[Federal Register Volume 61, Number 78 (Monday, April 22, 1996)]
[Notices]
[Pages 17721-17728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9767]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Georgia-Pacific Corporation; Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16 (b)-(h), that a proposed Final
Judgment, Stipulation and Order, and Competitive Impact Statement have
been filed with the United States District Court in Delaware, Civil No.
96-164, as to defendant, Georgia-Pacific Corporation (``Georgia-
Pacific'').
On March 29, 1996, the United States filed a Complaint alleging
that the proposed acquisition by Georgia-Pacific of the gysum business
assets of Domtar, Inc. (``Domtar'') would violate Section 7 of the
Clayton Act, 15 U.S.C. Sec. 18. The proposed Final Judgment, filed the
same time as the Complaint, requires Georgia-Pacific to divest its
Buchanan, New York and Wilmington, Delaware gypsum board plants, along
with certain tangible and intangible assets.
Public comment is invited within the statutory 60-day comment
period. Such comments and responses thereto will be published in the
Federal Register and filed with the Court. Comments should be directed
to J. Robert Kramer, Chief, Litigation II Section, Antitrust Division,
United States Department of Justice, 1401 H Street, N.W., Suite 3000,
Washington, D.C. 20530 (telephone: 202/307-0924).
Copies of the Complaint, Stipulation and Order, Proposed Final
Judgment, and Competitive Impact Statement are available for inspection
in Room 207 of the U.S. Department of Justice, Antitrust Division, 325
7th Street, N.W., Washington, D.C. 20530, (telephone: 202/307-0924).
Copies of the Complaint, Stipulation and Order, Proposed Final
Judgment, and Competitive Impact Statement are available for inspection
in Room 207 of the U.S. Department of Justice, Antitrust Division, 325
7th Street, N.W., Washington, D.C. 20530, (202) 514-2841. Copies of
these materials may be obtained upon request and payment of a copying
fee.
Constance K. Robinson,
Director of Operations.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and vence of this action is
proper in the District of Delaware.
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. Sec. 16 (b)-(h)), and without further notice to any party or
other proceedings, provided that plaintiff has not withdrawn its
consent, which it may do at any time before the entry of the proposed
Final Judgment by serving notice thereof on defendant and by filing
that notice with the Court.
3. The parties shall abide by and comply with the provisions of the
proposed Final Judgment pending entry of the Final Judgment, and from
the date of the filing of this Stipulation, shall comply with all the
terms and provisions of the Final Judgment as though they were in full
force and effect as an order of the Court.
4. In the event plaintiff withdraws its consent, or if the proposed
Final Judgment is not entered pursuant to this Stipulation, this
Stipulation shall be of no effect whatever and the making of this
Stipulation shall be without prejudice to any party in this or any
other proceeding.
Dated: March 29, 1996.
For Plaintiff, United States:
Anne K. Bingaman,
Assistant Attorney General District of Columbia #369900.
Anthony V. Nanni,
Chief, Litigation I Section, State of New York (no bar number
assigned).
Willie L. Hudgins,
Asst. Chief, Litigation II Section, State of Virginia #01547.
John Schmoll,
Attorney, State of Wisconsin #1013897, Antitrust Division, U.S.
Department of Justice, 1401 H Street, NW, Suite 4000, Washington, DC
20530, (202) 307-5780.
Gregory M. Sleet,
US Attorney,
By: Richard G. Andrews,
AUSA, State of Delaware #2199, 1201 Market Street, Suite 1100,
Wilmington, Delaware 19899, (302) 573-6277.
For Defendant, Georgia-Pacific Corp.
Donald L. Flexner,
Esquire, Crowell & Morning 1001 Pennsylvania Avenue, N.W. Washington,
DC 20004-2595 (202) 624-2500.
Matthew B. Lehr,
Esquire, State of Delaware #2370, Morris, Nichols, Arsht & Tunnell,
1201 Market Street, Wilmington, Delaware 19801, (302) 575-7281.
O r d e r
It is so ordered, this 29th of March, 1996.
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United States District Judge
Final Judgment
Whereas, plaintiff, United States of America, having filed its
Complaint herein on March 29, 1996, and plaintiff and defendant, by
their respective attorneys, having consented to the entry of this Final
Judgment without trial or adjudication of any issue of fact or law
herein, and without this Final Judgment constituting any evidence
against or an
[[Page 17722]]
admission by any party with respect to any issue of law or fact herein;
And whereas, defendant has agreed to be bound by the provisions of
this Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is prompt and
certain divestiture of assets to assure that competition is not
substantially lessened;
And whereas, plaintiff requires defendant to make certain
divestitures for the purpose of establishing viable competition in the
production and sale of gypsum board;
And whereas, defendant has represented to plaintiff that the
divestitures ordered herein can and will be made and that defendant
will later raise no claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
Now, therefore, before the taking of any testimony, and without
trial or adjudication of any issue of fact or law herein, and upon
consent of the parties hereto, it is hereby ORDERED, adjudged, and
decreed as follows:
I. Jurisdiction
This Court has jurisdiction over each of the parties hereto and the
subject matter of this action. The Complaint states a claim which
relief may be granted against defendant under Section 7 of the Clayton
Act, as amended (15 U.S.C. Sec. 18).
