CELEX: 32015M7584
Language: en
Date: 2015-06-09 00:00:00
Title: Commission Decision of 09/06/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7584 - INTERNATIONAL CHEMICAL INVESTORS / INEOS CHLOROVINYLS BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 09.06.2015
C(2015) 4055 final

COMP Operations

                                        [pic]

To the notifying party:

Dear Sir/Madam,

Subject:    Case M.7584 - International Chemical Investors / INEOS Chlorovinyls Business
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

On 29 April 2015, following a referral pursuant to Article 4(5) of the Merger Regulation, the European  Commission  received  notification  of  a
proposed concentration pursuant to Article 4 of the Merger Regulation by which International Chemical Investors Group S.E.  ("ICIG",  Luxembourg)
acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of a chlorovinyls business (the “Chlorovinyls  Business”  or  the
“Target”) previously owned and operated by INEOS Group AG ("INEOS", Switzerland), by way of purchase of shares (the  "Transaction").[3]  ICIG  is
hereinafter referred to as the "Notifying Party", and together with INEOS as the "Parties".

THE PARTIES AND THE OPERATION

ICIG is a privately owned industrial holding company, active worldwide in agrochemicals, fine chemicals, basic chemicals, performance  chemicals,
finished dose pharmaceuticals and pharmaceutical ingredients.

The Target comprises assets for the production and supply of S-PVC and  other  related  products,  such  as  caustic  potash  (“KOH”),  chlorine,
ethylene dichloride (“EDC”), Vinyl Chloride Monomer (“VCM”), caustic soda, hydrochloric acid and sodium hypochlorite located in Belgium,  France,
Germany, the Netherlands and the United Kingdom. INEOS is  the  parent  of  a  group  of  companies  which  are  active  in  the  manufacture  of
petrochemicals, specialty chemicals and oil products.

The Transaction originates from the commitments entered into by INEOS and Solvay SA (“Solvay”) in the context of the Commission’s  merger  review
of the combination of INEOS’ and Solvay’s EEA chlorovinyls activities and related businesses into a full-function joint venture, INOVYN, in  Case
M.6905 INEOS / Solvay / JV.[4] The creation of INOVYN was cleared by the Commission on 8 May 2014 subject to the up-front divestment of a  number
of INEOS’ chlorovinyl activities.

In particular, INEOS committed to divest three S-PVC plants (Wilhelmshaven in Germany, Mazingarbe in France and Beek Geleen in the  Netherlands),
as well as various production facilities for chemical substances on the upstream levels of the multi-level PVC production value chain up  to  the
manufacture of chlorine at Tessenderlo in Belgium and Runcorn in the United Kingdom. These activities are now being acquired by ICIG  along  with
part of INEOS’ KOH business at Tessenderlo.

On 14 November 2014, a Share Purchase Agreement (“SPA”) was agreed between ICIG and INEOS. In the context of the Commission’s review of  ICIG  as
the proposed purchaser of the divestment business in Case M.6905, certain amendments were made to the original SPA. The SPA was  complemented  by
a set of ancillary agreements as foreseen by the commitments in case M.6905, and is also accompanied by additional  agreements  relating  to  the
transfer of part of INEOS’ KOH business to ICIG. On 3 June  2015,  ICIG  and  INEOS  submitted  an  amended  SPA  which  took  into  account  and
incorporated these modifications and additional agreements (the “Amended SPA”).

Under the Amended SPA, ICIG will toll manufacture a certain volume of KOH for INOVYN at the Tessenderlo plant, while retaining the right  to  use
all the remaining capacity (the “KOH Toll Agreement”).[5] The KOH Toll Agreement is currently due to expire […]. By this  date,  ICIG  will  have
had to decide to either shut down the Tessenderlo KOH plant or invest in conversion plans, as the industry  is  phasing  out  the  older  mercury
electrolysis technology due to environmental concerns.[6]

In addition, in the context of the purchaser approval process in Case M.6905, ICIG has pledged to  [summary  of  the  terms  of  the  Independent
Promise of Guarantee].

ICIG has formalised this pledge by means of an “Independent Promise of Guarantee” under German law  (selbständiges  Garantieversprechen)  entered
into with Baker Tilly, the Monitoring Trustee, on the basis of a Trustee Mandate submitted to the Commission on 29 May 2015.

As a result of the Transaction, ICIG will exercise sole control over the Target.

EU DIMENSION

The Transaction does not meet either of the alternative jurisdictional thresholds under Article 1 of the Merger Regulation, because the  combined
aggregate worldwide turnover of all the undertakings concerned in 2014 does not exceed EUR 2 500 million (EUR […]  for  ICIG;  EUR  […]  for  the
Target).[7] The Transaction therefore has no EU dimension, but was referred to the Commission pursuant to a referral request under  Article  4(5)
of the Merger Regulation.

