EN Case No COMP/M.6191 Birla/ Columbian Chemicals Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 22(3) Date: 08/04/2011
COMMISSION OF THE EUROPEAN COMMUNITIES 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 Where possible the information omitted has been replaced by ranges of figures or a general description. Brussels, 8.4.2011 C(2011) 2616 final PUBLIC VERSION MERGER PROCEDURE ARTICLE 22(3) DECISION To: Office of Fair Trading Dear Sir, Subject: Case No COMP/M.6191 Birla/ Columbian Chemicals Request for referral of 2 March 2011 by the Bundeskartellamt of Germany to the Commission pursuant to Article 22(1) of the EC Merger Regulation Ref.: Letter of 25 March 2011 (received on that same day) by Mr. Sheldon Mills, Director of Mergers at the Office of Fair Trade, the competent Competition Authority of UK, to Mr Alexander Italianer, Director General for Competition I. INTRODUCTION (1) With the above-mentioned request of 2 March 2011 the German Competition Authority ( the Bundeskartellamt ) formally requested the Commission to examine, in application of Article 22(3) of Council Regulation (EC) No 139/2004 ( the EC Merger Regulation ), the concentration whereby the acquisition vehicle Indigold Carbon (Netherlands) B.V. controlled by Aditya Birla Group ("Birla", India) agreed to acquire Columbian Chemicals Acquisition LLC and associated companies which, together, constitute the Columbian Chemicals business ("Columbian"). (2) Pursuant to Article 22 (1) of the EC Merger Regulation, one or more Member States may request the Commission to examine any concentration, as defined in Article 3 of the EC Merger Regulation, that does not have a Community dimension within the meaning of Article 1 of the EC Merger Regulation but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request. Such a request must be made within 15 working days of the date of the notification of the concentration. Pursuant to Article 22(2) of the EC Merger Regulation, any other Member State may join the Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.
initial request within a period of 15 working days of being informed by the Commission of the initial request. (3) On 11 February 2011 Birla notified the acquisition of Columbian to the Bundeskartellamt. On 2 March 2011, the Commission received a referral request pursuant to Article 22(1) of the EC Merger Regulation from Bundeskartellamt. The Bundeskartellamt has thus made the referral request within 15 working days of the date of the notification as foreseen in Article 22 (1) of the EC Merger Regulation. (4) The Commission informed, in accordance with Article 22 (2) of the EC Merger Regulation, the competent authorities of the other Member States on 4 March 2011 and the undertakings concerned on 8 March 2011 of the request made by the Bundeskartellamt. (5) On 25 March 2011, thus within the time limit foreseen in Article 22 (2) of the EC Merger Regulation, the competent Authority of the United Kingdom, the Office of Fair Trading ( OFT ), has joined the referral request. Within the same time limit, the competent Authorities of Spain and France have also joined the request. II. THE PARTIES AND THE OPERATION (6) Birla is an international group active in the aluminium, chemical, electrotechnical, construction and agrarian sector. In India Birla is also active in telecommunication and financial services. Birla is also a significantly active in the production and supply of carbon black. 1 Birla's carbon black is delivered to the EEA via Birla's subsidiary in Egypt Alexandria Carbon Black SAE ("ACB"). In addition to Egypt, Birla Carbon has production plants in India, Thailand and China. (7) Columbian is a US-based producer of a wide portfolio of carbon black for use mainly in tyres but also in plastics, hoses, cables, seals, coatings, paints, inks etc. The group is present in different parts of the world including the EEA. Its facilities in Europe are located in Hungary, Italy, Spain and Germany. It also has facilities in Canada, the United States, Brazil, South Korea and China. (8) On 28 January 2011, Indigold Carbon (Netherlands) B.V, an acquisition vehicle controlled by Birla, agreed to acquire Columbian Chemicals Acquisition LLC and associated companies which, together, constitute the Columbian Chemicals business ("Columbian"). (9) The transaction involves the acquisition of sole control by Birla over Columbian, and therefore constitutes a concentration within the meaning of article 3 of the EC Merger Regulation. (10) The transaction would not constitute a concentration with a Community dimension within the meaning of Article 1 of the EC Merger Regulation. 1 The Commission in a previous decision considered that the distribution and sale of carbon black can be a separate product market. See M.1301 Texaco/Chevron. 2
III. ASSESSMENT OF THE REFERRAL REQUEST (11) Pursuant to Article 22 (3) of the EC Merger Regulation, the Commission may decide to examine the concentration if it considers that (i) it affects trade between Member States and (ii) it threatens to significantly affect competition within the territory of the Member State or States making the request. It follows that if these two legal requirements are met, the Commission may exercise discretion with regard to whether or not it is appropriate that the concentration is examined by the Commission. The Commission has, in its relevant Notice on Case Referral in respect of concentrations ( the Referral Notice ) 2, set out in a general manner its understanding regarding the appropriateness of particular cases or categories of cases for referral. Effect on trade between Member States (12) According to paragraph 43 of the Referral Notice, a concentration fulfils the criterion of effect on trade between Member States laid down in Article 22 EC Merger Regulation if it is liable to have some discernible influence on the pattern of trade between Member States. 3. 4 (13) The OFT states that it can be concluded that the transaction affects trade between Member States due to be cross-border nature of the transaction. The OFT points to the fact that carbon black is imported into the UK by Columbian from other EU Member States whereas Birla imports its carbon black from Egypt and it has refilling/decanting stations in a number of Member States. Thus, OFT submits that the trade between Member States will be affected due to the transaction. (14) Indeed, the parties are active in various Member States where their business activities overlap to an appreciable degree. In addition, there are currently significant trade flows of carbon black between Member States, and even with third countries, as is demonstrated by the Parties' presence and location of their assets within different Member states. (15) Birla is producing its carbon black for the EEA markets in Egypt, and it has refilling/decanting stations in Spain, Italy, Belgium and the UK. Birla's products are re-exported from these stations to other Member states where Birla is also active, such as Germany and France. Columbian has four carbon black production facilities in the EEA (Hungary, Italy, Spain, and Germany) and is exporting its products to other Member States in which it is active, for example to the UK and France. (16) Finally, previous Commission decisions considered that the geographic market for the sale of carbon black or related product markets were likely larger then 2 OJ C 56, 5.3.2005, p. 2. 3 The Referral Notice also makes reference by analogy to the Commission Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty, OJ C 101, 27.4.2004, p.81. 4 OJ C 101, 27.4.2004, p. 81. 3
