Friday, March 1, 2013

EU stops Merger of Tencel and Lenzing Lyocell - Part 5 (2001)

Acordis/Lenzing expected Chinese and Korean lyocell factories to be in production by 2003 and used this as part of the logic for merging.  The Commission did not find the arguments convincing and predicted the "worldwide monopoly" created in lyocell would last a lot longer. 

232. To date, Acordis and Lenzing have been competing against each other in the lyocell market, in particular in the EEA, with Lenzing charging significantly lower lyocell prices than Acordis. The notified operation will create a worldwide monopoly on the lyocell market and thus eliminate any existing competition between the parties.

The new entity will be able to act independently for the following reasons:

233. Whilst the parties have predicted the market entry of one Chinese and one Korean producer for around 2003, as well as the market entry of other producers at a later stage, the market investigation conducted by the Commission has revealed that no market entry by third parties may be expected in the short run. On the contrary, those amongst the potential market entrants who responded to the Commission's questionnaire stated that it would take them several years before they could become operational and could effectively compete against the parties in the lyocell market.

234. Lenzing and Acordis argue that their technology patents do not constitute an obstacle for market entry and that such intellectual property rights might be difficult to enforce. This opinion has been strongly contested by third parties interested in entering the market. The Commission's investigation has revealed the existence of a considerable technological barrier to market entry as the parties hold a significant number of patent rights for lyocell production technology (see paragraphs 247-248 ).

235. In their Reply, the parties argue that the Commission's Statement of Objections underestimates the likelihood of new entry. They put forward a list of potential market entrants, based on the replies of competitors to the Commission's questionnaires.

236. The Commission, having considered these arguments, does not find them
convincing. Indeed, several of the potential market entrants named by the parties are 
in reality research institutions involved in the development of lyocell production and processing technology; they can under no circumstances be regarded as potential producers of lyocell fibres.

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