MARKET DEFINITION

The Transaction results in a number of minor horizontal overlaps and vertical relationships as regards chlorine, caustic soda, hydrochloric  acid
and sodium hypochlorite, but none of these give rise to affected markets and, therefore, is not assessed further in this Decision.  In  addition,
post-Transaction ICIG would become INEOS' […] supplier of chlorine, which is used by INEOS for producing chlorotoluenes.  While  both  INEOS  and
ICIG are active in chlorotoluenes, the Target is not. Therefore, the Transaction does not lead to any  horizontal  or  vertical  relationship  as
regards chlorotoluenes, which are not assessed further in this Decision.[8]

As noted above, post-Transaction ICIG would be entitled to use the remaining capacity of the KOH plant at Tessenderlo, and would take over a  set
of customer contracts, currently part of INEOS’ portfolio, equivalent to around […]% of INEOS’ total KOH business. Given  that  ICIG  is  already
active in KOH through its plant at Thann (France), the Transaction gives rise to a horizontal  overlap  and  potentially  a  number  of  affected
markets in KOH. The remainder of this Decision will therefore focus on this horizontal overlap.

1 Product Market Definition

KOH is produced from the electrolysis of potassium chloride, a process that creates chlorine as a co-product. KOH is either sold in  liquid  form
as a 50% solution in water, i.e. liquid KOH (also referred to as lye) or is sold in a solid form (also referred to as  flakes).  KOH  flakes  are
produced from liquid KOH by heating the liquid at a high temperature to evaporate out the water content (around 10% of the content of KOH  flakes
is water which cannot be evaporated).

Overall, the majority of KOH is used for conversion into potassium carbonates (30%), potassium phosphates  (16%)  and  other  chemicals  such  as
organic and inorganic potassium salts, including de-icers (19%). The production of soaps / detergents (11%) and fertiliser  (6%)  constitute  two
other major applications for KOH.

From a demand-side perspective, the Notifying Party submits that, while the Commission has never assessed the market for KOH, this  latter  bears
significant similarities to the Commission’s decisional practice regarding liquid and solid caustic soda.[9] This is because liquid KOH  and  KOH
flakes (i) are typically used for different end-applications; (ii) customers generally purchase either one or the other but not both;  and  (iii)
only a few customers have the ability to store both types of caustic soda.

From a supply-side perspective, the Notifying Party explains that KOH flakes are more expensive to produce due to the costs  of  evaporating  the
liquid content and the additional packaging required. Not all  producers  have  the  necessary  equipment  on-site  to  undertake  the  necessary
evaporation and packaging needed to sell KOH flakes. This equipment is highly specialised and energy-intensive. The Notifying Party submits  that
according to its experience the additional energy and bagging costs add approximately […]% to the variable costs of producing liquid KOH.

Accordingly, the Notifying Party submits that liquid KOH and KOH flakes belong to two distinct product markets.

The results of the market investigation are broadly in line with the Notifying Party’s submissions. While a limited number  of  customers  appear
to be able to procure KOH flakes and then produce liquid KOH themselves, such in-house production of liquid  KOH  from  flakes  requires  certain
specific production facilities and know-how.[10] Moreover, a very large majority of customers indicated that they cannot replace liquid KOH  with
KOH flakes in their internal production processes without incurring significant costs.[11] By the same token, suppliers  also  generally  pointed
out that switching production between liquid KOH and KOH flakes cannot be done in  a  reasonable  timeframe  and  without  incurring  significant
costs.[12]

In light of the above, the Commission concludes that, for the purpose of this Decision, liquid KOH and KOH  flakes  belong  to  distinct  product
markets. Given that the Target is not active in KOH flakes, the remainder of this Decision will focus on liquid KOH.

2 Geographic market definition

As regards the geographic scope of the market for liquid KOH, the Notifying Party submits that this is likely to  be  national  or  regional.  In
principle, due to the high water content of liquid KOH, transport of liquid KOH by road truck is cost-competitive only for  distances  of  up  to
300-400 km. Proximity is a key competitive driver in the market because security of supply  and  short  supply  chains  are  generally  of  great
importance for customers. Empirically, this would be reflected in the trend according to which suppliers tend to have a high market share in  the
country where their plant is located compared with other countries where they also make sales.

However, the Notifying Party also explains that some regions in the EEA are  subject  to  competitive  dynamics  that  are  distinct  from  those
displayed in continental Europe. In the Nordic (Denmark, Finland, Norway and Sweden) and the United Kingdom / Ireland regions, there is no  local
KOH production, and therefore liquid KOH is imported from continental Europe via sea transport over distances larger than 300-400 km.

Moreover, demand conditions are markedly different in the Nordic region. This is partly due to seasonal factors because  a  number  of  customers
use KOH liquid for the production of de-icers during the winter months. The Nordic region is also relatively  large  compared  to  certain  other
continental regions because KOH is used as an input for drilling fluids, for which there is a demand in the Norwegian oil fields.

Finally, the Notifying Party submits that these differences in competitive dynamics have a significant effect on price levels for liquid  KOH  in
different regions in the EEA. In particular, the United Kingdom/Ireland region has appreciably different prices: based on its 2014  sales,  INEOS
achieved an average net invoice value of EUR […] per tonne of KOH liquid in the United Kingdom and EUR […] per tonne in Ireland, compared to  EUR
[…] per tonne in Belgium, EUR […] in the Netherlands and EUR […] in France.

