EN This text is made available for information purposes only. A summary of this decision is published in all Community languages in the Official Journal of the European Union. Case No COMP/M.6471 – Outokumpu/ INOXUM Only the English text is authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 8 (2) Date: 07/11/2012 EN EN EUROPEAN COMMISSION Brussels, 7.11.2012 C(2012) 7969 final PUBLIC VERSION COMMISSION DECISION of 07.11.2012 addressed to: Outokumpu OYJ declaring a concentration to be compatible with the internal market and the EEA agreement (Case COMP/M.6471 – Outokumpu/INOXUM) (Only the English text is authentic) EN EN TABLE OF CONTENTS 1. The Parties.................................................................................................................... 7 1.1. Outokumpu................................................................................................................... 7 1.2. Inoxum ......................................................................................................................... 9 2. The Operation and the Concentration .......................................................................... 9 3. Union Dimension ....................................................................................................... 12 4. The Procedure............................................................................................................ 12 5. Assessment................................................................................................................. 13 5.1. Introduction to the stainless steel industry................................................................. 13 5.1.1. Properties of stainless steel ........................................................................................ 13 5.1.2. Differences between the stainless steel and the wider steel industry......................... 15 5.1.3. Production process..................................................................................................... 16 5.1.4. Families and possible classifications of stainless steel .............................................. 18 5.1.5. Grades of stainless steel ............................................................................................. 20 5.1.6. Supply side of the market: the main global players ................................................... 21 5.1.7. Demand side of the market ........................................................................................ 22 5.1.8. Price formation........................................................................................................... 23 5.1.9. The Parties' activities in stainless steel ...................................................................... 25 5.2. Sources of evidence relied on by the Commission in its investigation...................... 26 5.3. Relevant product market ............................................................................................ 27 5.3.1. Production and supply of stainless steel products...................................................... 27 5.3.1.1. Semi-finished stainless steel products........................................................................ 28 5.3.1.2. Finished stainless steel products ................................................................................ 29 5.3.1.3. Conclusion on the relevant product market for CR ................................................... 45 5.3.2. Ferrochrome ............................................................................................................... 45 5.3.3. Distribution of stainless steel flat products ................................................................ 46 5.4. Relevant geographic market....................................................................................... 50 5.4.1. Production and wholesale of stainless steel products ................................................ 50 5.4.1.1. Slabs ........................................................................................................................... 50 5.4.1.2. Hot rolled (HR) .......................................................................................................... 51 EN 2 EN 5.4.1.3. Cold rolled (CR)......................................................................................................... 52 5.4.2. Ferrochrome ............................................................................................................... 54 5.4.3. Distribution of stainless steel flat products ................................................................ 55 5.5. Competitive assessment ............................................................................................. 57 (A) Horizontal overlaps............................................................................................................ 57 5.5.1. Production and wholesale of stainless steel flat products - Slabs .............................. 58 5.5.2. Production and wholesale of stainless steel flat products - HBB............................... 59 5.5.3. Production and wholesale of stainless steel flat products - HWB ............................. 60 5.5.4. Assessment of non-coordinated effects on the EEA market for CR.......................... 61 5.5.4.1. Effects of the proposed transaction on market shares and concentration levels........ 63 5.5.4.2. Entry in the EEA market for CR is unlikely .............................................................. 73 5.5.4.3. Theory of harm and criticisms of the Notifying Party ............................................... 75 5.5.4.4. A significant number of respondents to the market investigation showed concerns with regard to reduction of competition and likely price increases in the EEA market for CR further to the proposed transaction................................................................. 80 5.5.4.5. Loss of competition between the Parties caused by the proposed transaction........... 89 5.5.4.6. Imports are an imperfect and insufficient constraint................................................ 102 5.5.4.7. Competition from the merged entity's EEA competitors is insufficient to prevent price increases post-merger...................................................................................... 130 5.5.4.8. Independent distributors, beyond their already assessed role as gateway for imports, are not a strong competitive constraint on the merged entity .................................. 157 5.5.4.9. Potential synergies stemming from the proposed transaction would not offset its anticompetitive effects ............................................................................................. 161 5.5.4.10. The Notifying Party's arguments are not sufficient to dispel non-coordinated effects even when they are considered jointly..................................................................... 164 5.5.4.11. The proposed transaction is likely to result in a significant impediment to effective competition through non-coordinated effects, by means of the creation of a dominant position in the EEA market for CR.......................................................... 168 5.5.5. Assessment of coordinated effects on the EEA market for CR ............................... 169 5.5.5.1. The Notifying Party's arguments on coordinated effects and the assessment in the Article 6(1)(c) decision ............................................................................................ 170 5.5.5.2. Assessment of coordinated effects........................................................................... 172 5.5.6. Precision strip........................................................................................................... 174 5.5.7. Distribution of stainless steel ................................................................................... 175 EN 3 EN (B) Vertical effects................................................................................................................. 179 5.5.8. Supply of ferrochrome/production of stainless steel................................................ 179 5.5.9. Supply of Slabs / HBB / HWB / CR ........................................................................ 180 5.5.10. Supply of HWB and CR / Distribution of stainless steel......................................... 182 6. Proposed Commitments ........................................................................................... 183 6.1. Commitments submitted on 19 September 2012 ..................................................... 183 6.1.1. Process leading to the submission of the Commitments of 19 September 2012 ..... 183 6.1.2. Description of the commitments .............................................................................. 183 6.1.3. Investigation on Swedish Coil ................................................................................. 185 6.1.3.1. Sources of evidence ................................................................................................. 185 6.1.3.2. Overview of the results of the market test ............................................................... 186 6.1.3.3. Complement to the market test ................................................................................ 190 6.1.4. Assessment............................................................................................................... 196 6.1.4.1. Legal framework for the assessment of remedies.................................................... 196 6.1.4.2.