Mergers between Backward Integrated Firms: Insights from BASF/Solvay’s Polyamide Business†

On 19 September 2017, BASF publicly announced that it had agreed to purchase Solvay’s polyamide business, and the transaction was notified to the European Commission on 22 May 2018.1 After opening an in-depth investigation on 26 June 2018 and receiving an offer for commitments on 10 October 2018, the Commission conditionally cleared the transaction on 18 January 2019. In announcing the approval of the deal, Commissioner for Competition Margrethe Vestager hailed the ‘creation of a significant European player’ in the polyamide industry. According to the press release on the opening of the in-depth investigation, the Commission’s initial market investigation raised a set of traditional horizontal and vertical concerns throughout the polyamide value chain.2 In addition, ‘[t]he initial market investigation […] showed that competitors of the merged entity fear that it would stop supplying them with these essential inputs because of its own increased needs downstream.’ Members of the Chief Economist Team of DG Competition may have also been referring to this transaction when they wrote that in 2017/2018 ‘[t]he CET was involved in all of these second-phase investigations as well as in some complex first-phase investigations, with a focus on specific topics such as […] horizontal effects in seemingly vertical transactions that involve integrated firms […].’3