According to the Commission Notice on the definition of relevant market for  the  purposes  of  Community  competition  law  (“Market  Definition
Notice”)[13] the relevant geographic market comprises:

         “the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions  of
         competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the  conditions  of  competition
         are appreciably different in those areas.”[14]

The market investigation has provided strong indications suggesting that the market for liquid KOH is wider than national, and at least  regional
in scope.[15] Market participants largely considered that while national borders do not constitute an obstacle  to  KOH  trade,  transport  costs
have a significant impact on the final price of liquid KOH and security of  supply  is  a  very  important  factor  in  the  customers'  sourcing
strategy.[16] These factors are generally associated with short supply chains to streamline logistics and reduce costs.

While market participants generally agreed that selling over large distances make  the  price  of  liquid  KOH  less  attractive,  there  was  no
consensus as to what specific distance would constitute an insurmountable barrier. This is because  customers  located  in  the  area  comprising
Benelux, France and Germany generally enjoy access to several suppliers. Customers located in the Nordic  region  appear  instead  to  have  more
limited sourcing options due to the lack of local suppliers. By the same token, suppliers of  liquid  KOH  consider  a  number  of  factors  when
planning their strategy such as proximity of customers, customer-specific requirements, number of competitors in a given area, as well  as  their
own cost-base.[17]

Based on the results of the market investigation and the Notifying Party’s submissions, it appears that different regions across the EEA  display
different competitive dynamics. For this reason, the EEA could be split between a North West European region  (“NWE”),[18]  or  even  a  narrower
continental region (“Continental NWE”),[19] distinct from surrounding regions such as the Nordic, the United Kingdom / Ireland, the Southern  and
the Eastern European regions.

In light of the above, the Commission concludes that, for the purposes of this Decision, the scope  of  market  for  liquid  KOH  is  wider  than
national, and at least regional in scope. The question as to whether this market should be  split  between  NWE  or  Continental  NWE  and  their
surrounding regions can be left open, as the Transaction does not raise serious doubts under any of those alternative market definitions.

COMPETITIVE ASSESSMENT

As noted above, the Commission will analyse whether the Transaction is likely to give rise to serious doubts in the market for liquid  KOH  under
several geographic dimensions. This analysis will be centred on Continental NWE and NWE, as those regions constitute the main area  of  focus  of
ICIG’s and INEOS’ KOH businesses and the geographic region where the bulk of the EEA capacity is  located.  The  impact  of  the  transaction  on
possible markets for liquid KOH in Easter Europe and Southern Europe will not be discussed in this Decision, given that  these  possible  markets
would not be affected.

1 Non-coordinated effects

From a structural point of view, the Transaction would fundamentally lead to a de-concentration because a share of assets and customers would  be
transferred from INEOS to ICIG.

The Commission considers that, as a result of the Transaction, ICIG would expand its market share and acquire a  platform  with  which  it  could
better compete with INOVYN. The transfer of (i) customer and distributor contracts; (ii) the necessary sales  personnel  located  across  Europe;
and (iii) better logistics will enable ICIG to obtain a much larger share in all possible affected markets in  a  much  shorter  period  than  it
could otherwise achieve. ICIG would also have the necessary purchasing expertise at Tessenderlo for procurement of the key raw material  for  KOH
production, KCl salt, in addition to its own experts at ICIG’s plant in France. Finally, the Transaction would likely result in cost savings  for
ICIG on KCl purchases as it would be able to purchase KCl on a combined basis for its operations at both Tessenderlo and Thann.

In addition, the Commission considers that strong incentives exist for ICIG to convert the the Tessenderlo plant so as to  continue  serving  the
customers captured during the period following completion of the Transaction and prior to closure of the Tessenderlo mercury  cell  room.[20]  In
this regard, the Commission notes that the Independent Promise of Guarantee entered into by ICIG ensures that the Target  will  have  significant
resources at its disposal, which would increase the likelihood of a conversion of the Tessenderlo plant. The Commission considers therefore  that
the Independent Promise of Guarantee constitutes a factual element that the Commission must take into account in this case - along with  all  the
other elements in its file - in its assessment of the impact of the Transaction on the market for liquid KOH.[21]

Lastly, based on the market investigation, the Commission notes that switching does not generally entail  a  lengthy  and  costly  process,  most
customers being able to switch in a few months incurring relatively limited expenditure.[22] While customers  emphasised  that,  in  most  cases,
their number of alternative suppliers is limited, the Transaction would strengthen an  existing  player,  giving  ICIG  additional  capacity  and
facilities at the heart of Europe.

The specific effects of the Transaction with respect to each of the possible markets identified in Section 3 of this Decision  are  discussed  in
the sections below.

1 Continental NWE market for liquid KOH

Table 1 below shows the effects of the de-concentration brought about by the Transaction in Continental NWE. As it can  be  seen,  INEOS'  market
share would decrease from [30-40]% to [10-20]%, while ICIG's market share would increase from [10-20]% to [30-40]%.

