01-27960. Airgas, Inc.; 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 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 November 26, 2001.

ADDRESSES:

Comments should be directed to: FTC/Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Christina Perez, FTC/S-2308, 600 Pennsylvania Ave., NW., Washington, DC [phone].

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 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 October 26, 2001), on the World Wide Web, at “http://www.ftc.gov/​os/​2001/​10/​index.htm.” A paper copy can be obtained from the FTC Public Reference Room, Room H-130, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling [phone].

Public comment is invited. Comments should be directed to: FTC/Office of the Secretary, Room 159, 600 Pennsylvania. Ave., NW., Washington, DC 20580. Two paper copies of each comment should be filed, and should be accompanied, if possible, by a 31/2 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 Agreement Containing Consent Order To Aid Public Comment

The Federal Trade Commission (“Commission”) has accepted, subject to final approval, an Agreement Containing Consent Order (“Consent Agreement”) from Airgas, Inc. (“Airgas”), which is designed to remedy the anticompetitive effects resulting from an acquisition by certain wholly-owned subsidiaries of Airgas of the Puritan Bennett Medical Gas Business (“Puritan Bennett”). Under the terms of the Consent Agreement, Airgas will be required to divest a nitrous oxide business to Air Liquide America Corporation (“Air Liquide”) within ten days of the date the Commission issues the Decision and Order in this matter.

The Consent Agreement 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 again review the Consent Agreement and the comments received, and will decide whether it should withdraw from the Consent Agreement or make final the Decision and Order.

On January 21, 2000, Airgas acquired Puritan Bennett from Mallinckrodt, Inc., for approximately $90 million. The Commission's Complaint alleges that the acquisition violated section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, in the market for the production and sale of nitrous oxide in the United States and Canada (“North America”).

Nitrous oxide is a clear, odorless gas that is mainly used in dental and surgical procedures as an analgesic or a weak anesthetic. Because nitrous oxide elevates the patient's pain threshold and relieves patient anxiety, it is predominantly used by dentists when a patient is undergoing extensive dental work or by anesthesiologists during many surgical procedures as a supplement to other anesthetics. According to customers of nitrous oxide, other anesthetics and analgesics are far more expensive or have other detriments when compared to nitrous oxide, and thus are not viable substitutes for nitrous oxide.

Currently, Airgas is the only producer of nitrous oxide in North America. However, prior to its purchase by Airgas, Puritan Bennett was also a producer and seller of nitrous oxide in North America. As a result, before the acquisition, Puritan Bennett and Airgas competed against each other for a wide variety of nitrous oxide customers across the country. Therefore, Airgas's acquisition of Puritan Bennett effectively elimated any competition in the North American market for the production and sale of nitrous oxide.

There are substantial barriers to new entry into the nitrous oxide market. Effective new entry would require a company to build multiple production facilities, which would take well in excess of two years. In addition, a new entrant would have to incur substantial investments, including the acquisition of a source of red material and the development of an appropriate infrastructure to deliver bulk nitrous oxide to end-users and to distributors for resale. In light of the fact that the nitrous oxide market is relatively small compared to the costs that a new entrant would have to incur, new entry is not likely to occur. Because of the cost and difficulty of accomplishing these tasks, no new entry into the nitrous oxide market is likely to occur within the next two years to deter or counteract the anticompetive effects resulting from the transaction.

The proposed order effectively remedies the acquisition's anticompetitive effects in the North American nitrous oxide market by requiring Airgas to divest a nitrous oxide business, which consists of two nitrous oxide production plants, customers contracts, and all related assets necessary for distribution and storage to Air Liquide. The order also requires Airgas to supply Air Liquide with a specified amount of bulk liquid nitrous oxide from its Florida nitrous oxide production plant in order to ensure that Air Liquide has the same volume of nitrous oxide as Airgas did before its acquisition of Puritan Bennett.

Air Liquide has all of the necessary attributes to restore competition to the relevant market. Not only does it produce other medical gases, such as medical grade oxygen and nitrogen, but it also already has extensive contracts with gas distributors, which are the major customers of nitrous oxide. Indeed, many distributors already buy a wide variety of other gases from Air Liquide. Furthermore, Air Liquide has the financial resources to purchase the assets and operate the business in a competitive manner.

Pursuant to the proposed order, Airgas is required to divest these assets to Air Liquide within ten days of the date the Commission issues the Decision and Order in this matter. If the divestiture to Air Liquide is not accomplished by then, Airgas must divest these nitrous oxide assets to a Commission-approved acquirer within six months. Should Airgas fail to do so, the Commission may appoint a trustee to divest the business.

In order to ensure that the Commission remains informed about the status of the Airgas nitrous oxide business pending divestiture, and about efforts being made to accomplish the divestiture, the Consent Agreement requires Airgas to report to the Commission within 30 days, and every 60 days thereafter until the divestiture is accomplished. In addition, Airgas is required to report to the Commission every 60 days regarding its obligations to provide transitional services and facilities management.

The purpose of this analysis is to facilitate public comment on the Consent Agreement, and it is not intended to constitute on official interpretation of the Consent Agreement or to modify in any way its terms.

By direction of the Commission.

Donald S. Clark,

Secretary.