national, and even indicated the geographic scope to be possibly EEA wide or wider. 5 (17) It is thus considered that the transaction is affecting trade between Member States. Concentration threatens to significantly affect competition (18) It is recalled that according to Article 22 (3) of the EC Merger Regulation and paragraph 44 of the Referral Notice on case referrals, the referring Member States are required in essence to demonstrate that, based on a preliminary analysis, there is a real risk that the transaction may have a significant adverse impact on competition, and thus that it deserves close scrutiny. Such preliminary indications may be in the nature of prima facie evidence of such a possible significant adverse impact, but would be without prejudice to the outcome of a full investigation. 6 (19) The letter by the OFT provides that on a preliminary, prima facie basis, the proposed transaction raises the possibility of unilateral or coordinated effects in the UK and thus it deserves closer scrutiny. The request to join the referral indicates that the concentration in question threatens to significantly affect competition within the territory of the United Kingdom. (20) The OFT preliminary analysis indicates that currently the top four suppliers (including the Parties) supply together over [80-90] % of the UK's consumption of carbon black. Thus, according to the OFT, the merger could be viewed as reducing the number of suppliers in the UK from four to three. (21) Indeed, the proposed operation may lead to the elimination of one of the four main players on the market. As a result of the transaction, the already concentrated market with four main players would become even more concentrated with only three main players controlling almost [80-90]% of the EEA market. According to the Parties' estimates, the EEA market shares of the main producers of carbon black are: the merged entity [20-30]% (Birla [5-10]%, Columbian [10-20]%), Evonik [30-40]% and Cabot [20-30]%. (22) It has been also indicated by the Bundeskartellamt in its initial referral request that production capacities for carbon black have been significantly reduced in the wake of the financial and economic crisis, which recently lead to supply shortages. (23) What is more, in relation to possible creation or strengthening of coordinated behaviour, the product appears to be of homogenous nature and a preliminary analysis of the Bundeskartellamt indicates that there is a degree of transparency 5 See Commission's decisions: M.5243 - CVC/RAG/Evonik, M.1301 Texaco/Chevron, M.5453 OEP/CCH. 6 See Commission Notice on Case Referral in respect of Concentrations, paragraph 44. 4
with regards to the prices for carbon black. 7 Also, transaction would enhance the relative symmetry of the remaining main suppliers of carbon black. (24) On the basis of the above and without prejudice to the outcome of the investigations by the Commission, it is considered that the concentration in question threatens to significantly affect competition within the territory of the United Kingdom. On the appropriateness of a referral of the present case to the Commission (25) Pursuant to paragraph 45 of the Referral Notice, due account should be given to the fact that as post-notification referrals may entail additional cost and time delay for the merging parties, referrals of concentrations already notified should normally be limited to those cases which appear to present a real risk of negative effects on competition and trade between Member States and where it appears that these would be best addressed at the Community level. (26) In the present case, the competitive impact of the operation appears to be at a scale that is larger than national. Without prejudice to the outcome of the investigations by the Commission, the transaction is likely to give rise to serous competition concerns in a market which is likely to be wider than national. (27) In addition, the transaction requires a market investigation in several Member States and possibly in third countries, as both the main competitors and main customers of carbon black are located in various Member States. Moreover, the transaction qualifies for merger scrutiny and is subject to filing in several Member States, therefore there are inherent benefits from a 'one-stop-shop' review by the Commission. The Parties, after being informed about the referral request of the Bundeskartellamt, did not express any objections with regards to the referral of the case to the Commission. (28) Therefore the Commission has concluded that it is, in the present circumstances, be the best placed authority to assess this concentration. IV. CONCLUSION (29) After examination of the above-mentioned, the Commission has concluded that the transaction the OFT refers to in its request are a concentration within the meaning of Article 3 of the Merger Regulation. The Commission considers that the request by the Competition Authority of the United Kingdom to join the initial referral request made by the German Competition Authority for the application of Article 22 (3) is admissible as it meets the requirements laid down in Article 22 (2) and 22 (3) of the EC Merger Regulation and paragraphs 42-45 of the Commission Notice on Case Referral in respect of concentrations 8. (30) The Commission therefore has decided to examine the proposed concentration under the Merger Regulation. This decision is based on Article 22 (3) of the EC Merger Regulation. 7 Prices of carbon black are said to be derived to a large extent by prices of the raw materials gas and oil (feedstock oils). Also, public communications of quotations by certain organisations could enable a certain level of price transparency. 8 OJ, C56, 5.3.2005, p.2. 5
(31) In the light of the above, I would like to inform your Authority that the Commission will initiate proceedings pursuant to Article 10 (1) of the EC Merger Regulation when it has the necessary information for its investigation. For the Commission (signed) Joaquin Almunia Member of the Commission 6