                                               Table 1: Liquid KOH market shares in Continental NWE
                                                             by Sales Volumes in 2014

|                         |Pre-Transaction                             |Post-Transaction                            |
|                         |Volume                 |Share               |Volume                 |Share               |
|                         |(dry kt)               |                    |(dry kt)               |                    |
|INEOS                    |[…]                    |[30-40]%            |[…]                    |[10-20]%            |
|ICIG                     |[…]                    |[10-20]%            |[…]                    |[30-40]%            |
|Evonik                   |[…]                    |[30-40]%            |[…]                    |[30-40]%            |
|Altair                   |[…]                    |[5-10]%             |[…]                    |[5-10]%             |
|Spolchemie               |[…]                    |[5-10]%             |[…]                    |[5-10]%             |
|SPCH                     |[…]                    |[0-5]%              |[…]                    |[0-5]%              |
|Ercros                   |[…]                    |[0-5]%              |[…]                    |[0-5]%              |
|Importers                |[…]                    |[0-5]%              |[…]                    |[0-5]%              |
|Total                    |[…]                    |100%                |[…]                    |100%                |

                                                            Source: Form CO, Annex 7.4

This de-concentration is also reflected in a  reduction  in  market  concentration  as  shown  by  the  Herfindahl-Hirschman  Index  (“HHI”).  In
Continental NWE, the pre-Transaction HHI is 2 637, which would then be reduced to 2 358, with a negative delta of -279.

At capacity level, the Transaction would also translate into a de-concentration. Table 2 shows that INEOS would shift from [40-50]% to  [20-30]%,
while ICIG would shift from [10-20]% to [30-40]%. In this case, the Commission considers that an analysis of capacity  levels  is  all  the  more
relevant because sales volumes are ultimately the result of the assignment of customer contracts to ICIG, and may change significantly  following
completion of the Transaction.

                                               Table 2: Liquid KOH market shares in Continental NWE
                                                               by Capacity in 2014

|                        |Pre-Transaction                                 |Post-Transaction                                |
|                        |Volume                  |Share                   |Volume                  |Share                   |
|                        |(dry kt)                |                        |(dry kt)                |                        |
|INEOS                   |[…]                     |[40-50]%                |[…]                     |[20-30]%                |
|ICIG                    |[…]                     |[10-20]%                |[…]                     |[30-40]%                |
|SPCH                    |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Evonik                  |[…]                     |[20-30]%                |[…]                     |[20-30]%                |
|BASF[23]                |[…]                     |[10-20]%                |[…]                     |[10-20]%                |
|Total                   |[…]                     |100%                    |[…]                     |100%                    |

                                                             Source: Form CO, page 58

In sum, while INEOS’ market position will decrease post-Transaction, ICIG will become a more significant player. Absent  the  Transaction,  INEOS
(and most likely in the future, INOVYN) would retain 100% of the capacity of the KOH plant at Tessenderlo,  and  would  likely  also  retain  its
strong market position.

Post-Transaction, ICIG will face significant competitive pressure from a number of players. In Continental NWE, besides the former market  leader
INEOS ([10-20]% by sales volume and [20-30]% by capacity), ICIG would compete with other large  suppliers  such  as  Evonik  ([30-40]%  by  sales
volume and [20-30]% by capacity), as well as a number of other non-negligible players such as Altair, Spolchemie, Ercros and  SPCH.  Even  though
these three competitors have their capacity located outside (Continental) NWE, as shown in Table 1, they have a combined  market  share  of  [10-
20]% in Continental NWE by sales volume: [5-10]% Altair (Italy),  [0-5]%  Ercros  (Spain),  and  [5-10]%  Spolchemie  (the  Czech  Republic).  In
addition, the general considerations outlined in Section 4.1 also apply with regard to this possible market.

In the light of the above, the Commission concludes that the Transaction is unlikely to give rise to non-coordinated effects in  the  Continental
NWE market for liquid KOH.

2 NWE market for liquid KOH

Table 3 below shows the effects of the de-concentration brought about by the Transaction in NWE. As it can be seen,  INEOS'  market  share  would
decrease from [40-50]% to [20-30]%, while ICIG's market share would increase from [5-10]% to [20-30]%.

                                                     Table 3: Liquid KOH market shares in NWE
                                                             by Sales Volumes in 2014

|                        |Pre-Transaction                                 |Post-Transaction                                |
|                        |Volume                  |Share                   |Volume                  |Share                   |
|                        |(dry kt)                |                        |(dry kt)                |                        |
|INEOS                   |[…]                     |[40-50]%                |[…]                     |[20-30]%                |
|ICIG                    |[…]                     |[5-10]%                 |[…]                     |[20-30]%                |
|Evonik                  |[…]                     |[20-30]%                |[…]                     |[20-30]%                |
|Altair                  |[…]                     |[5-10]%                 |[…]                     |[5-10]%                 |
|Spolchemie              |[…]                     |[5-10]%                 |[…]                     |[5-10]%                 |
|SPCH                    |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Ercros                  |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Importers               |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Total                   |[…]                     |100%                    |[…]                     |100%                    |

                                                            Source: Form CO, Annex 7.4

The de-concentration is also reflected in the reduction in market concentration, as shown by HHI index. In NWE,  the  pre-Transaction  HHI  is  2
930, which would then be reduced to 2 295, with a negative delta of -635.

At capacity level, the Transaction would also translate into a de-concentration, as shown in  Table  2  as  there  is  no  additional  production
capacity located in the additional countries comprising NWE.