II. Definitions
As used in this Final Judgment:
A. ``Georgia-Pacific'' or ``defendant'' means defendant Georgia-
Pacific Corporation, a Georgia corporation headquartered in Atlanta,
Georgia, and includes its successors and assigns, and its subsidiaries,
directors, officers, managers, agents, and employees acting for or on
behalf of any of them.
B. ``The Northeast Region'' means the District of Columbia and the
states of Maine, Vermont, New Hampshire, Rhode Island, Connecticut,
Massachusetts, New York, New Jersey, Delaware, Pennsylvania, Maryland,
and Virginia.
C. ``Gypsum Board Assets'' means: (1) all rights, titles and
interests, including all fee and all leasehold and renewal rights, in
Georgia-Pacific's Buchanan, New York gypsum board plant and related
warehouses and docking facilities (the ``Buchanan Plant'') including,
but not limited to, all real property, capital equipment, fixtures,
inventories, contracts (including but not limited to customer
contracts), customer lists, trucks and other vehicles, interests,
assets or improvements related exclusively to the production,
distribution and sale of gypsum board at the Buchanan Plant; and
(2) All rights, titles and interests, including all fee and all
leasehold and renewal rights, in Georgia-Pacific's Wilmington, Delaware
gypsum board plant and related warehouses and docking facilities (the
``Wilmington Plant'') including, but not limited to, all real property,
capital equipment, fixtures, inventories, contracts (including but not
limited to customer contracts), customer lists, trucks and other
vehicles, interests, assets or improvements related exclusively to the
production, distribution and sale of gypsum board at the Wilmington
Plant.
D. ``Gypsum board'' means material that consists primarily of a
solid, flat core of processed gypsum between two sheets of paper
surfacing, and which is used principally for constructing or repairing
interior walls and ceilings of commercial and residential buildings.
III. Applicability
A. The provisions of this Final Judgment apply to the defendant,
its successors and assigns, subsidiaries, directors, officers,
managers, agents, and employees, and all other persons in active
concert or participation with any of them who shall have received
actual notice of this Final Judgment by personal service or otherwise.
B. Defendant shall require, as a condition of the sale or other
disposition of all or substantially all of the Gypsum Board Assets,
that the purchaser or purchasers agree to be bound by the provisions of
this Final Judgment.
IV. Divestitures
A. Georgia-Pacific is hereby ordered and directed in accordance
with the terms of this Final Judgment, within one hundred and fifty
(150) calendar days after the filing of this Final Judgment, to:
(i) Divest the Gypsum Board Assets to a purchaser or purchasers;
(ii) Enter into a perpetual, non-exclusive license (or licenses, as
the case may be) with the purchaser or purchasers, transferable to any
future purchaser of the Wilmington or Buchanan Plants, to use, in
manufacturing gypsum board at such Plants, all intangible assets,
wherever located, that have been used in the last six (6) months in the
manufacture of gypsum board at such Plants, including but not limited
to, trade secrets and know-how, but excluding patents for the DENS
products, trademarks, trade names, service marks, and service names;
and
(iii) At the option of the purchaser or purchasers, enter into a
supply contract for gypsum rock (which may or may not include
transportation) and/or gypsum linerboard paper sufficient to meet all
or part of the capacity requirements of the Buchanan and Wilmington
Plants over a period of up to ten (10) years; provided that the terms
and conditions of any contractual arrangement meant to satisfy this
provision must be related reasonably to market conditions for gypsum
rock and/or gypsum linerboard paper.
B. Divestiture of Georgia-Pacific's leasehold interest, if any, in
the Gypsum Board Assets shall be by transfer of the entire leasehold
interest, which shall be for the entire remaining term of such
leasehold, including any renewal rights.
C. Defendant agrees to use its best efforts to accomplish the
divestitures as expeditiously and timely as possible. Plaintiff, in its
sole discretion, may extend the time period for any divestiture for two
additional periods of time not to exceed sixty (60) calendar days in
toto.
D. In accompanying the divestitures ordered by this Final Judgment,
defendant promptly shall make known, by usual and customary means, the
availability of the Gypsum Board Assets and the licenses and supply
contracts described in Section IV (A) of this Final Judgment
(collectively, the ``Divestiture Package''). Defendant shall inform any
person making an inquiry regarding a possible purchase that the sale is
being made pursuant to this Final Judgment and provide such person with
a copy of this Final Judgment. Defendant shall make known to any person
making an inquiry regarding a possible purchase of the Divestiture
Package that the assets described in Section II (C) and the licenses
and supply contracts described in Section IV (A) of this Final Judgment
are being offered for sale and that the Buchanan and Wilmington Plants
and related assets may be purchased as a two-plant package or sold
separately to two different purchasers. Defendant shall also offer to
furnish to all bona fide prospective purchasers, subject to customary
confidentiality assurances, all information regarding the Divestiture
Package customarily provided in a due diligence process except such
information subject to attorney-client privilege or attorney work-
product privilege. Defendant shall make available such information to
plaintiff at the same time that such information is made available to
any other person.
