Following an in-depth
investigation, the European Commission has cleared under the EU Merger
Regulation the proposed combination of the European chlorvinyls
businesses of INEOS AG of Switzerland and Solvay S.A. of Belgium into a
newly created joint venture. The approval is conditional upon the
divestiture of certain of INEOS' suspension polyvinyl chloride ("S-PVC")
plants and related assets. This divestment will provide its purchaser
with a self-standing S-PVC business capable of competing with the new
joint venture. The Commission had concerns that the transaction, as
originally notified, would have enabled the merged entity to raise
prices for S-PVC in North West Europe and for sodium hypochlorite
("bleach") in the Benelux, since it combined the two largest suppliers
in these markets. The commitments offered address these concerns.
Commission Vice President in charge of competition policy Joaquín Almunia said: "PVC
is an important raw material used in the construction sector and in
many other industries. The proposed commitments will ensure that the
transaction will not result in higher prices to the detriment of
businesses and consumers in Europe."
S-PVC is a type of resin, used
for instance to produce pipes or window frames. Bleach is mainly used
for water treatment, disinfection and laundry bleaching.
In the market for commodity
S-PVC in North West Europe, the transaction, as originally notified,
would have removed INEOS' strongest competitor, Solvay. The merged
entity would have faced an insufficient competitive constraint from the
remaining much smaller players and would therefore have been able to
raise prices. In addition, the Commission found evidence that INEOS
held, already before the transaction, a certain degree of market power,
which enabled it to increase prices. The Commission's investigation also
revealed that the parties' competitors would have had neither the
capacity nor the incentives to expand production sufficiently to
outweigh a price increase by the new joint venture. In addition, imports
do not play an important role in this market and this is unlikely to
change substantially in the next future. Finally, customers do not wield
significant buyer power and would therefore have suffered from the
reduction of supply options following the transaction. The Commission
also found that the efficiencies claimed by the parties, even if
accepted, would be limited if compared to the likely price increase
resulting from the transaction and would therefore not be sufficient to
offset its negative effects on customers.
In the market for bleach in the
Benelux, the transaction would have created a market leader with a
market share above 60%, whilst Akzo, the only other remaining player,
would clearly have been unable to sufficiently constrain the merged
entity to avoid price increases for customers...
To address these concerns, the
companies offered to divest INEOS' S-PVC plants in Wilhelmshaven,
Mazingarbe and Beek Geleen, together with the upstream chlorine and
ethylenedichloride ("EDC") production assets in Tessenderlo and Runcorn.
The merged entity and the purchaser will enter into a joint venture
agreement for producing chlorine at Runcorn. The divestment will provide
the purchaser with a fully integrated self-standing S-PVC business.
These commitments remove the
overlaps between the parties' activities in both the market for
commodity S-PVC in North West Europe and the market for bleach in the
Benelux. The parties have committed not to close the proposed
transaction before concluding a binding agreement for the sale of the
divestment business to a suitable purchaser approved by the Commission. A
set of purchaser criteria will ensure that these assets are sold to a
purchaser capable of running the business as a competitive force in the
market.
The Commission concluded that
the transaction, as modified by the commitments, would no longer raise
competition concerns. This decision is conditional upon full compliance
with the commitments.
Background
The Commission has already dealt
with the PVC industry. In particular the Commission has approved two
successive acquisitions undertaken by INEOS in this industry in the
recent past: in 2008 the Commission approved after in-depth review
INEOS' acquisition of Kerling (see IP/08/109) and in 2011 it approved INEOS' acquisition of Tessenderlo's PVC business (see IP/11/929).
INEOS and Solvay notified the
planned transaction to the Commission on 16 September 2013. The
Commission opened an in-depth investigation on 5 November 2013 (see IP/13/1040).
On 21 January 2014, the Commission informed the parties in a statement
of objections that the proposed transaction, as originally notified,
raised serious competition concerns in the market for commodity S-PVC in
North West Europe and in the market for bleach in the Benelux.
The Commission's investigation
found that the proposed transaction would not raise competition concerns
in all other markets where the parties' activities overlap or are
vertically related, in particular in the markets for butadiene,
raffinate1, chlorine, caustic soda, vinyl chloride monomer, hydrochloric
acid, emulsion PVC, methylene chloride and chloroform. This is mainly
because of the limited change in the combined market share and the
presence of other market players able to exert a sufficient constraint.
Companies
INEOS is the parent of a group
of companies which are active in the manufacture of petrochemicals,
specialty chemicals and oil products. Its subsidiary, INEOS ChlorVinyls,
is a European producer of chlor-alkali products and a supplier of
polyvinyl chloride ("PVC").
Solvay is the parent of a group
of companies which are internationally active in the research,
development, production, marketing and sale of chemicals and plastics.
Its subsidiary, SolVin, is a European supplier of PVC resins.
The joint venture will be
jointly controlled by its two parents. According to the agreement
between INEOS and Solvay, no later than six years after its creation,
the joint will pass under the sole control of INEOS. The transaction may
be then subject to further review by the Commission.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast
majority of notified mergers do not pose competition problems and are
cleared after a routine review. From the moment a transaction is
notified, the Commission generally has a total of 25 working days to
decide whether to grant approval (Phase I) or to start an in-depth
investigation (Phase II).
There are currently five other
on-going phase II merger investigations. The first one concerns the
proposed acquisition of the German cement company Cemex West by its
rival Holcim of Switzerland (see IP/13/986).
The deadline for a final decision in this case is 8 July 2014. The
second on-going investigation, the planned acquisition of Telefónica
Ireland by Hutchison 3G UK (H3G), concerns, the markets for retail
mobile telephony and for wholesale access and call origination in
Ireland (see IP/13/1048).
The deadline for a final decision in this case is 20 June 2014. The
third one concerns the proposed acquisition of E-Plus by Telefónica
Deutschland (see IP/13/1304 and IP/14/95)
with a deadline suspended from 5 May 2014. The fourth phase II
investigation concerns the planned acquisition by Huntsman of a number
of equity interests held by Rockwood, both of the US (see IP/14/220).
The deadline for a final decision in this case is 18 September 2014.
The last ongoing phase II case was opened in April 2014 into the planned
acquisition of certain assets of the Swiss building materials group
Holcim by its Mexican rival Cemex (see IP/14/472). The deadline for a decision in this case is 5 September 2014.
More information will be available on the competition website, in the Commission's public case register under the case number M.6905.
