[Federal Register Volume 65, Number 4 (Thursday, January 6, 2000)]
[Notices]
[Pages 777-779]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-260]
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[File No. 991-0167]
MacDermid, Inc., et al.; Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
-----------------------------------------------------------------------
SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before January 21, 2000.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pennsylvania Ave., NW, Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT: Morris Bloom, FTC/S-3418, 600
Pennsylvania Ave., NW, Washington, D.C. 20580. (202) 326-2707.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of thirty (30) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for December 22, 1999), on the World Wide Web, at ``http://
www.ftc.gov/os/actions97.htm.'' A paper copy can be obtained from the
FTC Public Reference Room, Room H-130, 600 Pennsylvania Avenue, NW,
Washington, D.C. 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW,
Washington, D.C. 20580. Two paper copies of each comment should be
filed, and should be accompanied, if possible, by a 3\1/2\ inch
diskette containing an electronic copy of the comment. Such comments or
views will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders
(``Agreement'') from MacDermid, Inc. (``MacDermid'') and Polyfibron
Technologies, Inc. (``Polyfibron'') to resolve competitive concerns
arising out of MacDermid's proposed acquisition of Polyfibron. The
Agreement includes a proposed Decision and Order (the ``proposed
Order'') which would require MacDermid and Polyfibron (``respondents'')
to divest the Polyfibron business of producing and selling liquid
photopolymers; to terminate their respective agreements to distribute
sheet photopolymers in North America (MacDermid's 1998 distribution
agreement with Asahi Chemical Industry Co., Ltd. (``Asahi''), and
Polyfibron's 1995 distribution agreement with BASF Lacke + Farben AG
(``BASF'')); and to cease and desist from inviting, entering into or
participating in any agreements with other photopolymer manufacturers
that have as their effect any allocation, division or illegal
restriction of competition. The Agreement also includes an Order to
Maintain Assets which requires respondents to preserve the Polyfibron
business of producing and selling liquid photopolymers as a viable,
competitive, and ongoing business until the divestiture is achieved.
The proposed Order has been placed on the public record for thirty
(30) days for reception of comments by interested persons. Comments
received during this period will become part of the public record.
After thirty (30) days, the Commission will review the Agreement and
comments received and decide whether to withdraw its acceptance of the
Agreement or make final the Agreement's proposed Order.
The proposed complaint alleges that the acquisition, if
consummated, would violate Section 7 of the Clayton Act, 15 U.S.C. 18,
as amended, and Section 5 of the Federal Trade Commission Act (``FTC
Act''), 15 U.S.C. 45, as amended,
[[Page 778]]
in the following markets: (1) The research, development, manufacture,
and sale of liquid photopolymers for use in the manufacture of
flexographic printing plates for printing on packaging materials, such
as corrugated containers and multi-wall bags (``Liquid
Photopolymers''); and (2) the research, development and sale of solid
sheet photopolymers for use in the manufacture of flexographic printing
plates for printing on packaging materials such as plastic bags and
other flexible packaging, as well as corrugated containers and multi-
wall bags (``Sheet Photopolymers'').
The proposed complaint alleges that the Liquid Photopolymer market
in North America is highly concentrated, and that the proposed
acquisition of Polyfibron by MacDermid represents a virtual merger to
monopoly in that market.
The proposed complaint also alleges that the Sheet Photopolymer
market in North America is highly concentrated, with the pre-merger
market being dominated by two firms, E.I. du Pont de Nemours & Co.,
Inc. (``DuPont'') and Polyfibron (selling its own-manufactured Sheet
Photopolymer products, and those of BASF under the 1995 distribution
agreement). Other firms that participate in the North American Sheet
Photopolymer market are niche players with minor market shares. While
MacDermid does not produce Sheet Photopolymers, it entered into a
distribution agreement with Asahi in 1998 that gives it the right--
which it has not yet exercised--to distribute and sell Asahi's Sheet
Photopolymer products in North America. The proposed complaint alleges
that the existence of the respective distribution agreements means that
the present duopoly in the sale of Sheet Photopolymers in North America
would be further entrenched, because the only two likely entrants, BASF
and Asahi, are bound by the distribution agreements to sell only
through polyfibron and MacDermid, respectively.