E. Defendant shall not interfere with any negotiations by any
purchaser or
[[Page 17723]]
purchasers to employ any Georgia-Pacific employee who works at, or
whose principal responsibility is the manufacture, sale or marketing of
gypsum board produced at Georgia-Pacific's Buchanan and Wilmington
Plants.
F. Defendant shall permit prospective purchasers of the Divestiture
Package to have access to personnel and to make such inspection of the
Gypsum Board Assets, the intangible assets relating to the licenses
described in Section IV (A) of this Final Judgment, and any and all
financial, operational, or other documents and information customarily
provided as part of a due diligence process.
G. Unless plaintiff otherwise consents in writing, the divestiture
pursuant to Section IV (A), or by the trustee appointed pursuant to
Section V of this Final Judgment, shall include the Divestiture Package
and be accomplished by selling or otherwise conveying the assets
described in Section II (C) and by entering into the licenses and
supply contracts described in Section IV (A) of this Final Judgment, to
one or two purchasers, in such a way as to satisfy plaintiff, in its
sole discretion, that the Divestiture Package can and will be used by
the purchaser or purchasers as part of a viable, ongoing business or
businesses engaged in the manufacture and sale of gypsum board. The
divestiture, whether pursuant to Section IV or Section V of this Final
Judgment, shall be made to a purchaser or purchasers for whom it is
demonstrated to plaintiff's sole satisfaction that: (1) The purchaser
or purchasers have the capability and intent of competing effectively
in the manufacture and sale of gypsum board in the Northeast Region;
(2) the purchaser or purchasers have or soon will have the managerial,
operational, and financial capability to compete effectively in the
manufacture and sale of gypsum board in the Northeast Region; and (3)
none of the terms of any agreement between the purchaser or purchasers
and defendant give defendant the ability unreasonably to raise the
purchaser's or purchasers' costs, to lower the purchaser's or
purchasers' efficiency, or otherwise to interfere in the ability of the
purchaser or purchasers to compete effectively in the Northeast Region.
V. Appointment of Trustee
A. In the event that Georgia-Pacific has not divested the
Divestiture Package within the time specified in Sections IV (A) or (C)
of this Final Judgment, the Court shall appoint, on application of the
United States, a trustee selected by the United States to effect the
divestiture of the Divestiture Package.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Gypsum Board Assets and enter
into the licenses and supply contracts described in Section IV (A) of
this Final Judgment. The trustee shall have the power and authority to
accomplish the divestiture at the best price then obtainable upon a
reasonable effort by the trustee, subject to the provisions of Sections
V and VI of this Final Judgment, and shall have such other powers as
the Court shall deem appropriate. Subject to Section V (C) of this
Final Judgement, the trustee shall have the power and authority to hire
at the cost and expense of defendant any investment bankers, attorneys,
or other agents reasonably necessary in the judgment of the trustee to
assist in the divestiture, and such professionals and agents shall be
accountable solely to the trustee. The trustee shall have the power and
authority to accomplish the divestiture at the earliest possible time
to a purchaser or purchasers acceptable to plaintiff, and shall have
such other powers as this Court shall deem appropriate. Defendant shall
not object to a sale by the trustee on any grounds other than the
trustee's malfeasance. Any such objections by defendant must be
conveyed in writing to plaintiff and the trustee within ten (10)
calendar days after the trustee has provided the notice required under
Section VI of this Final Judgment.
C. The trustee shall serve at the cost and expense of defendant, on
such terms and conditions as the Court may prescribe, and shall account
for all monies derived from the sale of the assets sold by the trustee
and all costs and expenses so incurred. After approval by the Court of
the trustee's accounting, including fees for its services and those of
any professionals and agents retained by the trustee, all remaining
money shall be paid to Georgia-Pacific and the trust shall then be
terminated. The compensation of such trustee and of any professionals
and agents retained by the trustee shall be reasonable in light of the
value of the Divestiture Package and based on a fee arrangement
providing the trustee with an incentive based on the price and terms of
the divestiture and the speed with which it is accomplished.
D. Defendant shall use its best efforts to assist the trustee in
accomplishing the required divestiture. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of defendant, and defendant shall develop
financial or other information relevant to such assets as the trustee
may reasonably request, subject to reasonable protection for trade
secret or other confidential research, development, or commercial
information. Defendant shall take no action to interfere with or to
impede the trustee's accomplishment of the divestiture.
