Mergers: Commission opens in-depth investigation into proposed acquisition of Kerling by INEOS
European Commission - IP/07/1290 07/09/2007
Brussels, 7th September 2007
The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned acquisition of Kerling ASA of Norway by the UK-based INEOS Group Limited. The Commission’s preliminary market investigation found that the proposed transaction raises serious doubts as to its compatibility with the Single Market and the European Economic Area (EEA) agreement given the strong market position that Ineos would achieve on the Suspension PVC (S PVC) market in some Member States, in particular in the UK. The Commission now has 90 working days (until 25 January 2008) to decide whether the takeover would significantly impede effective competition within the EEA or a significant part of it. A decision to open an in-depth investigation does not prejudge the final result of the procedure.
Competition Commissioner Neelie Kroes said “After this transaction, INEOS would become by far the largest supplier of S PVC to the UK merchant market and the only local producer in the UK. It is the Commission’s duty to thoroughly analyse the consequences of such a transaction to ensure that it would not harm business and domestic consumers”.
INEOS is active in the production and distribution of speciality chemicals on a global level. Kerling is a subsidiary of Norsk Hydro ASA and comprises the polymer division of the Norsk Hydro group. It is mainly active in the production and supply of polyvinyl chloride (PVC) and caustic soda.
The proposed transaction would mainly affect the commodity Suspension PVC market (S PVC). S PVC is mainly used in the production of plastic products such as PVC tubes, window frames and PVC films. Following its initial investigation the Commission believes that the geographic scope of the S PVC market may be regional or national and in any case narrower than EEA wide. Several factors, such as extremely high market shares, differences in market conditions and indications that with small but durable price increases by INEOS the remaining competitors would not be likely to increase their presence in certain countries, indicate the presence of national relevant markets. Should the relevant markets be national, then following the transaction INEOS would have a strong position in the production and supply of S PVC in various Member States, in particular in the UK, Norway and Sweden. At this stage of the investigation other suppliers from Continental Europe (for example from Germany, France or The Netherlands) do not appear able to exert enough competitive pressure to constrain attempts by INEOS to increase prices.
During the first phase of the investigation, INEOS submitted an initial set of undertakings aimed at removing the competitive concerns identified by the Commission. However, in light of the market test and the analysis carried out by the Commission, these undertakings proved to be unsatisfactory and insufficient as they failed, in particular, to eliminate competition concerns in the UK S PVC market.
On the basis of these concerns, the Commission has decided to open a second
phase investigation in order to carry out an in-depth assessment of the effects
of the transaction with a focus on the UK S PVC market. During its in-depth
investigation, the Commission will also analyse the impact of the transaction in
other national markets, in particular Norway and Sweden, as well as the impact
on the market for caustic soda, S PVC compounds and rigid PVC films.