The proposed complaint further alleges that the effect of the
acquisition may be to substantially lessen competition and to tend to
create a monopoly by, among other things, eliminating direct
competition between MacDermid and Polyfibron in the manufacture,
distribution and sale of Liquid Photopolymers, entrenching the existing
duopoly in North America in the sale of Sheet Photopolymers, increasing
the likelihood that purchasers of Liquid Photopolymers and Sheet
Photopolymers will be forced to pay higher prices, increasing the
likelihood that technical and sales services provided to customers will
be reduced, and increasing the likelihood that innovation will be
reduced. Customers have complained that the effect of the transaction
would be increased prices for Liquid Photopolymers and Sheet
Photopolymers and reduced technical service, support, and innovation.
The proposed complaint further alleges that entry into the relevant
markets would not be timely, likely, or sufficient to deter or offset
the adverse effects of the acquisition on competition. Entry is
difficult in this market because of the length of time it would take
and the expense that would be incurred in building appropriate chemical
production facilities; the difficulty of perfecting the underlying
polymer chemistry without violating existing patents; the need to offer
to customers plate-making equipment on a consignment or lease basis and
the concurrent difficulty and cost of obtaining a source of supply for
plate-making equipment; and the difficulty of gaining recognition in a
marketplace in which customers are reluctant to change from proven
suppliers. In addition, the proposed complaint alleges that most
customers in the relevant market for Liquid Photopolymers are engaged
in long-term equipment and material supply contracts with either
MacDermid or Polyfibron, further reducing the number of customers
available to a new entrant at any given time.
Finally, the proposed complaint alleges that the respondents have
allocated markets for the sale of photopolymers with competitors, or
invited competitors to allocate markets for the sale of photopolymers.
Specifically, the complaint alleges that beginning in 1995, when
MacDermid first entered the market for the production and sale of
Liquid Photopolymers (by virtue of its acquisition of Hercules, Inc.'s
photopolymer business), MacDermid and Asahi agreed to allocate markets
such that Macdermid would not compete in the sale of Liquid
Photopolymers in Japan and in other areas of the world in which Asahi
sold Liquid Photopolymers while Asahi would not compete in the sale of
Liquid Photopolymers in North America. In the case of Polyfibron, the
proposed complaint alleges that during the same period of 1995 through
1998, Polyfibron engaged in discussions with Asahi that had as their
purpose the division of markets between the two companies. The proposed
complaint alleges that on several occasions during this time period,
Polyfibron invited Asahi to agree not to compete in the sale of Sheet
Photopolymers and Liquid Photopolymers in North America in return for
Polyfibron's agreement not to compete in the sale of Sheet
Photopolymers and Liquid Photopolymers in Japan.
The proposed Order is designed to remedy the anticompetitive
effects of the acquisition in the North American markets for Liquid
Photopolymers and Sheet Photopolymers, as alleged in the complaint, by
requiring the divestiture of Polyfibron's Liquid Photopolymer business,
by requiring the respondents to terminate their respective distribution
agreements with Asahi and BASF, and by requiring the respondents to
cease and desist from entering into, inviting or participating in any
agreements to allocate, divide or illegally restrict competition in the
relevant markets.
Under the terms of the proposed Order, respondents are required to
divest Polyfibron's North American Liquid Photopolymer business to
Chemence, Inc. (``Chemence''), no later than twenty (20) days after the
date the Order becomes final. Chemence currently produces adhesives,
sealants and photopolymers for making printing stamps, using technology
similar to that involved in Liquid Photopolymers. Chemence also
produces a small amount of Liquid Photopolymers in its facilities in
Alpharetta, Georgia, as well as in the United Kingdom.
Divestiture of Polyfibron's Liquid Photopolymer business to
Chemence is designed to promote the viability and competitiveness of
the divested business by placing the business in the hands of a company
with extensive expertise in photopolymer technology, expertise in
related chemistries, and economies of scale resulting from shared
research and development, overhead and production. The divestiture
package, in turn, will permit Chemence to penetrate the North American
market. It provides Chemence with a photopolymer technology that is
well-known, well-respected and proven in the marketplace, access to
plate-making equipment that it may offer to its resin customers, a
sales and technical support force that is well-known in the industry,
customer lists, and long-term equipment/resin supply contracts with
those customers.