E. After its appointment, the trustee shall file monthly reports
with the parties and the Court setting forth the trustee's efforts to
accomplish the divestiture order under this Final Judgment. If the
trustee has not accomplished such divestiture within six (6) months
after its appointment, the trustee thereupon shall file promptly with
the Court a report setting forth (1) the trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the trustee's
judgment, why the required divestiture has not been accomplished, and
(3) the trustee's recommendations; provided, however, that to the
extent such reports contain information that the trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. The trustee shall at the same time furnish such report to
the parties, who shall each have the right to be heard and to make
additional recommendations consistent with the purpose of the trust.
The Court shall enter thereafter such orders as it shall deem
appropriate in order to carry out the purpose of the trust, which may,
if necessary, include extending the trust and the term of the trustee's
appointment by a period requested by the United States.
VI. Notification
Within two (2) business days following execution of a definitive
agreement, contingent upon compliance with the terms of this Final
Judgment, to effect, in whole or in part, any proposed divestiture
pursuant to Sections IV or V of this Final Judgment, Georgia-Pacific or
the trustee, whichever is then responsible for effecting the
divestiture, shall notify plaintiff of the proposed divestiture. If the
trustee is responsible, it shall similarly notify defendant. The notice
shall set forth the details of the proposed transaction and list the
name, address, and telephone number of each person not previously
identified who offered to, or expressed an interest in or a desire to,
acquire any ownership interest in the assets that are the subject of
the binding contract, together with full details of same. Within
fifteen (15) calendar days of receipt by plaintiff of such notice,
plaintiff may request from defendant, the proposed purchaser or
purchasers,
[[Page 17724]]
or any other third party additional information concerning the proposed
divestiture and the proposed purchaser or purchasers. Defendant and the
trustee shall furnish any additional information requested within
fifteen (15) calendar days of the receipt of the request, unless the
parties shall otherwise agree. Within thirty (30) calendar days after
receipt of the notice or within twenty (20) calendar days after
plaintiff has been provided the additional information requested from
defendant, the proposed purchaser or purchasers, and any third party,
whichever is later, plaintiff shall provide written notice to defendant
and the trustee, if there is one, stating whether or not it objects to
the proposed divestiture. If plaintiff provides written notice to
defendant and the trustee that it does not object, then the divestiture
may be consummated, subject only to defendant's limited right to object
to the sale under Section V (B) of this Final Judgment. Absent written
notice that plaintiff does not object to the proposed purchaser or upon
objection by plaintiff, a divestiture proposed under Section IV shall
not be consummated. Upon objection by plaintiff, or by defendant under
the proviso in Section V (B), a divestiture proposed under Section V
shall not be consummated unless approved by the Court.
VII. Affidavits
A. Within twenty (20) calendar days of the filing of this Final
Judgment and every thirty (30) calendar days thereafter until the
divestitures have been completed whether pursuant to Section IV or
Section V of this Final Judgment, Georgia-Pacific shall deliver to
plaintiff an affidavit as to the fact and manner of compliance with
Sections IV or V of this Final Judgment. Each such affidavit shall
include, inter alia, the name, address, and telephone number of each
person who, at any time after the period covered by the last such
report, made an offer to acquire, expressed an interest in acquiring,
entering into negotiations to acquire, or was contacted or made an
inquiry about acquiring, any interest in the Divestiture Package, and
shall describe in detail each contact with any such person during that
period. Each such affidavit shall further describe in detail any
negotiations, including negotiations concerning the terms, conditions
and price, between a purchaser or purchasers of the Gypsum Board Assets
and Georgia-Pacific for the license(s) and supply contract(s) for
gypsum rock and/or gypsum linerboard paper described in Section IV (A)
of this Final Judgment.
B. Within twenty (20) calendar days of the filing of this Final
Judgment, Georgia-Pacific shall deliver to plaintiff an affidavit which
describes in detail all actions Georgia-Pacific has taken and all steps
Georgia-Pacific has implemented on an on-going basis to preserve the
Gypsum Board Assets pursuant to Section IX of this Final Judgment and
describes the functions, duties and actions taken by or undertaken at
the supervision of the individual(s) described at Section IX (F) of
this Final Judgment with respect to Georgia-Pacific's efforts to
preserve the Gypsum Board Assets. The affidavit also shall describe,
but not be limited to, Georgia-Pacific's efforts to maintain and
operate the Gypsum Board Assets as an active competitor, maintain the
management, sales, marketing and pricing of the Gypsum Board Assets
apart from Georgia-Pacific's gypsum business, maintain and increase
sales of gypsum board producted at the Buchanan and Wilmington Plants,
and maintain the Gypsum Board Assets in operable condition at current
or greater capacity configurations. Georgia-Pacific shall deliver to
plaintiff an affidavit describing any changes to the efforts and
actions outlined in Georgia-Pacific's earlier affidavit(s) filed
pursuant to this Section within fifteen (15) calendar days after the
change is implemented.