Post-Transaction, ICIG would continue to face significant competitive pressure from a number of  players.  In  NWE,  besides  the  former  market
leader INEOS ([20-30]%), ICIG would compete with another large supplier, Evonik ([20-30]%), as well as with  a  number  of  other  non-negligible
players such as Altair, Spolchemie, SPCH and Ercros. In addition, the general considerations outlined in Section 4.1 also apply  with  regard  to
this possible market.

Therefore, the Commission concludes that the Transaction is unlikely to give rise to non-coordinated effects in the NWE market for liquid KOH.

3 Nordic market for liquid KOH

Table 4 below shows the effects of the de-concentration brought about by the Transaction in the Nordic market for liquid KOH. As it can be  seen,
INEOS' market share would decrease from [70-80]% to [50-60]%, while ICIG's market share would increase from [5-10]% to [20-30]%.

                                              Table 4: Liquid KOH Market Shares in the Nordic Market
                                                             by Sales Volumes in 2014

|                        |Pre-Transaction                                 |Post-Transaction                                |
|                        |Volume                  |Share                   |Volume                  |Share                   |
|                        |(dry kt)                |                        |(dry kt)                |                        |
|INEOS                   |[…]                     |[70-80]%                |[…]                     |[500-60]%               |
|ICIG                    |[…]                     |[5-10]%                 |[…]                     |[20-30]%                |
|Evonik                  |[…]                     |[10-20]%                |[…]                     |[10-20]%                |
|Spolchemie              |[…]                     |[5-10]%                 |[…]                     |[5-10]%                 |
|Altair                  |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Ercros                  |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|SPCH                    |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Importers               |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Total                   |[…]                     |100%                    |[…]                     |100%                    |

                                                            Source: Form CO, Annex 7.4

The de-concentration is also reflected in the reduction in market concentration,  as  shown  by  HHI  index.  In  the  Nordic  Region,  the  pre-
Transaction HHI is 5 704, which would then be reduced to 4 087, with a negative delta of -1 617.

Post-Transaction, ICIG will become a much more significant competitive force in this market than in the past,  with  a  market  share  increasing
from [5-10]% to [20-30]%. It will be therefore able to exercise more competitive pressure on INEOS, the market leader, than  in  the  absence  of
the transaction. In  addition,  ICIG  would  compete  with  other  two  suppliers,  Evonik  ([10-20]%)  and  Spolchemie  ([5-10]%).  The  general
considerations outlined in Section 4.1 would also apply with regard to this possible market. Given that, no capacity is  located  in  the  Nordic
region, Table 2 constitutes the best proxy with respect to the impact of the Transaction on capacity in this market.

In the light of this, the Commission concludes that the Transaction is unlikely to give rise to non-coordinated effects in the Nordic market  for
liquid KOH.

4 United Kingdom / Ireland market for liquid KOH

Table 5 below shows the effects of the de-concentration brought about by the Transaction in the United Kingdom / Ireland market for  liquid  KOH.
As it can be seen, INEOS' market share would decrease from [70-80]% to [60-70]%, while ICIG's market share would increase  from  [0-5]%  to  [10-
20]%.

                                     Table 5: Liquid KOH market shares in the United Kingdom / Ireland Market
                                                             by Sales Volumes in 2014

|                        |Pre-Transaction                                 |Post-Transaction                                |
|                        |Volume                  |Share                   |Volume                  |Share                   |
|                        |(dry kt)                |                        |(dry kt)                |                        |
|INEOS                   |[…]                     |[70-80]%                |[…]                     |[60-70]%                |
|ICIG                    |[…]                     |[0-5]%                  |[…]                     |[10-20]%                |
|SPCH                    |[…]                     |[10-20]%                |[…]                     |[10-20]%                |
|Evonik                  |[…]                     |[5-10]%                 |[…]                     |[5-10]%                 |
|Altair                  |[…]                     |[5-10]%                 |[…]                     |[5-10]%                 |
|Ercros                  |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Spolchemie              |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Importers               |[…]                     |[0-5]%                  |[…]                     |[0-5]%                  |
|Total                   |[…]                     |100%                    |[…]                     |100%                    |

                                                            Source: Form CO, Annex 7.4

The de-concentration is also reflected in the reduction in market concentration, as shown by HHI index. In the United Kingdom / Ireland, the pre-
Transaction HHI is 5 596, which would then be reduced to 4 089, with a negative delta of -1 507.

   Post-Transaction, ICIG will become a much more significant competitive force in this market than in the past, with a market  share  increasing
   from [0-05]% to [10-20]%. It will be therefore able to exercise more competitive pressure on INEOS, the market leader, than in the absence  of
   the transaction. In addition, ICIG would compete with three other suppliers, SPCH ([10-20]%),  Evonik  ([5-10]%)  and  Altair  ([5-10]%).  The
   general considerations outlined in Section 4.1 would also apply with regard to this possible market. Given that, no capacity is located in the
   United Kingdom / Ireland, Table 2 constitutes the best proxy with respect to the impact of the Transaction on capacity in this market.

In the light of this, the Commission concludes that the Transaction is unlikely to give rise to non-coordinated effects in the United  Kingdom  /
Ireland market for liquid KOH.

