Competition Commission
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Joint venture could damage competition
The Competition Commission (CC) has concluded that the anticipated joint venture between Kemira GrowHow Oyj (Kemira) and Terra Industries Inc (Terra) could damage competition in the market for the supply of carbon dioxide as well as those for related chemical products. The joint venture (JV) would merge the greater part of the UK businesses of these two international companies, which are both fertilizer production businesses but also sell chemical products which are outputs from their processes.
In its final report, published today at http://www.competition-commission.org.uk, the CC has decided that the JV would lead to a substantial lessening of competition in each of the markets in the UK for: carbon dioxide (CO2); 58 to 60 per cent concentration nitric acid; aqueous ammonia; and anhydrous ammonia (the latter three being termed 'the process chemicals'). It would not, however, damage competition in the larger market for fertilizers and the market in supply of ammonium nitrate for non-agricultural customers, mainly explosives manufacturers. These findings confirm the inquiry group's provisional findings which were published in May 2007.
As the JV would hold high market shares in both the CO2 and the process chemicals markets, it could take advantage of its position by raising prices to customers. In order to address the potential damage to competition, the CC has decided on remedies to protect customers' interests by ensuring that there continue to be alternative suppliers of these products after the JV has been established.
To address the competition concerns in the markets for the process chemicals, Kemira will be required to divest its commercial business for the relevant process chemicals at Ince to a suitable buyer which will then be in a position to compete with the JV. The divestiture package will include a long-term lease on fixed assets, long-term supply agreements, and transfer of customer and other contracts, information and key personnel. As Kemira will still be acting as supplier to the buyer of the divestment package, the buyer will be further protected by guarantees about supply.
To address the lessening of competition in the CO2 market, Kemira will be required to make detailed commitments in relation to its existing supply contract with a third party supplier of carbon dioxide, Air Liquide, in order to preserve this source of supply.
Notes for editors
1. The CC is an independent public body which carries out investigations into mergers, markets, and the regulated industries.
2. The members of the Kemira/Terra inquiry group are Bob Turgoose (Chairman), Jill Hill and Professor Sudi Sudarsanam.
3. The Enterprise Act 2002 empowers the OFT to refer to the CC completed or proposed mergers for investigation and report which create or enhance a 25 per cent share of supply in the UK (or a substantial part thereof) or where the UK turnover associated with the enterprise being acquired is over £70 million.
4. The CC has a 24-week period in which it is required to publish its report, which may be extended by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period. The case was referred to the CC on 26 January 2007.
5. Further information on the CC and its procedures, including its policy on the provision of information and the disclosure of evidence, can be obtained from its website at: http://www.competition-commission.org.uk.
