EC Opens Investigation into Mondi’s Acquisition of Parts of Walki's Packaging Division

07 Sep 2015 --- The European Commission has opened an in-depth investigation to assess whether the proposed acquisition by Mondi of two industrial packaging plants currently owned by Walki is in line with the EU Merger Regulation. Mondi is a vertically integrated packaging and paper manufacturer. Mondi also operates a number of plants across Europe manufacturing extrusion coating products (used for example for food wrapping, insulation material or envelopes).

The plants Mondi intends to buy from Walki also manufacture extrusion coating products. The Commission has concerns that the removal of a key competitor may lead to less choice and ultimately higher prices for customers of wrapping materials which also serve as moisture barriers (these are used, for example, in the paper industry or in boxes for fresh food products). The Commission now has 90 working days, until 18 January 2016 to investigate whether these initial concerns are confirmed. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Commissioner Margrethe Vestager, in charge of competition policy, commented: "The proposed merger could remove a key competitor for several types of packaging material. These are used in everyday items such as food packaging. I am concerned that the merger would lead to higher prices and less choice for these companies' clients and that the price increases could ultimately be passed on to consumers." 

Extrusion coating is a process through which a molten resin is added on to a substrate material, for example paper. It is a coating technique that results in a strong and moisture resistant foil employed with a large number of uses, like paper packaging, envelopes, food wrapping and bags, timber wrapping, and insulation materials for construction.

Mondi and Walki are the two leading suppliers in the European Economic Area (EEA) of several products derived from extrusion coating, in particular wrapping materials for the paper industry and case lining. The two companies are currently vigorously competing on these markets.

The Commission’s initial investigation has shown that the proposed acquisition of Walki's plants may remove a major competitive constraint on Mondi. Remaining competitors would have considerably lower production capacity than the merged entity and may not be able to match its product offering or proximity to key customers. At this stage, the Commission has concerns that these competitors may be unable to exert sufficient competitive constraint on the behaviour of the merged entity. This risks leading to a reduction of choice for customers and potentially to price increases for the products concerned.

The Commission will now investigate in-depth the effects of this transaction on competition to determine whether its initial concerns are confirmed.

The transaction was notified to the Commission on 29 July 2015.