2 Coordinated effects

According to the case law of the European Courts and the Guidelines on the assessment of horizontal mergers under the Council Regulation  on  the
control of concentrations between undertakings (“Merger Horizontal Guidelines”),[24] coordination is most likely to emerge in  markets  where  it
is relatively simple to reach a common understanding on the terms of coordination. Three conditions  have  to  be  met  for  coordination  to  be
sustainable: (i) the coordinating firms must be able to monitor to a sufficient degree whether the terms of coordination are  being  adhered  to;
(ii) discipline requires that there is some form of credible deterrent mechanism that can be activated if deviation is detected;  and  (iii)  the
reactions of outsiders, such as current and future competitors not participating in the coordination, as well as customers, should  not  be  able
to jeopardise the results expected from the coordination.

In this light, and even if the Transaction does not reduce the number of players active in the relevant market, the  Commission  notes  that  the
Transaction creates a certain degree of symmetry in capacity shares, as shown in Table 2 for Continental NWE. Moreover, the  KOH  Toll  Agreement
creates a link between INEOS and ICIG in the market for liquid KOH.

Based on the Notifying Party’s submission and the results of the market investigation, and for the reasons set  out  in  the  assessment  in  the
following sections, the Commission considers that the market for liquid KOH  does  not  display  the  characteristics  required  for  coordinated
effects to take place. In addition, the Commission has reviewed the KOH Toll Agreement and  the  proposed  mechanism  for  transferring  customer
contracts to ICIG, and has reached the conclusion that such transaction structure, in the specific circumstances of the case, does  not  increase
the likelihood of coordination.

1 KOH prices are not transparent

The Commission notes that pricing and volumes in the market for liquid KOH do not appear to be transparent. As submitted by the Notifying  Party,
this market is characterised by short-term, bilateral negotiations, which generally  remain  confidential  between  the  supplier  and  customer.
Negotiations typically take place quarterly, regardless of the exact duration of a given contract, and customers are in principle free to  source
their requirements from a different supplier if a given negotiation is not satisfactory.[25]

In addition, the Commission notes that market for liquid KOH does not feature an  index  to  which  prices  in  contracts  and  negotiations  are
generally benchmarked. Although a benchmark price does exist and is published by IHS, many market participants either do not calculate prices  by
reference to that  benchmark  price  or  use  it  only  for  internal  purposes  to  have  a  better  understanding  of  market  dynamics  before
negotiations.[26] In this regard, it is worth noting that neither INEOS nor ICIG make reference to the IHS benchmark in any of  their  KOH  sales
contracts or negotiations with customers.[27]

The Notifying Party further substantiated its arguments regarding the lack of transparency with an analysis showing that there  is  also  a  wide
dispersion in the actual prices paid by liquid KOH customers, both between customers in a given geographic market and between national markets.

In view of the above, the Commission concludes that prices in the market for liquid KOH are not transparent.

2 Demand and supply for KOH are not stable

The market investigation confirmed that demand for KOH tends to fluctuate during one year,  essentially  due  to  the  use  of  KOH  in  de-icing
liquids. Depending on weather conditions in a given year, demand for de-icing liquids, and therefore for  KOH,  may  suddenly  and  substantially
change. These changes are caused by factors which are out of the suppliers' control.

In addition, the Commission notes that the market for liquid KOH is currently going through a major transformation, as suppliers face  regulatory
obligations to phase out the old mercury technology used for electrolysis and convert their plants into the newer membrane  technology  over  the
next few years.[28] As noted by the Notifying Party, in the run up to and after 2017 there will be substantial volatility  on  the  supply  side.
This is because the conversion process entails very large investments, and there is no guarantee that all  suppliers  will  be  able  to  convert
their mercury-based cellrooms by the relevant national deadlines. Indeed, the market investigation indicated that there is a  certain  degree  of
uncertainty, especially among customers, as to whether all capacity or only part of it will be converted.[29]

These factors lead to significant instability between demand and supply in the future, and uncertainty as to the development of these  variables,
which would make it more difficult for existing suppliers to coordinate.

3 Upcoming entry and capacity expansion

The market investigation also indicated that the market for KOH is about to experience substantial new entry or capacity expansion.

In particular, the Commission notes that Tessenderlo Chemie has announced that it will re-enter the market for liquid KOH through its  subsidiary
PC Loos.[30] Moreover, KOH producer Altair, which  is  already  active  in  NWE  through  imports  from  Italy,  plans  to  expand  its  capacity
significantly.[31]

The Commission considers that this entry and expansion would  make  potential  coordination  more  unstable  and  therefore  less  likely  to  be
maintained.

4 Competitors have different cost structures and incentives to compete

Cost structures in the KOH industry are not sufficiently symmetrical to make coordination likely. In particular,  suppliers  in  the  liquid  KOH
market tend to have different downstream product chains for the chlorine that is co-produced with KOH.

Chlorine can be used in a variety of different  markets,  depending  on  factors  including  each  supplier’s  production  facilities,  location,
capabilities, market position and customer relationships. In this regard, KOH suppliers appear to have different  downstream  uses  of  chlorine,
and therefore different opportunity costs of producing (or withholding) KOH. These complex cost  differences  make  it  very  difficult  for  one
supplier to understand the marginal incentive of another. In other words, producing one less tonne of KOH will have direct implications for  each
supplier depending on the use made by each supplier of chlorine.