C. Defendant shall preserve all records of all efforts made to
preserve and divest the Divestiture Package.
VIII. Financing
With prior written consent of the plaintiff, defendant may finance
all or any part of any purchase made pursuant to Sections IV or V of
this Final Judgment.
IX. Preservation of Assets
Until the divestitures required by the Final Judgment have been
accomplished:
A. Defendant shall take all steps necessary to ensure that the
Gypsum Board Assets will be maintained and operated as an independent,
ongoing, economically viable and active competitor in the manufacture
and sale of gypsum board in the Northeast Region; and that, except as
necessary to comply with Section IX (B) of this Final Judgment, the
management of the Gypsum Board Assets will not be influenced by
Georgia-Pacific and the books, records, and competitively sensitive
sales, marketing and pricing information associated with the Gypsum
Board Assets will be kept separate and apart from Georgia-Pacific's
other gypsum board business.
B. Defendant shall use all reasonable efforts to maintain and
increase sales of gypsum board produced at its Buchanan and Wilmington
Plants, and defendant shall maintain at 1995 or previously approved
levels, whichever are higher, promotional, advertising, sales,
marketing and merchandising support for gypsum board sold from the
Buchanan and Wilmington Plants. Georgia-Pacific's sales and marketing
employees responsible for sales of gypsum board from the Buchanan and
Wilmington Plants shall not be transferred or reassigned to other
plants of defendant.
C. Defendant shall take all steps necessary to ensure that the
Gypsum Board Assets are fully maintained in operable condition at no
lower than their current rated capacity configurations, and shall
maintain and adhere to normal maintenance schedules for the Gypsum
Board Assets.
D. Defendant shall not, except as part of a divestiture approved by
plaintiff, remove, sell or transfer any of the Gypsum Board Assets,
including all intangible assets that relate to the licenses described
in Section IV (A) of this Final Judgment, other than gypsum board and
related products sold in the ordinary course of business.
E. Defendant shall take no action that would jeopardize the
divestiture of the Divestiture Package.
F. Defendant shall appoint a person or persons to oversee the
Gypsum Board Assets, and who will be responsible for defendant's
compliance with Section IX of this Final Judgment.
X. Compliance Inspection
Only for the purposes of determining or securing compliance with
the Final Judgment and subject to any legally recognized privilege,
from time to time:
A. Duly authorized representatives of the United States Department
of Justice, upon written request of the Attorney General or of the
Assistant Attorney General in charge of the Antitrust Division, and on
reasonable notice to defendant made to its principal offices, shall be
permitted:
(1) Access during office hours of defendant to inspect and copy all
books, ledgers, accounts, correspondence, memoranda, and other records
and documents in the possession or under the control of defendant, who
may have counsel present, relating to enforcement of this Final
Judgment; and
(2) Subject to the reasonable convenience of defendant and without
restraint or interference from it, to interview its officers,
employees, and agents, who may have counsel present, regarding any such
matters.
B. Upon the written request of the Attorney General or of the
Assistant Attorney General in charge of the
[[Page 17725]]
Antitrust Division, made to defendant's principal offices, defendant
shall submit such written reports, under oath if requested, with
respect to enforcement of this Final Judgment.
C. No information or documents obtained by the means provided in
Section X of this Final Judgment shall be divulged by a representative
of plaintiff to any person other than a duly authorized representative
of the Executive Branch of the United States, except in the course of
legal proceedings to which the United States is a party (including
grand jury proceedings), or for the purpose of securing compliance with
this Final Judgment, or as otherwise required by law.
D. If at the time information or documents are furnished by
defendant to plaintiff, defendant represents and identifies in writing
the material in any such information or documents to which a claim of
protection may be asserted under Rule 26(b)(7) of the Federal Rules of
Civil Procedure, and defendant marks each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(7) of the
Federal Rules of Civil Procedure,'' then ten (10) calendar days notice
shall be given by plaintiff to defendant prior to divulging such
material in any legal proceeding (other than a grand jury proceeding).
XI. Retention of Jurisdiction
Jurisdiction is retained by this Court for the purpose of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for such further orders and directions as may be necessary or
appropriate for the construction or carrying out of this Final
Judgment, for modification of any of the provisions hereof, for the
enforcement of compliance herewith, and for the punishment of any
violation hereof.
XII. Termination
Unless this Court grants an extension, this Final Judgment will
expire on the tenth anniversary of the date of its entry.
XIII. Public Interest
Entry of this Final Judgment is in the public interest.
Dated: ______________
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United States District Judge
Competitive Impact Statement
The United States, pursuant to Section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16 (b)-(h),
files this Competitive Impact Statement relating to the proposed Final
Judgment submitted for entry in this civil antitrust proceeding.
I.
