Commission Approves Failing Firm Defense

On Sept. 2, 2013, the European Commission approved the acquisition of Shell Deutschland Oil GmbH’s Harburg refinery assets by Swedish company Nynas AB, finding that, in the absence of the proposed transaction, the Harburg refinery would be closed.

The Commission opened an in-depth investigation into the transaction in March 2013, based on concerns that the transaction would result in the merged entity becoming the only producer of naphthenic oils for use in some end applications, such as industrial rubber, fertilisers and defoamers, and for other segments, including transformer oils.  The Commission’s concern was that the few remaining competitors importing into the European Economic Area may not have been able to exercise a significant competitive constraint.

During the in-depth investigation, however, Shell demonstrated that it would not continue to operate the Harburg refinery, and the Commission found that, other than Nynas, there were no alternative buyers for the refinery assets. The Commission concluded that the reduction in the number of competitors would occur anyway and would not be caused by the acquisition itself. The closure of the refinery would have reduced production capacity in the EEA below EEA demand, which would have to be met by imports, resulting in higher prices for consumers. The Commission also found that the acquisition by Nynas would have positive effects on competition, as Nynas would achieve significant reductions in variable costs for its additional supplies, which would be likely to be passed on to consumers.