The costs of producing KOH can also vary depending on capacity utilisation; the ability of the plant to purify different types of KCl  salt  (and
therefore purchase cheaper, impure KCl); and the scale of the plant. KOH suppliers will also  incur  different  transport  and  logistics  costs,
which will be depend on their ability to store KOH, their ability to load different modes of transport, and their location.

5 Absence of concerns regarding coordination amongst customers

None of the customers that responded  to  the  Commission's  requests  for  information  or  were  interviewed  during  the  Commission's  market
investigation have expressed fears that the Transaction would result in or  reinforce  coordination  in  the  liquid  KOH  market.  Indeed,  many
customers have welcomed the transaction insofar as it creates opportunities for ICIG to expand its geographic reach in new and act as  a  greater
competitive force on the liquid KOH market.

6 KOH Toll Agreement and customer split

The Commission considers that the KOH Toll Agreement and customer split agreed between ICIG  and  INEOS  constitute  factual  elements  that  the
Commission must take into account in this case - along with all the other elements in its  file  -  in  its  assessment  of  the  impact  of  the
Transaction on the market for liquid KOH.[32]

In this regard, the Commission notes that the KOH Toll Agreement will create links between the Parties. However, such links are of a  short-term,
transitional nature, and are destined to expire […]. Futhermore, ICIG and INEOS have agreed  to  comply  with  the  following  measures  for  the
duration of the KOH Toll Agreement:

        a. INOVYN will be entitled to request that ICIG toll manufactures a specified quantity of KOH on its behalf […] of KOH, rather than  any
           ratio or amount linked to plant output.

        b. ICIG will sell to INOVYN a fixed amount of […]  of chlorine per annum for a price of EUR […] per tonne (irrespective of the amount of
           KOH produced by ICIG[…]). It is intended that INOVYN will on-supply the […] of  chlorine  purchased  from  ICIG  to  INEOS’  retained
           chlorotoluenes business at Tessenderlo.

        c. Each of INOVYN and ICIG will purchase  independently  their  own  KCl,  which  accounts  for  […]%  of  the  variable  costs  of  KOH
           production.[33]

        d. The tolling fee to be paid by INOVYN to ICIG will be composed of a fixed tolling fee and a variable component to account  for  energy
           (and other variable) costs.

        e. The Target will split between KOH production and all KOH commercial/sales functions. The production  and  commercial/sales  functions
           will be housed in separate legal entities, each of which will be 100% owned by the Target  holding  company.  The  Target  production
           subsidiary will receive orders from both ICIG and INOVYN. It will also be responsible for the operation and take-off of KOH from  the
           storage facilities. The management of the production and commercial/sales subsidiaries will be entirely separate.[34]

        f. The KOH stock tanks at […] will be shared by INOVYN and ICIG in terms of volumes and costs, each party  being  entitled  to  a  fixed
           amount of capacity of the stock tanks, regardless of each party’s use.

        g. A compliance officer will be appointed by ICIG to ensure compliance with the confidentiality  arrangements.  The  compliance  officer
           will provide reports on a monthly basis to the Commission (or Monitoring Trustee appointed in Case M.6905 INEOS /  Solvay  /  JV)  on
           confidentiality-related issues (for example, breaches of the agreements, steps taken to train personnel, etc.).

0. Finally, with respect to the customer split, the Notifying Parties implemented a procedure that  minimises  the  possibility  that  INEOS  KOH
   customers are allocated to ICIG based on strategic considerations conducive of coordination.  More  specifically,  INEOS  KOH  customers  were
   assigned to ICIG in a randomized manner subject to two constraints:

        h. […] and

        i. maximising the total ICIG volume share post-transaction at [30-40]% in four regions: France, Germany,  Germany/Austria,  Norway,  and
           France/Germany/Belgium/Netherlands.

The randomised customer allocation was modified only marginally for the reasons of feasibility based on transparent  rules  that  were  discussed
with the Commission.

The Commission considers that the KOH Toll Agreement will only have a transitory impact on the structure of the market, as it is meant to  expire
[…]. The risk of collusive outcome stemming from this agreement, therefore, will be by nature limited to a transitory period.

Lastly, the Commission considers that the measures taken by ICIG and INEOS are adequate,  in  this  specific  case,  to  eliminate  the  risk  of
coordination. These measures will ensure that the cost structure of each of ICIG and INEOS  will  remain  different,  and  that  no  confidential
information related to the KOH volumes produced at Tessenderlo by one party  to  the  agreement  would  be  shared  with  the  other  party.  The
Commission also considers that the customer allocation procedure followed by ICIG and INEOS  has  prevented  the  parties  from  influencing  the
outcome of such allocation in any strategic way. Therefore, such customer allocation does not increase the likelihood of coordinated  effects  as
a result of the Transaction.

7 Conclusion on coordinated effects

In the light of the above, the Commission concludes that given the specificities of the Transaction at stake, coordinated  effects  are  unlikely
to arise in the market for liquid KOH under any plausible market definition.