Nature and Purpose of the Proceeding
On March 29, 1996, the United States filed a civil antitrust
Complaint,) which alleges that Georgia-Pacific Corporation's
(``Georgia-Pacific'') proposed acquisition of the gypsum business of
Domtar Inc. (``Domtar'') would violate Section 7 of the Clayton Act, 15
U.S.C. Sec. 18. The Complaint alleges that the combination of the third
and fourth largest gypsum board sellers in the Northeast Region would
lessen competition substantially in the production and sale of gypsum
board in the Northeast Region. As defined in the Complaint, the
Northeast Region encompasses Washington, D.C. and the states of Maine,
New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New
York, New Jersey, Pennsylvania, Delaware, Maryland, and Virginia. The
prayer for relief in the Complaint seeks: (1) a judgment that the
proposed acquisition would violate Section 7 of the Clayton Act; and
(2) a permanent injunction preventing Georgia-Pacific from acquiring
control of Domtar's gypsum business, or otherwise combining such
business with Georgia-Pacific's own business in the United States.
When the Complaint was filed, the United States also filed a
proposed settlement that would permit Georgia-Pacific to complete its
acquisition of Domtar's gypsum business, but require certain
divestitures that will preserve competition in the Northeast Region.
This settlement consists of a Stipulation and Order and a proposed
Final Judgment.
The proposed Final Judgment orders Georgia-Pacific to divest to one
or more purchases its Buchanan, New York and Wilmington, Delaware
gypsum board plants, and certain related tangible and intangible
assets. Georgia-Pacific must complete the divestiture of these plants
and related assets within one hundred and fifty (150) calendar days
after the date on which the proposed Final Judgment was filed (i.e.,
March 29, 1996), in accordance with the procedures specified therein.
The Stipulation and Order and proposed Final Judgment require
Georgia-Pacific to ensure that, until the divestitures mandated by the
proposed Final Judgment have been accomplished, the two gypsum board
plants and related assets to be divested will be maintained and
operated as an independent, ongoing, economically viable and active
competitor. Georgia-Pacific must preserve and maintain the gypsum board
plants to be divested as saleable and economically viable, ongoing
concerns, with competitively sensitive business information and
decision-making divorced from that of Georgia-Pacific's gypsum board
business. Thus, subject to Georgia-Pacific's obligation to preserve the
assets to be divested, the two plants will be operated independent of,
and in competition with, Georgia-Pacific, pending divestiture. Georgia-
Pacific will appoint a person or persons to monitor and ensure its
compliance with these requirements of the proposed Final Judgment.
The United States and Georgia-Pacific have stipulated that the
proposed Final Judgment may be entered after compliance with the APPA.
Entry of the proposed Final Judgment would terminate this action,
except that the Court would retain jurisdiction to construe, modify, or
enforce the provisions of the proposed Final Judgment and to punish
violations thereof.
II.
Description of the Events Giving Rise to the Alleged Violation
A. Georgia-Pacific, Domtar and the Proposed Transaction
Georgia-Pacific, based in Atlanta, Georgia, is a diversified
producer of building products and pulp and paper, with net sales of
over $12 billion for its 1994 fiscal year. Operating ten gypsum board
plants in the United States, Georgia-Pacific is the nation's third
largest gypsum products manufacturer, with an annual capacity to
produce approximately 3.1 billion square feet of gypsum board. In 1995,
Georgia-Pacific's United States gypsum board sales totaled about $251
million.
Domtar, Inc., a Canadian corporation headquartered in Montreal,
Canada, operates its gypsum business in the United States through its
wholly owned subsidiaries, Domtar gypsum, Inc., and Domtar Industries,
Inc., with offices in Ann Arbor, Michigan. The fourth largest producer
and seller of gypsum board in the United States, Domtar has the annual
capacity to produce about four billion square feet of gypsum board in
North America. In 1995, Domtar's United States gypsum board sales
totaled about $221 million.
On November 8, 1995, Georgia-Pacific agreed to acquire certain
stock and all the gypsum manufacturing operations of Domtar and its
subsidiaries in a cash transaction valued at $350 million. For $280
million, Georgia-Pacific will acquire Domtar's nine U.S. gypsum board
plants, one gypsum linerboard paper mill, and two plants producing
gypsum joint treatment. Georgia-Pacific
[[Page 17726]]
also proposes to acquire for $70 million Domtar's forty-nine percent
interest in a gypsum quarry in Mexico, four Canadian gypsum board
plants, one Canadian gypsum plaster plant, one Canadian gypsum joint
treatment plant and a Canadian gypsum products warehouse. This
transaction, which would take place in a concentrated oligopolistic
industry, precipitated the government's suit.
B. The Transaction's Effects in the Northeast Region
The Complaint alleges that the manufacture of gypsum board
constitutes a line of commerce, or relevant product market, for
antitrust purposes, and that the Northeast Region constitutes a section
of the country, or relevant geographic market. The Complaint alleges
the effect of Georgia-Pacific's acquisition may be to lessen
competition substantially in the manufacture and sale of gypsum board
in the Northeast Region.
