On May 4, 2020, the Commission unconditionally approved Aurubis’ proposed acquisition of Metallo, having issued formal objections just a few months earlier, in February 2020. The Aurubis/Metallo decision is noteworthy for two reasons. First, in the last five years, since Margrethe Vestager became Commissioner for Competition, only one other transaction has been unconditionally cleared after the Commission had sent a Statement of Objections to the companies involved, namely Tele2 NL/T-Mobile NL in 2018. Second, in Aurubis/ Metallo, the Commission’s concerns were based on buyer power, a theory of harm that has been rarely applied in the Commission’s merger review practice.
Context and factual background
This is the second proposed merger in the copper sector in the last two years involving Aurubis that the Commission has closely investigated. In February of last year, the Commission prohibited Wieland’s proposed acquisition of Aurubis’ rolled copper products business, as the Commission concluded that the merger would have created a dominant player. While Wieland/Aurubis concerned rolled copper products, Aurubis/Metallo concerned a separate market—the market for copper refining and recycling.
Aurubis is the largest integrated copper producer in Europe as well as the largest refiner of copper scrap globally, while Metallo is a large specialized refiner of copper scrap. Both companies are important buyers of a particular type of copper scrap generated in the EEA, namely copper scrap originating from products that have reached their end-of-life (e.g., electric and electronic components), as well as by-products from industrial production (e.g., from production of ships or cars).
The Commission’s investigation focused mainly on the EEA market for copper scrap for smelting and refining (“CSSR”), a segment of the market for copper for refining, which also includes relatively standardized products such as “copper scrap no.2” and e-scrap.
A U-turn: from formal objections to unconditional approval
The Commission opened an in-depth Phase II investigation on the basis of concerns that, by combining the two market leaders in the EEA, the transaction would lead to an increase in the merged entity’s buyer power which could result in consumer harm.
The Commission assessed whether, as a result of its increased buyer power, the merged entity would have the ability and incentive to reduce the volume of copper scrap it purchases, especially from industrial manufacturers, and thus extract a lower price. Such lower price for purchases could potentially harm industrial suppliers in the EEA that are selling copper scrap as a by-product of their production process.
Lower selling prices of the copper scrap could effectively be equated with higher production costs for these industrial suppliers, which could in turn force a price increase on their final product (e.g., ships or cars). As a result, end-consumers may be harmed by the merged entity’s increased buyer power on the CSSR purchasing market. The concerns were set out in a Statement of Objections addressed to the parties, which prompted the parties to offer commitments as a solution. The theory of harm is illustrated in figure 1 below.
The Commission ultimately found that an anticompetitive outcome would be unlikely. In a remarkable U-turn from its initial concerns and formal objections, the Commission concluded that the transaction would not harm suppliers of CSSR, and therefore considered that the Parties’ remedy offer was unwarranted. The finding was based on several considerations: (i) the merged entity’s combined share in the CSSR purchasing market was moderate; (ii) Aurubis and Metallo were not close competitors because they typically purchased different types of CSSR products; (iii) alternative purchasers of copper scrap on the CSSR purchasing market both within and outside the EEA would exercise a competitive constraint; and (iv) the complementarity of Aurubis’ and Metallo’s purchasing activities would lead to synergies in the market for copper refining. Accordingly, the Commission dropped its objections and approved the transaction without any conditions.
The Commission likely made a turnaround in its decision for the following reasons: (i) a better understanding of the different types of CSSR products lead to a more informed view of the market and closeness of competition; (ii) a more in-depth assessment of the market dynamics showed that purchasers of copper scrap outside the EEA are a credible alternative countering the increased buyer power of the merged entity; and (iii) the realization that the theory of harm it was pursuing was convoluted—the Commission had to show that several conditions were met, including that the reduced volume or lower prices of copper scrap would result in a significant cost increase for industrial suppliers and that such an increase would be passed on to end-consumers in the form of higher prices.
Enforcement of buyer power theory of harm
Buyer power in merger control is typically used as a defense—a countervailing factor that mitigates the possibility of an increase in market power. The Commission rarely investigates market power over suppliers as a theory of harm in mergers, unless this would lead to an exceptionally high buyer concentration. Indeed, a strengthening of bargaining buyer power is generally beneficial for competition. This is because it leads to lower input prices, which should in turn be partially passed on to consumers in the form of lower prices for the final product.
In exceptional circumstances, the Commission may, however, find concerns in buyer power consolidation, especially where a powerful buyer can obtain lower prices by reducing its purchases of inputs or foreclosing downstream rivals. In Aurubis/Metallo, the Commission attempted to apply such a theory of harm but ultimately dropped it.
While there is a recent trend towards stricter antitrust enforcement of concerns relating to buyer power, the Commission’s efforts have been concentrated outside the merger control context. These cases have generally involved more obvious restrictions such as the fixing of purchase prices (also known as buyers’ cartels). The Aurubis/Metallo case demonstrates the difficulty in pursuing a buyer power consolidation theory of harm in the context of merger control, and in particular, in establishing that it leads to consumer harm.
 Aurubis/ Metallo Group Holding (Case COMP/ M.9409), decision not yet published. See Commission Press Release IP/20/801, available at: https://ec.europa.eu/ commission/presscorner/detail/en/IP_20_801.
 T-Mobile NL/Tele2 NL (Case COMP/ M.8792), Commission decision of November 27, 2018. The unconditional approval in this case was to a great extent due to flailing firm considerations.
 This is unsurprising given the “growing importance of electric cars,” for which copper products are a key input. See Commission Press Release IP/19/6305, available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_6305. See also, Commission Press Release IP/19/883, available at: https://ec.europa. eu/commission/presscorner/detail/en/IP_19_883
 See Wieland/Aurubis Rolled Products/Schwermetall (Case COMP/M.8900), decision not yet published. See Commission Press Release IP/19/883, available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_883, as reported in our February 2019 Newsletter.
 As copper is fully recyclable, copper scrap is an important input for the production of copper products.
 The Commission found that copper scrap for smelting and refining is different from copper scrap for direct melting, and thus concluded that these two areas constitute separate markets.
 The Commission did not raise any concerns with respect to the market for copper scrap no.2 because it found that many alternative outlets will remain available to suppliers post-transaction. The Commission also concluded that no concerns would arise as a result of vertical relationships between the parties.
 This is in sharp contrast with the initial concerns the Commission raised. In its press release on the opening of the in-depth investigation, the Commission stated that the merger would lead to “very large combined market shares in the purchasing and refining of copper scrap,” as well as that the preliminary investigation suggests that Aurubis and Metallo are “each other’s closest competitors,” and “could currently be the only two viable purchasers” of these materials. See Commission Press Release IP/19/6305, available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_6305.
 The Commission has only exceptionally identified competition concerns in respect of the procurement of input products by the merging parties and has generally not pursued competitors’ complaints that the merging parties’ ability to obtain favorable prices for inputs would have an adverse effect on competition.
 See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertaking, OJ 2004 C 31/5, para. 62.
 Ibid., para. 61.
 This is particularly the case in the supermarkets sector, where the Commission and national competition authorities have initiated several investigations in the past year. See the Commission’s formal investigation of potential anticompetitive coordination between two French supermarket chains, Casino and Intermarché, as reported in our November 2019 Newsletter, and other cases cited therein.
 See, e.g., Car battery recycling (Case COMP/AT.40018), Commission decision of February 8, 2017. See also Recyclex v. Commission (Case T-222/17) EU:T:2019:356, as reported on in our May 2019 Newsletter; and Campine and Campine Recycling v. Commission (Case T-240/17) EU:T:2019:778, as reported in our November 2019 Newsletter.