The proposed Order requires that respondents divest all trade
secrets, know-how, trade marks and trade names, intellectual property,
intangible assets, tangible assets including equipment, and supply
contracts and business information (including purchasing, sales,
marketing, licensing, and similar information) relating to
[[Page 779]]
Polyfibron's Liquid Photopolymer business. The proposed Order also
requires that respondents provide incentives to certain employees
identified by the acquirer as important to the continued
competitiveness and viability of the Liquid Photopolymers business, to
facilitate their transfer and the transfer of know-how to the acquirer.
The proposed Order to Maintain Assets requires that respondents
preserve the Polyfibron Liquid Photopolymer business as a viable and
competitive business until it is transferred to the Commission-approved
acquirer. It includes an obligation on respondents to build and
maintain a sufficient inventory of Liquid Photopolymers to ensure there
is no shortage of supply during the period that the business is being
transitioned to the Commission-approved acquirer, and obligations to
maintain an adequate workforce.
Both the proposed Order and the Order to Maintain Assets include
provisions designed to protect the Commission-approved acquirer during
the transition period from the possibility that respondents might
target customers on the customer lists being transferred to the
Commission-approved acquirer. The provisions prohibit respondents from
soliciting Liquid Photopolymer customers of Polyfibron for the
transition period, which in any event is not to exceed ninety (90) days
from the date the assets to be divested are transferred to the
Commission-approved acquirer.
If, following receipt and review of public comments regarding the
proposed Order, the Commission determines to disapprove the divestiture
to Chemence, respondents are required to rescind the transaction with
Chemence and divest Polyfibron's Liquid Photopolymers business, within
three (3) months, to an acquirer that receives the prior approval of
the Commission. The proposed Order also provides that if respondents
fail to divest the Liquid Photopolymers business as required by the
proposed Order, the Commission may appoint a Divestiture Trustee to
divest the business along with any assets related to the business that
are necessary to effect the purposes of the proposed Order.
Under the terms of the proposed Order, respondents are required to
terminate their distribution agreements with BASF and Asahi. These
provisions of the proposed Order are designed to remedy the foreseeable
anticompetitive effects of maintaining the existing duopoly in the sale
of Sheet Photopolymers in North America. Presently, DuPont and
Polyfibron represent over ninety (90) percent of the sales of Sheet
Photopolymers in North America. The investigation revealed that prices
for Sheet Photopolymers in North America are considerably higher than
prices for Sheet Photopolymers in other areas of the world where all of
the major world players--DuPont, Polyfibron, BASF and Asahi--compete
for business. Furthermore, the investigation revealed evidence of
coordinated price activity in the sale of Sheet Photopolymers in North
America among the two major firms. By requiring the respondents to
terminate the distribution agreements with BASF and Asahi, the order
frees BASF and Asahi to enter the North American market independently,
and thereby to act as a competitive counterweight to DuPont and
respondents.
Finally, the proposed Order requires that respondents cease and
desist from inviting, creating, maintaining, adhering to, participating
in, or enforcing any agreement with any producer of photopolymer
products to allocate, divide or illegally restrict competition in the
relevant markets. This provision of the proposed Order is designed to
further enhance competition in the North American markets for Liquid
Photopolymers and Sheet Photopolymers by ensuring that no potential
entrant into these markets refrains from entering because of any
illegal invitations from or arrangements with the respondents.
The proposed Order requires respondents to provide the Commission,
within thirty (30) days of the date the Agreement is signed, with an
initial report setting forth in detail the manner in which respondents
will comply with the provisions relating to the divestiture of assets.
The proposed Order further requires respondents to provide the
Commission with a report of compliance with the Order within thirty
(30) days following the date the Order becomes final and every thirty
(30) days thereafter until they have complied with the divestiture
provisions of the Order. Furthermore, the Order requires respondents to
report annually to the Commission, for ten (10) years, regarding their
compliance with the provisions of the Order relating to the Sheet
Photopolymer distribution agreements and market allocation agreements.
The purpose of this analysis is to facilitate public comment on the
proposed Order. This analysis is not intended to constitute an official
interpretation of the Agreement or the proposed Order or in any way to
modify the terms of the Agreement or the proposed Order.
By direction of the Commission.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 00-260 Filed 1-5-00; 8:45 am]
BILLING CODE 6750-01-M