Gypsum board consists of processed gypsum rock sandwiched between
sheets of liner board paper. Sometimes called drywall, wallboard or
sheetrock, gypsum board is used to construct and repair interior walls
and ceilings in residential and commercial buildings. No good economic
functional substitutes exist for gypsum board.
Gypsum board customers in the Northeast Region have been served
almost exclusively by gypsum board manufacturing plants located in the
Region. Gypsum board is a bulky, fragile and heavy product and is
cumbersome and expensive to ship long distances. It is generally sold
on a delivered price basis, and freight is an important cost component.
As a result, competition is regional, with producers selling the
majority of gypsum board to buyers within a 500 mile radius of the
producing plant. Domtar services the Northeast Region from its
Newington, New Hampshire and Camden, New Jersey gypsum board plants,
and Georgia-Pacific serves the Region from its Buchanan, New York and
Wilmington, Delaware plants.
The Complaint alleges that Georgia-Pacific's acquisition of Domtar
would increase the likelihood of coordinated pricing activity among
gypsum board in manufacturers serving the Northeast Region and will
increase the likelihood of anticompetitive price increases for
consumers there. The acquisition would increase concentration
significantly in the already highly concentrated, difficult-to-enter
Northeast Region. If the proposed acquisition were to proceed, Georgia-
pacific and the two largest producers in the Northeast Region, United
States Gypsum Co. and National Gypsum Co., each with approximately 30
percent of the market, would control collectively about 90 percent of
the gypsum board sales in the Northeast Region. Using the Herfindahl-
Hirschman Index (``HHI'') as a measure of market concentration (HHI is
defined and explained in Appendix A to the Complaint), the acquisition
increases the HHI by over 400 points to over a 2700 post-merger level
in the Northeast Region.
The structure of the gypsum board industry is fertile grounds for
anticompetitive coordination. For example, gypsum board is a
homogeneous product, and price is an important dimension of
competition. Capacity, production and pricing information is widely
available and price changes are normally announced well in advance of
implementation. In addition, at least once every generation this
century, civil or criminal actions have exposed successful price-fixing
agreements among the dominant gypsum board manufacturers. See United
States v. Gypsum Industries Association, et al., E25-215 (S.D.N.Y.
1922); United States v. United States Gypsum Co., 333 U.S. 364 (1948);
Wall Products Co. v. National Gypsum Co., 326 F. Supp. 295 (N.D. Cal.
1971); United States v. United States Gypsum Co., et al., 600 F.2d 414
(3rd Cir. 1979).
New entry in the Northeast Region is unlikely to restore the
competition lost through Georgia-Pacific's removal of Domtar from the
marketplace. De novo entry into gypsum board manufacturing requires a
significant capital investment and likely would take over two years
before the gypsum board plant comes on-line.
Furthermore, manufacturers with gypsum board plants outside the
Northeastern United States are unlikely to offer significant
competition in the Northeast Region. With their capacity largely
devoted to servicing the needs of customers concentrated around their
plants, which are far from the Northeast, manufacturers outside the
Northeast Region have neither the ability nor the incentive to ship
sufficient quantities of gypsum board to defeat a small but significant
nontransitory price increase in the Northeast Region. Collectively, the
outside manufacturers represent less than six percent of the footage of
gypsum board sold in the Northeast Region in 1995. Historically,
whether in times of strong or weak demand, manufacturers located
outside the Northeast have not had anything more than a small share of
the sales in there.
D. Harm to Competition as a Consequence of the Acquisition
The Complaint alleges that the transaction would have the following
effects, among others: competition generally in the Northeast Region
will be lessened substantially; actual and potential competition
between Georgia-Pacific and Domtar in the Northeast Region will be
eliminated; and prices for gypsum board in the Northeast Region are
likely to increase above competitive levels.
III
Explanation of the Proposed Final Judgment
The proposed Final Judgment would preserve competition in the
production and sale of gypsum board in the Northeast Region by placing
in independent hands the two gypsum board plants used by Georgia-
Pacific to serve the Northeast Region prior to this acquisition. Within
one hundred and fifty (150) calendar days after filing the proposed
Final Judgment, Georgia-Pacific must divest its Wilmington, Delaware
and Buchanan, New York gypsum board plants and related assets. Georgia-
Pacific shall enter into a supply contract for gypsum rock and/or
gypsum liner board paper which at the option of the purchaser(s) may be
up to 10 years and sufficient to meet all or part of the Buchanan and
Wilmington plants' requirements at terms reasonably related to market
conditions. The plants and related assets will be sold to one or more
purchasers who demonstrate to the sole satisfaction of the United
States that they will be an economically viable and effective
competitor, capable of maintaining or surpassing Georgia-Pacific's pre-
acquisition market performance in the sale of gypsum board in the
Northeast Region.
