Commission, September 9, 2014, No M.7054

(1)

Cemex España, SA (‘Cemex España’, Spain) is controlled by Cemex, S.A.B. de C.V., which is headquartered in Mexico and, along with the rest of the Cemex companies, constitutes the Cemex Group. All companies of the Cemex Group are hereinafter referred to as ‘Cemex’.

(2)

Cemex is a global building materials company active in cement, ready-mix concrete (‘RMX’), aggregates and related building materials. It has operations in Africa, the Americas, Asia, Europe and the Middle East. In Spain, Cemex undertakes its activities through Cemex España, which is the sole holding company of Cemex España Operaciones S.L.U. (‘Cemex España Operaciones’, Spain), which owns Cemex’s cement, mortar, concrete plants and aggregate quarries in Spain.

(3)

Holcim España, SA (‘Holcim España’, Spain) owns plants and quarries dedicated to the production and supply of cement, aggregates, RMX and mortar in Spain (‘Holcim Assets’, Spain). The Holcim Assets are currently controlled by Holcim Ltd (‘Holcim’), a joint stock company established under Swiss law, which is the ultimate parent company of the Holcim Group. All companies of the Holcim Group are hereinafter referred to as ‘Holcim’.

(4)

Holcim is a global supplier of cement, aggregates, mortar, RMX, asphalt, cementitious materials and related building materials with operations in more than 70 countries.

(5)

On 28 February 2014, the European Commission received a notification of a proposed transaction by which Cemex intends to acquire sole control over the Holcim Assets.

(6)

The proposed transaction does not meet the turnover thresholds of Article 1(2) or Article 1(3) of Regulation (EC) No 139/2004. It does therefore not have a Union dimension. The Commission decided, however, to examine the proposed transaction by adopting a decision on 18 October 2013 pursuant to Article 22(3) of Regulation (EC) No 139/2004. That decision followed a request from Spain of 12 September 2013 pursuant to Article 22(1) of the aforementioned Regulation.

(7)

The transaction was notified to the Commission on 28 February 2014. On 23 April 2014, the Commission found that the proposed transaction raised serious doubts as to its compatibility with the internal market and with the EEA Agreement, and initiated proceedings pursuant to Article 6(1)(c) of the Merger Regulation.

(8)

The in-depth investigation allowed dispelling the competition concerns preliminarily identified.

(9)

The draft Decision was discussed with the Member States during the Advisory Committee on Concentrations on 26 August 2014, which provided a favourable opinion. The Hearing Officer provided its favourable opinion on the proceedings in his report which was submitted on 29 August 2014.

(10)

The transaction concerns the building materials industry and notably cement, aggregates RMX, mortar and clinker.

(11)

In the decision opening proceedings the Commission raised serious doubts as to the compatibility of the transaction with the internal market and with the EEA Agreement in relation to the market for grey cement due to: (i) non-coordinated effects; and (ii) coordinated effects.

(12)

The Commission did not raise serious doubts as to the compatibility of the transaction with the internal market and with the EEA Agreement in relation to the other products.

(13)

The market investigation in the present case has supported the Commission’s earlier findings that the two main types of cement (white and grey) constitute separate product markets.

(14)

The Commission also investigated whether grey cement should be further segmented according to different presentations (bulk versus bagged) and different types of classes.

(15)

The Commission concludes that, for the assessment of the effects of the proposed transaction, the relevant product market is the overall market for grey cement. However the exact market definition can be left open.

(16)

The Commission considers in the circumstances of the present case that the relevant geographic markets should be defined as circular areas around the relevant cement plants, in line with the previous practice of the Commission as regards grey cement.

(17)

The Commission concludes that in light of the existing and potential demand and supply patterns and the views of market participants, it is most appropriate in this case to assess the competitive effects of the proposed transaction on different geographic markets on the basis of radii of 150 km around the Parties’ plants.

(18)

Both Parties are active in the production and supply of grey cement. Cemex operates five integrated plants in Spain: one in Buñol (province of Valencia), one in Alicante, one in Alcanar (province of Tarragona), one in Morata (province of Zaragoza) and one in Lloseta (Balearic Islands). In addition it operates one grinding mill in Castillejo (province of Toledo) and a number of terminals. Holcim owns three integrated plants in southern Spain: two of the plants (Gador and Carboneras) are located in the province of Almeria and one in Jerez (province of Cadiz). In addition it operates one grinding mill in Yeles (province of Toledo) and a number of terminals.

(19)

The Commission has analysed potential non-coordinated effects of the proposed transaction on the various clusters defined by circles with radii of 150 km drawn around the Parties’ cement production facilities in Spain.

(20)

In the Gador-Carboneras cluster, the Parties’ combined 2013 market share was (40-50) %, with an overlap of (10-20) %. The competitive landscape in the Gador-Carboneras cluster is fragmented. In terms of market share, the Parties’ nearest competitors are the grinding mills Cementos La Unión (CLU) and Cementos La Cruz (CLC), Financiera y Minera (FYM) and Votorantim (all with (5-10) %).

