electricity to household and smaller industrial and commercial  customers  that  are
       connected to the low voltage grid[13].

   33) The Commission generally defined the markets for retail supply of electricity as being national in scope[14].

   34) In any case, since the transaction does not raise any competition concerns with regard to this market, the market definition can  be  left
       open.

2 Competitive Assessment

       No Horizontally Affected Markets

   35) TRIMET is active both on the market for primary and  for  secondary  aluminium[15],  while  its  presence  on  the  downstream  market  is
       negligible[16].

   36) NewCo is only active on the market for production of primary aluminium, which it produces in its two production sites in France.

   37) The present transaction does not give rise to any horizontally affected market since, regardless of the precise product market  definition
       of worldwide markets for primary and secondary aluminium production, market shares for TRIMET and NewCo, both separately and combined, are
       below 15%.

   38) The Commission therefore considers that the concentration does not lead to serious doubts as to its compatibility with the internal market
       as a result of horizontal effects on the worldwide markets (and submarkets) for primary and secondary aluminium.

       Vertically Affected Markets

   39) The proposed transaction gives rise to a vertical relationship between EDF's activities in the supply of electricity to  large  industrial
       customers and NewCo's activities the downstream markets for the production of primary aluminium.

       Input foreclosure to the detriment of other aluminium producers

   40) The Commission assessed whether the transaction leads to a situation where EDF would foreclose other aluminium producers.

   41) In assessing the likelihood of input foreclosure, the Commission examines, first, whether the merged entity would have,  post-merger,  the
       ability to substantially foreclose access to inputs, second, whether it  would  have  the  incentive  to  do  so,  and  third,  whether  a
       foreclosure strategy would have a significant detrimental effect on competition downstream[17].

   42) A merged entity has the ability to foreclose downstream competitors, if it can negatively affect the overall availability  of  inputs  for
       the downstream market[18].

   43) According to the Parties, EDF will not have an ability to foreclose other  aluminium  producers  as  the  main  aluminium  competitors  of
       NewCo/Trimet are not located in France and other suppliers of electricity like GDF/SUEZ and E.ON are active on the  French  retail  market
       and could supply producers of aluminium in France.

   44) In this respect the Parties note that the legal situation in France gives EDF's competitors regulated access  to  electricity  from  EDF's
       nuclear power plants. Pursuant to the “NOME” Law, which entered into force in July 2011, EDF’s competitors can source, until  31  December
       2025, nuclear-generated electricity from EDF at a cost-oriented price set by the French Government and by  the  French  Energy  Regulatory
       Commission as of December 2013 (“ARENH regime”)[19].

   45) Therefore, the “NOME” Law allows any competitor wishing to supply retail customers in France to have access, under  regulated  conditions,
       to the electricity produced by EDF’s nuclear power plants, enabling them to cover up to 80% in average of their customers’ needs.

   46) The Commission notes that electricity is a key input for the production of primary aluminium. Moreover, as  regards  France,  EDF  held  a
       significant market share of [40-50%]  in the market for the supply of electricity to large industrial customers in 2012.

   47) However, the Commission considers that EDF will not have an ability to foreclose  electricity  input  for  competitors  on  the  aluminium
       markets.

   48) First, EDF's strong position on the French market for electricity generation is mitigated by its legal  obligation  to  grant  competitors
       regulated access to its nuclear generated electricity under the ARENH regime.

   49) Second, the production sites of NewCo's and Trimet's main competitors as for example Rusal (Russia), Chalco (China), Alcoa  (USA)  or  Rio
       Tinto Alcan (Canada) are not located in France. They are located in other areas of the world where EDF  does  not  have  a  strong  market
       position or does not supply electricity on the retail market for large industrial customers.

   50) Third, competitors of EDF such as GDF/Suez (ca. [10-20%]), E.ON (ca. [10-20%]) as well as HEW, ENEL and ALPIQ (each ca.  5-10%)  would  be
       able to supply in France competitors active on the aluminium markets.

   51) The Parties would also need to have an incentive to foreclose which depends on the expected profitability of such a strategy[20].

   52) In this respect the Parties note that EDF will hold only have a limited shareholding of 35% in  NewCo,  which  in  turn  only  represented
       around [0-5%] of the market for primary aluminium in 2012.

   53) In view of the above the Commission considers it unlikely that EDF would forego profits from supplying potential downstream competitors of
       NewCo in order to hypothetically increase the latter's sales in the market for primary aluminium products.

   54) Finally, as regards the overall impact of the transaction on competition, a concentration will normally not raise competition concerns  if
       there remain sufficient credible downstream competitors.[21]

   55) In that regard the Parties note that the merged entity accounts for less than [0-5%]  of the worldwide market for primary aluminium. There
       remain significant market players, which all had significantly higher market shares than the merged entity in 2012, such as Rusal (ca. [5-
       10%]), Chalco (ca. [5-10%]), Alcoa (ca. [5-10%]) or Rio Tinto Alcan (ca. [5-10%]).

   56) In view of the above, the Commission considers it unlikely that any foreclosure efforts by EDF would result in  a  significant  effect  on
       competition on the market for primary aluminium.

   57) The Commission notes that in the course of the market investigation, none of the competing aluminium  producers  raised  any  concerns  as
       regards to the possibility of EDF being able to negatively impact their electricity supplies.

   58) In view of the above, the Commission considers that the concentration does not raise serious doubts  as  to  its  compatibility  with  the
       internal market as a result of input foreclosure.

