IP/00/313
Brussels, 29 March 2000
Commission clears joint venture between Shell and
BASF subject to commitments
The European Commission has cleared the proposed joint venture between
the Dutch company, Shell Petroleum N.V. and the German company BASF
Aktiengesellschaft, subject to a number of commitments given by the parties.
The joint venture will combine all of Shell’s and BASF’s worldwide
polypropylene and polyethylene interests. To remedy the concerns identified
by the Commission, the parties will divest plants with the capacity to
produce 600kT of polypropylene resins and 130kT of polypropylene
compounds. The Novolen PP technology business will also be divested and
the joint venture company will license its metallocene patent rights to all
interested third parties, or not assert its patent rights against them if they
license technology from elsewhere. It has only been possible to accept such
a complex package of commitments to remedy concerns in a Phase 1
investigation due to the notifying parties’ openness and willingness to cooperate at all stages of the investigation.
The joint venture’s parents will contribute all of their polypropylene (PP) and
polyethylene (PE) interests. These are currently held by Montell (100% Shell
affiliate), Targor (100% BASF affiliate) and Elenac, an existing joint venture between
Shell and BASF that is active in polyethylenes and that was previously cleared by
the Commission.
The Commission has found that the concentration, as originally notified, could have
led to the creation or strengthening of a dominant position in a number of vertically
related markets for polypropylenes – the market for licensing of PP technology
packages, and the markets for PP resins and PP compounds. The operation
involves the merger of the two most important players in these markets, and in all
markets would have resulted in combined market shares two to three times higher
than that of their main competitors.
To remedy the concerns that the operation would otherwise have raised in relation to
PP resins, the parties have committed to divesting three PP resins production plants
with a combined production capacity of 600kT. After the divestments, the joint
venture’s market share in Western Europe will fall to less than 30%. To remedy the
Commission’s concerns in relation to PP compounds, the parties have committed to
sell a facility with 130kT of capacity, which by itself represents just less than 10% of
output in Western Europe. After the divestment, the joint venture’s market share
would fall to less than 35%.
Both BASF and Shell currently license the technology to produce polypropylenes
and supply the associated traditional, Ziegler-Natta, catalysts. Since a technology
licensee will initially use the catalysts supplied by the licensor, the Commission
considers that the relevant market should include the licensing of technology and the
supply of catalysts. Shell’s Spheripol technology has been the leading global
technology for at least 15 years and the combination of this technology with BASF’s
Novolen technology raised concerns about the effects of the operation on
competition. To remedy these concerns, the parties have committed to divest the
Novolen technology business.
BASF, through Targor, also holds a strong suite of patents relating to the newest
family of PP catalysts – metallocene catalysts. BASF’s patents, together with the
patents held by other companies, have created the situation that none of the
individual patent owners is free to use or license metallocene catalyst without the
consent of the others. By itself, BASF’s patents could be used to prevent other
licensors or producers from developing metallocene catalysts.
The Commission considers that the combination of this strong patent position with
the position that the joint venture would hold in relation to traditional catalysts and
technology would raise serious concerns about the effect of the operation. To
remedy these concerns, the parties have committed to license the BASF/Targor
patents to all third parties who wish to license them directly. In addition, the parties
will not assert these patents against those third parties who wish to license
technology from other players in the technology market. Together, these
commitments will remove the joint venture’s ability to prevent the development of
metallocene catalysts.
Finally, the package of commitments to which the parties have committed to in order
to remedy the Commission’s concerns in this case is highly complex, especially
given that an in-depth investigation has not been carried out. Such a complex
package can only be accepted at this stage because the parties have been open
with the Commission about the problems that the operation would raise, they
discussed these problems and potential remedies with the Commission before
submitting formal notification of the operation, and they have subsequently
cooperated at all stages of the investigation. Without such cooperation, it is highly
unlikely that the Commission’s concerns about the operation could have been
eliminated at this stage.
The Commission has decided to clear the operation subject to the fulfilment of these
commitments, and to declare it compatible with the Common Market.
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