CONCLUSION

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
-----------------------
[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").

[3]   Publication in the Official Journal of the European Union No C 156, 12.05.2015, p. 9..

[4]   Case M.6905 INEOS / Solvay / JV of 8 May 2014.

[5]   More in detail, ICIG will own the KOH Tessenderlo plant and related infrastructure, but will toll manufacture KOH  liquid  for  INOVYN  […]
(as 100% KOH) per annum (Form CO, paragraph 89).

[6]   See also Case M.6905 – INEOS / Solvay / JV, footnote 58 and paragraph 460.

[7]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

[8]   The Transaction would be unlikely to increase the risk of coordination between INEOS and ICIG at the level of chlorotoluenes as: (i)  INEOS
and ICIG are active in the production of different  chlorotoluenes,  with  the  exception  of  [substituted  chlorotoluene  A]  and  [substituted
chlorotoluene B]; (ii) INEOS and ICIG  face  intense  competition  from  Asian  producers  in  [substituted  chlorotoluene  A]  and  [substituted
chlorotoluene B], and chlorotoluenes customers confirmed that they would be ready to increase their purchases from Asia in  the  event  of  price
increases in [substituted chlorotoluene A] and [substituted chlorotoluene B] in the EEA; (iii) chlorine does not appear to be an important  input
in the production of [substituted chlorotoluene A] and [substituted chlorotoluene B]; and in any event (iv) ICIG is already supplying INEOS  with
[mono-substituted chlorotoluene], which is a necessary input for the production of [substituted chlorotoluene A] and  [substituted  chlorotoluene
B]. The Transaction would not, therefore, increase ICIG's  visibility  over  the  volumes  of  [substituted  chlorotoluene  A]  and  [substituted
chlorotoluene B] sold by INEOS.
[9]   See e.g. Commission Decision of 8 May 2014, M.6905 INEOS/Solvay/JV, paragraph 475; and Commission  Decision  of  30  January  2008,  M.4734
INEOS/Kerling, nos. 33 – 34.

[10]  See minutes of conference call with [Customer].

[11]  Questionnaire Q1 (customers), question 8.

[12]  Questionnaire Q2 (competitors), question 10.

[13]  Commission Notice on the definition of relevant market for the purpose of Community competition law, OJ C 372, 9.12.1997, p. 5-13.

[14]  Market Definition Notice, paragraph 7.

[15]  Questionnaire Q1 (customers), question 10.

[16]  Questionnaire Q1 (customers), questions 11 and 27.

[17]  Questionnaire Q2 (competitors), question 16.

[18]  Belgium, Luxembourg, Netherlands, Denmark, France, Germany, Ireland, Sweden, Norway and the United Kingdom.

[19]  Belgium, Luxembourg, Netherlands, France and Germany.

[20]  ICIG will complete its conversion to membrane technology in Thann in Q3 or Q4 2015.

[21]  In this respect, it should be pointed out that, as is the case for any information which is material to  the  Commission's  declaration  of
compatibility of a concentration, the Commission may be entitled to revoke the present  decision  pursuant  to  Article  6(3)(a)  of  the  Merger
Regulation, should ICIG fail to respect the measures set out in the Independent Promise of Guarantee.

[22]  Questionnaire Q1 (customers), question 26.

[23]  BASF does not currently make any merchant market sales of KOH liquid: it uses all of its KOH liquid production captively.

[24]  Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between  undertakings,  OJ
C 31, 5.2.2004, p. 5-18.

[25]  Questionnaire Q1 (customers), question 24. See also minutes of conference call with [Customer].

[26]  Questionnaire Q1 (customers), question 23. See also minutes of conference calls with [Customer], [ Customer]. and [ Customer].

[27]  Form CO, paragraph 169.

[28]  See also Case M.6905 – INEOS / Solvay / JV, footnote 58 and paragraph 460.

[29]  Questionnaire Q1 (customers), question 29.

[30]  See
http://www.tessenderlo.com/binaries/Press%20Release%20PC%20Loos%20ENG_tcm9-29550.pdf

[31]  Questionnaire Q2 (competitors), question 40. See also minutes of conference call with Altair.

[32]  In this respect, it should be pointed out that, as is the case for any information which is material to  the  Commission's  declaration  of
compatibility of a concentration, the Commission may be entitled to revoke the present  decision  pursuant  to  Article  6(3)(a)  of  the  Merger
Regulation, should ICIG fail to respect the measures set out in the KOH Toll Agreement.

[33]  Since ICIG will also continue to produce KOH from its own facility at Thann, its variable costs at this plant will  be  unaffected  by  the
Transaction. [Further detail concerning the business plan of ICIG].

[34]  In addition, all employees of the production and commercial/sales  subsidiaries  will  be  subject  to  strict  confidentiality  agreements
prohibiting them from sharing any commercially sensitive information between these subsidiaries. Physical separation measures (such as  different
offices etc.) will also be put into place as far as required and  reasonably  practicable.  Accountants  of  the  Chlorovinyls  Business  holding
company responsible for the consolidation of the relevant figures for both the KOH production and commercial/sales subsidiaries will  equally  be
subject to strict confidentiality agreements

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