European Commission approves PVC joint venture between INEOS and Solvay, subject to conditions

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." 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.