[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