       Customer foreclosure to the detriment of other electricity suppliers

   59) The Commission has assessed whether the transaction leads to customer foreclosure to the detriment of other electricity suppliers  on  the
       upstream market for retail supply of electricity to large industrial and commercial customers in France.

   60) Customer foreclosure may arise where a supplier integrates with an important customer on the downstream market, thus foreclosing  upstream
       rival's access to this customer base[22]. A customer may be considered as important, if he has a significant degree of market power in the
       downstream market[23].

   61) In that regard the Parties note that NewCo only accounts for less than [0-5%] in volume of the market for the supply of electricity to the
       sites of large industrial and commercial customers in France and  less  than  [0-5%]   of  the  downstream  market  of  primary  aluminium
       production.

   62) Besides, the Parties submit that NewCo already procures almost all of its electricity from EDF[24]. The transaction  would  therefore  not
       significantly change the existing situation.

   63) In view of the above, the Commission considers that the merged entity is not an important customer with a  significant  degree  of  market
       power.

   64) In view of the above, the Commission considers that the concentration does not raise serious doubts  as  to  its  compatibility  with  the
       internal market as a result of customer foreclosure.

       CONCLUSION

   65) 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.

   66) This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

                                        For the Commission
                                        (Signed),
                                        Joaquín ALMUNIA
                                        Vice-President

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[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]   Trimet and EDF are designated hereinafter also as the 'Parties".
[3]   These conditions were made in view of complying with the commitments taken by EDF in the antitrust case COMP/39.386.
[4]   Commission Consolidated Jurisdictional Notice under  Council  Regulation  (EC)  No  138/2004  on  the  control  of  concentrations  between
      undertakings, OJ C 95, 16.4.2008, p.1, para. 47.
[5]   Turnover calculated in accordance with Article 5 of the Merger Regulation.
[6]   IV/M.470, Gencor / Shell; IV/M.1003, Alcoa / Inespal; COMP/M.1693, Alcoa / Reynolds; COMP/M.2702, Norsk Hydro /  VAW;  COMP/M.4441,  EN+  /
      Glencore / Sual / UC Rusal; COMP/M.4827, Rio Tinto / Alcan.
[7]   COMP/M.4441, EN+ / Glencore / Sual / UC Rusal.
[8]   COMP/M.4441, EN+ / Glencore / Sual / UC Rusal.
[9]   The Commission also noted that, despite the existence in the EEA of import duties and regional premiums which have to be added to  the  LME
      price, the import volumes of primary aluminium are significant.
[10]  IV/M.470, Gencor / Shell; IV/M.1003, Alcoa / Inespal; COMP/M.1693, Alcoa / Reynolds; COMP/M.2702, Norsk Hydro /  VAW;  COMP/M.4441,  EN+  /
      Glencore / Sual / UC Rusal; COMP/M.4827, Rio Tinto / Alcan.
[11]  IV/M.470, Gencor / Shell; IV/M.1003, Alcoa / Inespal; COMP/M.1693, Alcoa / Reynolds; COMP/M.2702, Norsk Hydro /  VAW;  COMP/M.4441,  EN+  /
      Glencore / Sual / UC Rusal; COMP/M.4827, Rio Tinto / Alcan.
[12]  IV/M.470, Gencor / Shell; IV/M.1003, Alcoa / Inespal; COMP/M.1693, Alcoa / Reynolds; COMP/M.2702, Norsk Hydro /  VAW;  COMP/M.4441,  EN+  /
      Glencore / Sual / UC Rusal; COMP/M.4827, Rio Tinto / Alcan.
[13]  COMP/M.5979 KGHM / Tauron Wytwarzanie / JV; COMP/M.6225 – Molaris/Commerz Real/RWE/Amprion; COMP/M.5827 – Elia/IFM/50Hertz;  COMP/M.5467  –
      RWE/Essent.
[14]  COMP/M.6225 – Molaris/Commerz Real/RWE/Amprion; COMP/M.5827 – Elia/IFM/50Hertz; COMP/M.5467 – RWE/Essent; COMP/M.5512  Electrabel  /  E.on;
      COMP/M.5224 EDF / British Energy; COMP/M.4180 Gaz de France / Suez; COMP/M.3696 E.ON / MOL.
[15]  TRIMET also trades and provides approximately […] tonnes/year of electrolytic copper cathodes. However, this business is unrelated  to  the
      aluminium business since the copper products traded are in no way complementary to aluminium. The supply of  electrolytic  copper  cathodes
      is therefore not further discussed in the present assessment.
[16]  Trimet only finishes certain quantities of die-cast aluminium products in majority cast by other parties. However,  these  sales  represent
      less than [0-5%] of the worldwide sales.
[17]  Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of concentrations  between  undertakings
      (OJ C265, 18.10.2008, p. 6), (hereafter: "Non-Horizontal Merger Guidelines"), para. 32.
[18]  Non-Horizontal Merger Guidelines, para. 36.
[19]  SA.21918 (C 17/2007) Tarifs réglementés de l'électricité en France (12.6.2012).
[20]  Non-Horizontal Merger Guidelines, para. 40.
[21]  Non-Horizontal Merger Guidelines, para. 50.
[22]  Non-Horizontal Merger Guidelines, para. 58
[23]  Non-Horizontal Merger Guidelines, para. 61
[24]  EDF supplies electricity to NewCo's  Saint-Jean-de-Maurienne  site,  which  accounts  for  more  than  [90-100%]   of  NewCo's  electricity
      consumption (approximately […]),while the site in Castelsarrasin  accounts  for  less  than  [0-5%]   of  NewCo's  electricity  consumption
      (approximately […]).

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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