[Federal Register Volume 63, Number 64 (Friday, April 3, 1998)]
[Notices]
[Pages 16552-16553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8764]
[[Page 16552]]
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FEDERAL TRADE COMMISSION
[File No. 971-0118]
Degussa Aktiengesellschaft, et al.; Analysis To Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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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 June 2, 1998.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
Joseph Krauss, FTC/H-386, Washington, D.C. 20580. (202) 326-2713.
SUPPLEMENTARY INFORMATION: Pursuant to Section 69(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 sixty (60) 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 March 30, 1998), 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, Sixth Street and Pennsylvania Avenue, N.W.,
Washington, DC 20580, either in person or by calling (202) 326-3627.
Public comment is invited. 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 To Aid Public Comment on the Provisionally Accepted
Consent Order
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Order from Degussa
Aktiengesellschaft and Degussa Corporation (collectively ``Degussa'').
The proposed Order is designed to remedy anticompetitive effects
stemming from a proposed transaction between Degussa and E.I. du Pont
de Nemours & Co. (``DuPont''). On July 30, 1997, representatives of
Degussa and DuPont signed a Letter of Intent setting out the elements
of a proposed transaction whereby Degussa would require, inter alia,
the assets of DuPont's worldwide hydrogen peroxide business, including
its North American production facilities in Memphis, Tennessee;
Maitland, Ontario; and Gibbons, Alberta, in exchange for $325 million.
The parties have since proposed a modified transaction, whereby Degussa
will acquire only DuPont's production facility in Gibbons, Alberta, and
DuPont will retain its facilities in Memphis, Tennessee, and Maitland,
Ontario.
The Agreement Containing Consent Order, if finally accepted by the
Commission, would settle charges that the acquisition, as originally
proposed, may have substantially lessened competition in the North
American hydrogen peroxide market. The Commission has reason to believe
that Degussa's original proposal to acquire DuPont's hydrogen perxide
business, if consummated, would have violated Section 7 of the Clayton
Act and Section 5 of the Federal Trade Commission Act. The proposed
complaint, described below, relates the basis for this belief.
The proposed Order has been placed on the public record for sixty
(60) days for reception of comments from interested persons. After
sixty (60) days the Commission will again review the Agreement and the
comments received and will decide whether it should withdraw from the
Agreement or make final the Agreement's proposed Order.
The Proposed Complaint
According to the Commission's proposed complaint, Degussa
Aktiengesellschaft is a German corporation with worldwide sales
exceeding $8.7 billion in 1997, which is engaged in, inter alia, the
development and manufacture of chemicals, pharmaceutical specialties,
and precious metals. Degussa Corporation, a wholly-owned subsidiary of
Degussa A.G., manufactures and distributes widely diverse products in
the markets for chemicals, pigments, metals, and dental materials in
the United States, Canada, and Mexico. Among these products is hydrogen
peroxide. In 1996, Degussa has sales in excess of $2.3 billion, to
which sales of hydrogen peroxide contributed $65 million. DuPont is a
publicly-traded corporation with reported revenues in 1996 of $43.8
billion and net income of $3.6 billion. DuPont is one of the largest
chemical companies in the world, operating about 175 manufacturing and
processing facilities in approximately 70 countries. DuPont is engaged
in diverse businesses, including chemicals, fibers, films, polymers,
petroleum, agricultural products, biotechnology, and pharmaceuticals.
In 1996, DuPont posted sales of hydrogen peroxide of $156 million in
North America.
According to the proposed complaint, the relevant line of commerce
in which to analyze the effects of Degussa's proposed acquisition of
Dupont's hydrogen peroxide production assets is the market for hydrogen
peroxide, and the relevant geographic market is North America. The
Commission's proposed complaint further alleges that the North American
market for hydrogen peroxide is highly concentrated, and that the
originally proposed acquisition would have increased concentration, as
measured by the Herfindahl-Hirschman Index, by close to 600 points, to
a level of over 2500. With the acquisition as modified, in which
Degussa would acquire only DuPont's Gibbons plant, the level of the HHI
would actually decrease. The proposed complaint charges that de novo
entry or fringe expansion into the relevant market would require a
substantial sunk investment and a significant period of time, such that
new entry would be neither timely, likely, nor sufficient to deter or
counteract anticompetitive effects of the originally proposed
acquisition.
The proposed complaint alleges that the acquisition, as originally
proposed, would likely lead to a substantial lessening of competition
in the North American hydrogen peroxide market. The acquisition would
substantially increase concentration in a market that is already highly
concentrated. The increased concentration would enable the firms
remaining in the market to engage more successfully and more completely
in coordinated interaction. The complaint cites several bases for this
conclusion. Significantly, there is a long history of collusion, both
tacit and express, among the firms that would remain after the proposed
acquisition, involving hydrogen peroxide and its derivative products.
In addition, evidence demonstrates that competitive information in the
North American hydrogen peroxide market is sufficiently available to
allow producers to engage in coordinated interaction. Practices
[[Page 16553]]
such as public announcement of price increases, and the use of meeting
competition clauses in contracts, serve to make competitive information
available. There is also evidence of a strong degree of mutual
interdependence among hydrogen peroxide producers, and evidence of
market tendencies toward coordination and forbearance. For example,
sales of hydrogen peroxide among producers are made with some
frequency, and in some cases appear to be intended to avoid competitive
conflicts. Finally, the complaint also cites projections in documents
that prices would be higher after the acquisition than they otherwise
would have been.
The Proposed Order
The proposed Order contains a provision that requires Degussa to
obtain the prior approval of the Commission of an acquisition of either
of the two plants that DuPont would retain. In addition, it contains a
provision that requires Degussa to provide prior notification to the
Commission before consummating an acquisition of any other North
American hydrogen peroxide production facilities, unless such
acquisition must be reported under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, 15 U.S.C. 18a (``HSR''). This provision
specifically requires that Degussa comply with HSR-like premerger
notification and waiting periods.
In accord with the Commission's Statement of Policy Concerning
Prior Approval and Prior Notice Provisions, 60 FR 39,745 (Aug. 3,
1995), reprinted in 4 Trade Reg. Rep. (CCH) para. 13,241, the prior
approval provision ensures that the Commission will have the
appropriate mechanism with which to review the originally proposed
acquisition, which appeared likely to have anticompetitive effects. The
prior notice provision, in addition, ensures that the Commission will
obtain notification of hydrogen peroxide acquisitions by Degussa,
including potential acquisitions in Canada, that may raise antitrust
concerns but would not be reportable under HSR. The prior approval and
prior notification provisions therefore afford the Commission ample
opportunity to guard against such potentially anticompetitive
acquisitions.
The purpose of this analysis is to invite public comment concerning
the proposed order. This analysis is not intended to constitute an
official interpretation of the agreement and order or to modify their
terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-8764 Filed 4-2-98; 8:45 am]
BILLING CODE 6750-01-M