Until the ordered divestitures take place, Georgia-Pacific must
take all reasonable steps necessary to accomplish the divestitures, and
cooperate with any prospective purchaser. If Georgia-Pacific does not
accomplish the ordered divestitures within the specific one hundred and
fifty (150) calendar days, which may be extended by up to sixty (60)
calendar days by the United States, the proposed Final Judgment
provides for procedures by which the Court shall appoint a trustee to
complete the divestitures. Georgia-Pacific must cooperate fully with
the trustee.
If a trustee is appointed, the proposed Final Judgment provides
that Georgia-Pacific will pay all costs and expenses of the trustee.
The trustee's compensation will be structured so as to
[[Page 17727]]
provide an incentive for the trustee to obtain the highest price for
the assets to be divested, and to accomplish the divestiture as quickly
as possible. After the effective date of his or her appointment, the
trustee shall serve under such other conditions as the Court may
prescribe. After his or her appointment becomes effective, the trustee
will file monthly reports with the parties and the Court, setting forth
the trustee's efforts to accomplish the divestiture. At the end of six
(6) months, if the divestiture has not been accomplished, the trustee
shall file promptly with the Court a report which sets forth the
trustee's efforts to accomplish the divestiture, explains why the
divestiture has not been accomplished, and makes any recommendations.
The trustee's report will be furnished to the parties and shall be
filed in the public docket, except to the extent the report contains
information the trustee deems confidential. The parties each will have
the right to make additional recommendations to the Court. The Court
shall enter such orders as it deems appropriate to carry out the
purpose of the trust.
IV
Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act (15 U.S.C. Sec. 15) provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorney's fees. Entry of the proposed Final Judgment neither will
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act (15 U.S.C.
Sec. 16(a)), the proposed Final Judgment has no prima facie effect in
any subsequent private lawsuit that may be brought against Georgia-
Pacific or Domtar.
V
Procedures Available for Modification of the Proposed Final Judgment
The United States and Georgia-Pacific have stipulated that the
proposed Final Judgment may be entered by the Court after compliance
with the provisions of the APPA, provided that the United States has
not withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person should comment within sixty (60)
days of the date of publication of this Competitive Impact Statement in
the Federal Register. The United States will evaluate and respond to
the comments. All comments will be given due consideration by the
Department of Justice, which remains free to withdraw its consent to
the proposed Final Judgment at any time prior to entry. The comments
and the response of the United States will be filed with the Court and
published in the Federal Register.
Written comments should be submitted to: J. Robert Kramer, Chief,
Litigation II Section, Antitrust Division, United States Department of
Justice, 1401 H Street, N.W., Suite 3000, Washington, D.C. 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI
Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits of its Complaint against
Georgia-Pacific. The United States is satisfied, however, that the
divestiture of the assets and other relief contained in the production
and sale of gypsum board that otherwise would be affected adversely by
the acquisition. Thus, the proposed Final Judgment would achieve the
relief the government would have obtained through litigation, but
avoids the time, expense and uncertainty of a full trial on the merits
of the government's Complaint.
VII
Standard of Review Under the APPA for proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty (60) day
comment period, after which the court shall determine whether entry of
the proposed Final Judgment ``is in the public interest.'' In making
that determination, the court may consider--
(1) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) the impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. Sec. 16(e) (emphasis added). As the Court of Appeals for the
District of Columbia Circuit recently held, the APPA permits a court to
consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the government's
complaint, whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the decree may
positively harm third parties. See United States v. Microsoft, 1995-1
Trade Cas. (CCH) para. 71,027, at 74,822 (D.C. Cir. 1995).
In conducting this inquiry, ``the Court is nowhere compelled to go
to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly settlement
through the consent decree process.'' 119 Cong. Rec. 24598 (1973).
Rather,
absent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade cas. (CCH)
para. 61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083
(1981); see also Microsoft, 1995-1 Trade Cas. at 74,829-74,833.
Precedent requires that:
the balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
[[Page 17728]]
United States v. Bechtel, 648 F.2d at 666 (citation omitted) (emphasis
added).
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' ''
(citations omitted). United States v. American Tel. and Tel. Co., 552
F. Supp. 131, 150 (D.D.C. 1982), aff'd sub nom., Maryland v. United
States, 460 U.S. 1001 (1983).
VIII
Determinative Documents
There are no determinative materials or documents within the
meaning of the APA that were considered by the United States in
formulating the proposed Final Judgment.
Respectfully submitted,
Executed on: April ____, 1996.
----------------------------------------------------------------------
John Schmoll,
Attorney, State of Wisconsin #1013897 Dept. of Justice, Antitrust
Division, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530,
(202) 307-5780.
----------------------------------------------------------------------
Gregory M. Sleet,
United States Attorney,
By:
Richard G. Andrews,
Esquire, State of Delaware #2199, 1201 Market Street, Suite 1100,
Wilmington, Delaware 19899, (302) 573-6277.
[FR Doc. 96-9767 Filed 4-19-96; 8:45 am]
BILLING CODE 4410-01-M