(21)

In the Alicante cluster, the Parties’ combined market share in 2013 was approximately (30-40) %, with an overlap of (10-20) %. The rest of the market in the Alicante cluster is also fragmented. In terms of market share, the Parties’ nearest competitors are CLU ((10-20) %) and CLC ((10-20) %) followed by Lafarge ((5-10) %).

(22)

In the Buñol cluster, the Parties’ combined market share in 2013 was (20-30) %, with an overlap of (10-20) %. The competitive landscape in the Buñol cluster is similar to that prevailing in the Alicante cluster. In terms of market share, the Parties’ nearest competitors are CLU ((10-20) %) and CLC ((10-20) %). These grinding mills are followed by the integrated player Lafarge ((5-10) %) and the grinding mill Cementval ((5-10) %).

(23)

The Commission considers that in Gador-Carboneras cluster, Alicante cluster and Buñol cluster (‘the Levante region clusters’) there are several competitors that can be considered as equally close or even closer alternatives for Holcim’s customers than Cemex. Likewise, some Levante region clusters rivals can be considered as closer or equally close alternatives for Cemex’s customers than Holcim.

(24)

Second, the Commission considers that the Parties’ competitors (grinding mills and integrated players) in the Levante region clusters have both the ability and incentive to increase supply if the merged entity were to increase prices as: (i) grinding mills in particular are not limited by their need to source clinker since they have the possibility to buy it from the integrated players in the region or from overseas; and (ii) the high level of spare capacity held by the Parties’ main competitors in the Levante region clusters is enough to make any unilateral attempt to increase prices by the merged entity unprofitable.

(25)

Regarding the Yeles and Castillejo clusters (‘the Centre region clusters’), the Parties’ combined market shares in 2013 were below (20-30) % and slightly above (20-30) % respectively. There are two competitors of comparable size to the Parties, namely CPV ((20-30) %) and Lafarge ((20-30) %). There are also other competitors with market shares in excess of (5-10) %, namely Balboa (above (10-20) % in both clusters) and Votorantim (above (5-10) % in the Yeles cluster). Moreover, the high level of spare capacity held by the Parties’ main competitors in the Centre region clusters is enough to make any unilateral attempt to increase prices by the merged entity unprofitable.

(26)

In the clusters of Alcanar, Lloseta, Morata and Jerez the increment brought about by the transaction is less than (0-5) %.

(27)

The Commission therefore concludes that the proposed transaction is unlikely to significantly impede effective competition in the markets for grey cement within the 150 km clusters around the Parties’ plants due to non-coordinated effects.

(28)

The Commission has analysed potential coordinated effects on the various clusters defined by circles with radii of 150 km drawn around the Parties’ cement production facilities in Spain.

(29)

The Commission considers that the most likely coordination scheme in the grey cement markets under investigation is customer allocation whereby competitors refrain from approaching rivals’ customers with low prices. Under such a coordination scenario, the sizable transport costs for cement would lead to a general allocation of customers based on their proximity to a given plant.

(30)

The Commission has thus investigated whether cement competitors might face limited incentives to attract new customers aggressively. Under such a scenario, competitors would benefit from a coordination scheme through increased margins and therefore profits.

(31)

The Commission considers that there are number features of the grey cement markets under investigation indicating that market interactions are not delivering competitive outcomes. For instance, the Parties’ and their main competitors achieve positive average gross margins in the Centre region clusters despite the availability of considerable spare capacity. However, on balance, all factors considered are insufficient to conclude that market outcomes can be associated with the existence of current coordination.

(32)

There are also elements speaking against any potential coordination. In particular, the role of independent distributors in the Centre region clusters has the potential to undermine the sustainability of a coordination scheme based on customer allocation.

(33)

As regards merger-specific effects, in the current case, given that the evidence is insufficient to conclude that existing market outcomes can be associated with the existence of current coordination, the Commission does not have to conclude on whether the changes that this merger brings about would make coordination easier, more stable or more effective.

(34)

On balance, there is insufficient evidence to establish that the current market outcomes are determined by the existence of customer allocation amongst the four major cement producers (namely the Parties, Lafarge and CPV). Therefore, the Commission concludes that it is unlikely that the proposed transaction will make coordination easier, more stable or more effective to a degree that could be considered to constitute a significant impediment to effective competition.

(35)

For similar reasons, the Commission also concludes that it is unlikely that competitors that were previously not coordinating are significantly more likely to engage in coordination as a result of the proposed transaction.

(36)

It is therefore considered that the proposed transaction is unlikely to significantly impede effective competition in the markets for grey cement within the 150 km around the Parties’ plants due to coordinated effects.

(37)

For the reasons mentioned above, the Commission concludes that the proposed concentration will not significantly impede effective competition in the Internal Market or in a substantial part of it.

(38)

The notified operation is therefore declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement.