[Federal Register Volume 61, Number 239 (Wednesday, December 11, 1996)]
[Notices]
[Pages 65236-65237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31468]
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DEPARTMENT OF JUSTICE
Antitrust Division; U.S. v. Oldcastle Northeast, Inc. et al.;
Public Comments and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16 (c)-(h), the United States publishes below the comment received on
the proposed final judgment in United States, et al. v. Oldcastle
Northeast, Inc., et al., Civil Action No. 396CV01749 AWT, filed in the
United States District Court for the District of Connecticut, together
with the United States' response to that comment.
Copies of the comment and response to the comment are available for
inspection and copying in Room 215 of the U.S. Department of Justice,
Antitrust Division, 325 7th Street, N.W., Washington, DC 20530
(telephone: (202) 514-2481), and at the Office of the Clerk of the
United States District Court for the District of Connecticut. Copies of
these materials may be obtained upon request and payment of a copying
fee.
Constance K. Robinson,
Director of Operations.
December 2, 1996
James A. Dunbar, Esquire
Venable, Baetjer and Howard
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
Re: United States, et al. v. Oldcastle Northeast, Inc., et al.,
Civil Action No.: 396CV01749 AWT (District of Connecticut, September
3, 1996)
Dear Mr. Dunbar: This letter responds to your letter of November
1, 1996 commenting on the proposed Final Judgment in the above-
referenced civil antitrust case challenging the acquisition by CRH
plc (CRH) through Oldcastle Northeast, Inc. (Oldcastle) of Tilcon,
Inc. (Tilcon) from BTR plc (BTR). The Complaint alleges that the
acquisition violated Section 7 of the Clayton Act, as amended, 15
U.S.C. Sec. 18, because it is likely substantially to lessen
competition in the manufacture and sale of asphalt concrete in the
greater Hartford, Connecticut area. Under the proposed Final
Judgment, the defendants are required to divest Tilcon's East
Granby, Connecticut quarry; two, three-ton, hot-mix plants located
at the East Granby Quarry; and all intangible assets located at the
quarry to assure that competition is not substantially lessened in
the greater Hartford area.
In your letter, you expressed concern that the proposed Final
Judgment does not address competitive concerns in additional
geographic areas (Vermont and the southwestern and central parts of
New Hampshire). The analytical process used by the Antitrust
Division to determine which areas the acquisition might raise
substantial competitive concerns required us to assess a number of
factors including market concentration, potential adverse
competitive effects, and entry. These factors must be evaluated in
an economically meaningful product and geographic market. This
analysis is aimed at allowing the Division to answer the ultimate
inquiry: whether the acquisition is likely to create or enhance
market power or facilitate the exercise of market power in a
relevant market. After a thorough investigation which included the
geographic areas mentioned in your letter, the Division concluded
that the asphalt concrete market in the greater Hartford area was
the relevant market where Oldcastle's acquisition of Tilcon might
create or enhance market power. It was determined that in Vermont
and central New Hampshire, the same number of competitors would be
present after the acquisition as were present before the
acquisition. In southwestern New Hampshire, a sufficient number of
competitors were found to be active in the region. The Division
concluded that in these three areas, the acquisition did not raise
significant competitive concerns.
Your letter also raises concerns about the transfer to Pike
Industries (a subsidiary of Oldcastle) of Tilcon's right of first
refusal to purchase the assets of your client, Frank W. Whitcomb
Construction Corporation (Whitcomb). Until Oldcastle elects to
exercise this option, Whitcomb will remain a competitor to Pike
Industries in Vermont and New Hampshire. If Oldcastle elects to
exercise the option, the Division has the ability to investigate the
competitive impact of the potential acquisition at that time.
In carefully reviewing the concerns made in your letter about
asphalt concrete competition in New Hampshire and Vermont, it is
clear that your concerns are outside the scope of the Complaint
filed by the Division. When evaluating a complaint and proposed
final judgment under the Antitrust Procedures and Penalties Act,
unless a strong showing of bad faith or improper behavior can be
made, a court will not reach beyond the complaint to evaluate claims
that the Division did not make and to inquire why they were not made
(See, United States v. Microsoft Corp., 56 F.3d 1448, 1459-60 (D.C.
Cir 1995)). A court's authority to review a decree depends on how
the Division exercises its prosecutorial discretion. In this
instance, the Court's review is linked to whether the proposed Final
Judgment assures that competition will not be substantially lessened
as alleged in the Complaint brought by the Division.
The Division appreciates you bringing your concerns to our
attention and hopes that this information will alleviate them. While
the Division understands your position, we believe that the proposed
Final Judgment will adequately alleviate the competitive concerns
created by CRH's acquisition of Tilcon from BTR. Pursuant to the
Antitrust Procedures and Penalties Act, a copy of your letter and
this response will be published in the Federal Register and filed
with the Court.
Thank you for your interest in the enforcement of the antitrust
laws.
Sincerely yours,
Frederick H. Parmenter,
Senior Trial Attorney.
November 1, 1996
VIA HAND-DELIVERY
J. Robert Kramer, Esquire
Chief, Litigation II Section
Antitrust Division
United States Department of Justice
1401 H Street, N.W.--Suite 3000
Washington, D.C. 20530
Re. United States of America, et al. v. Oldcastle Northeast, Inc.,
et al., Civil Action No. 396 CV 01749 AWT, In the United States
District Court for the District of Connecticut
Dear Mr. Kramer: This letter will serve as the comments of my
client, The Frank W. Whitcomb Construction Corporation
(``Whitcomb''), on the proposed final judgment in the above-
referenced matter. These comments concern an issue that has already
been raised with the Department of Justice, but has not been acted
upon.
We believe that the facts and circumstances set forth in this
letter demonstrate that the acquisition of Tilcon, Inc. by Oldcastle
Northeast, Inc. (``Oldcastle'') presents a substantial threat to
competition in the aggregate and asphalt paving business in Vermont
and the southwestern and central parts of New Hampshire, by
elimination of a potential
[[Page 65237]]
competitor and the possible elimination of substantially all
competition in those areas.
Whitcomb is in the aggregate and asphalt paving business,
primarily in the states of New Hampshire and Vermont. Pike
Industries is Whitcomb's primary competitor. Whitcomb and Pike are
the only competitors in Vermont with the exception of occasional
minimal competition in the southeast and northeast corners of the
State. Pike is a subsidiary of Oldcastle Northeast, Inc., and an
indirect subsidiary of CRH, Inc., defendants in the above-referenced
matter.
Tilcon is a large regional aggregate and paving company that,
Whitcomb believes, works primarily in New York, parts of New
England, and the Middle Atlantic States. At present, it is not a
direct competitor in most of Whitcomb's market area as described
above, but it is a potential competitor.
Since 1993, Whitcomb has been considering the sale of portions
or all of its business. In 1993, Whitcomb sold an asphalt plant
located in Keene, New Hampshire (which is in the southwestern part
of the State) to a subsidiary of Tilcon. As a part of that sale
Tilcon also purchased a Right of First Refusal to purchase other
plants and real estate owned by Whitcomb. (A copy of the portion of
the sale contract relating to the Right of First Refusal is attached
hereto.) We understand that as part of the purchase of Tilcon by
Oldcastle, this Right of First Refusal has been assigned to
Oldcastle.
The proposed acquisition of Tilcon by Oldcastle threatens
competition in the aggregate and asphalt paving business in Vermont
and south-central New Hampshire in two ways. First, it eliminates
Tilcon as a potential competitor. Before the acquisition, the market
consisted of two significant actual competitors, Pike and Whitcomb,
and at least one potential competitor, Tilcon. After the
acquisition, Tilcon will no longer offer potential competition.
Second, with the assignment of the Right of First Refusal to
Oldcastle, the proposed acquisition threatens to eliminate
competition in the Whitcomb market area almost completely. Whitcomb
would like to sell all or part of its business to an entity that can
provide viable competition in the market area. The existence of the
Right of First Refusal in the hands of its principal competitor
makes it difficult to find such a purchaser. Knowledge on the part
of a potential purchaser that a competitor could prevent any
purchase of Whitcomb or its assets will discourage most entities
from attempting to buy Whitcomb or any part of it. If Oldcastle is
permitted to exercise the Right of First Refusal, then competition
in Vermont will be almost completely eliminated and competition in
south-central New Hampshire will be significantly impaired.
As is set forth in the compliant and the competitive impact
statement in this case, there are high entry barriers into the
manufacture and sale of asphalt concrete. The paving business
itself, with the extensive use of expensive heavy equipment, is also
capital intensive.
There are no real substitutes for asphalt concrete products, and
manufacturers and buyers of asphalt concrete recognize asphalt as
the distinct product. Transportation costs and delivery time make it
difficult for entities outside of a geographic market--in this case
the Whitcomb market area of Vermont and south-central New
Hampshire--to compete with competitors located in the market.
In this case, the United States decided to sue Tilcon and CRH/
Oldcastle because the acquisition would reduce the number of
competitors operating hot mix plants in the greater Hartford area
from 3 to 2 and reduce the number of competitors supplying asphalt
concrete construction projects in that area from 2 to 1. The
proposed acquisition has a comparable competitive effect in the
Whitcomb market area. It reduces by 1 the number of potential
competitors, by eliminating Tilcon; and it threatens to reduce the
number of competitors supplying asphalt concrete construction
projects in the market area from 2 to 1, in the event that Oldcastle
is able to exercise the Right of First Refusal to purchase all or a
substantial part of Whitcomb. In such an event, Oldcastle would
control the price of asphalt concrete in the State of Vermont.
The potential harm stemming from the acquisition is particularly
substantial in this case because the main purchasers of asphalt
concrete for paving projects are tax-supported government entities
such as the State of Vermont.
Under the circumstances, we request that the Justice Department
withdraw its consent to the proposed acquisition unless and until
there is an agreement by both Tilcon and the acquiring companies
that the Right of First Refusal is null and void, and that they will
not exercise or attempt to exercise it. In the alternative, if the
government declines to take any action relating to the Right of
First Refusal, then the Court should modify the Consent Decree to
add such a provision.
Thank you for your attention to this matter. Please do not
hesitate to call me if you should have any questions.
Very truly yours,
James A. Dunbar
Attachment
16. Right of First Refusal. (a) As an additional inducement to
enter into this Agreement, Seller agrees that Seller shall not,
directly or indirectly, sell or transfer (whether by sale of stock,
acquisitive merger, business combination or otherwise), or offer to
sell, transfer or lease (other than a lease for a term of not more
than three years) (any such sale, lease, transfer or offer therefor
herein as ``Transfer'') any of its business real estate, now owned
or hereafter acquired (except the real estate identified on Schedule
16.1), to any other person without first offering to Transfer such
assets to the Buyer. If the Buyer and Seller are unable to agree on
the price and the terms of any Transfer after full disclosure of
information and negotiating in good faith for a period of sixty (60)
days, then Seller shall be free to solicit offers on such property
to or from any third parties, but only at a price and on terms no
more favorable to the purchaser than the price and terms offered to
the Buyer. In the event that the Seller receives a bona fide offer
to purchase or lease any such property, directly or indirectly,
Seller shall provide Buyer with notice of its intent to Transfer.
Buyer shall have thirty (30) days to decide internally whether it
wishes to purchase or lease the property at such price and on such
terms, and, if so, Buyer shall have another thirty (30) days to
obtain the approval of its parent corporation(s). Seller agrees to
provide Buyer with notice of the acquisition of any after-acquired
real estate used in connection with its aggregate and hot mix
business, and Seller agrees to execute any such instruments for
recordation on the appropriate land records as Buyer shall
reasonably request. For purposes of this Section 16, the term
``Seller'' shall include not only the Frank W. Whitcomb Construction
Corp. (``FWWCC''), but also any other company, corporation, trust,
partnership, association or entity of any form in which either
FWWCC, Claire R. Whitcomb, Frank L. Whitcomb or the Frank W.
Whitcomb Trust shall have an interest whether direct or indirect.
(b) Frank L. Whitcomb and the Frank W. Whitcomb Trust, (the
``shareholders'') agree not to sell or transfer more than one-third
of the outstanding shares of stock of Seller to any other person
without in each and every case first offering to sell any such
business assets or shares of stock at the same price and on the same
terms as offered to any such person. As to any proposed sale
exceeding one-third of the share, Buyer shall have sixty (60) days
in which to exercise the right of first refusal granted hereunder.
The sixty (60) day period shall commence after written notice to
Buyer and the delivery of all information reasonably necessary to
enable Buyer to make a decision. Notwithstanding the foregoing, the
shareholders shall be free to transfer shares to any family member
or any trust or other entity established for the benefit of any
family member provided that the transferee agrees to be bound by the
same terms and conditions hereof.
(c) Seller agrees that it shall not issue any shares of stock,
or warrants, options or other rights to acquire shares of stock, to
any persons other than Frank L. Whitcomb or the Frank W. Whitcomb
Trust if the issuance of such shares of stock would result in the
aggregate ownership of the Frank L. Whitcomb or the Frank W.
Whitcomb Trust (or any transferees permitted under paragraph (b)
above) to be less than two-thirds of the total stock issued and
outstanding, computed on a fully diluted basis.
[FR Doc. 96-31468 Filed 12-10-96; 8:45 am]
BILLING CODE 4410-11-M