[Federal Register Volume 62, Number 173 (Monday, September 8, 1997)]
[Notices]
[Pages 47209-47211]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23680]
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FEDERAL TRADE COMMISSION
[File No. 961-0106]
Insilco Corporation; 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--embodies in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before November 7, 1997.
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: Casey R. Triggs, Federal Trade
Commission, S-2308, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
(202) 326-2682. Nicholas R. Koberstein, Federal Trade Commission, S-
2308, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580. (202) 326-
2743.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, 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 accompanying complaint. An electronic copy of the
full text of the consent agreement package can be obtained from the
Commission Actions section of the FTC Home Page (for August 27, 1997),
on the World Wide Web, at ``http://www.ftc.gov/actions/htm.'' A paper
copy can be obtained from the FTC Public Reference Room, Room H-130,
Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C. 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 of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (the ``Commission'') has accepted for
public comment an agreement containing a proposed Consent Order from
Insilco Corporation (``Insilco''). The proposed Consent Order contains
a number of provisions designed to remedy the anticompetitive effects
that have resulted, and that are likely to continue to occur, because
of Insilco's acquisition of the assets of Helima-Helvetion, Inc.
(``Helima'') from Helima's German parent company, Helmut Lingemann &
Co. GmbH (``Lingemann'').
The Transaction
Pursuant to a purchase agreement dated July 10, 1996, Insilco
acquired from Lingemann the assets of Helima, a New York corporation
with its only plant in Duncan, South Carolina, and the stock of ARUP
Alu-Rohr und Profil GmbH, Lingemann's German subsidiary engaged in the
production and supply of welded-seam aluminum tubes.
The Complaint
The proposed complaint alleges that the consummated acquisition of
Helima violates Section 7 of the Clayton Act, as amended, 15 U.S.C.
Sec. 18, and Section 5 of the Federal Trade Commission Act, as amended,
15 U.S.C. Sec. 45, in two relevant markets: (1) the market for welded-
seam aluminum tubes with diameters of 50 millimeters or greater; and
(2) the market for welded-seam aluminum tubes with diameters less than
50 millimeters. Welded-seam aluminum tubes with diameters of 50
millimeters of greater are generally used in charged air coolers
(``CAC'') installed on heavy-weight trucks,\1\ whereas welded-seam
aluminum tubes with diameters less than 50 millimeters are generally
used in radiators. In both CAC and radiators, the welded-seam aluminum
tubes act as the heat exchange component, which is a device that
transfers heat from one fluid or gas to another medium, generally air.
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\1\ Heavy-weight truck is the designation given to a truck over
19,000 lbs. The Department of Transportation categorizes such trucks
as either Class 6, 7, or 8 vehicles.
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The complaint alleges that Insilco's acquisition of Helima gave it
a virtual monopoly or near-monopoly in these two types of welded-seam
aluminum tubes. This acquisition thereby increased the likelihood that
consumers would be forced to pay higher prices for welded-seam aluminum
CAC and radiator tubes.
A. The Welded-Seam Aluminum CAC Tube Market
In the market for welded-seam aluminum CAC tubes, Insilco's post-
acquisition market share is 100%. Currently, there is no foreign
supplier of
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welded-seam aluminum CAC tubes shipping product into North America, and
it is unlikely that there will be such a supplier in the next two
years, or at any time in the foreseeable future. Because the cost of
entering and producing welded-seam aluminum CAC tubes is relatively
high compared to the limited potential sales revenues available to an
entrant, entry into this market is not likely to be profitable, and is
therefore not likely to occur in a timely manner to counteract the
additional anticompetitive effects likely to result from the Helima
acquisition. Indeed, there has been no entry into the market for
welded-seam aluminum CAC tubes since the acquisition of Helima nearly a
year ago, nor has the threat of entry deterred any of the actual
anticompetitive effects resulting from the acquisition.
B. The Welded-Seam Aluminum Radiator Tube Market
In the merchant market for welded-seam aluminum radiator tubes,
Insilco's post-acquisition market share increased to about 90%.
Although there is one foreign supplier of welded-seam aluminum radiator
tubes shipping product into North America, that supplier has limited
sales. It is highly unlikely that this supplier's market share will
significantly expand within the next two years because of import
duties, shipping costs and time, and customer concerns about the
accessibility of the supplier.
Entry sufficient to avert the anticompetitive effects of this
acquisition is unlikely. Indeed, there has been no entry into the
market for welded-seam aluminum radiator tubes since the time of the
Helima acquisition, and the threat of entry has not deterred
anticompetitive effects resulting from the Helima acquisition.
C. The Pre-Consummation Transfer of Competitively-Sensitive Information
The proposed complaint also alleges that Lingemann, at Insilco's
request, gave Insilco comprehensive competitively-sensitive information
before consummation of the acquisitions. In particular, Helima gave
Insilco customer-specific price information, current and future pricing
plans, competition strategies, price formulas, and price strategies.
This information transfer was particularly harmful because Insilco and
Helima competed against each other in two highly concentrated markets
(duopolies) and the information concerned products that are relatively
fungible. This transfer had the potential to harm competition in the
interim pre-consummation period and in the event the acquisitions were
delayed, modified, or abandoned, may have led to even greater and more
long-lasting harm. The complaint thus alleges that the transfer of such
competitively-sensitive information in such highly concentrated markets
violates Section 5.
The Consent Order
The proposed Consent Order requires Insilco to divest two welded-
seam aluminum tube mills (out of the assets acquired from Lingemann)
within four months of the date on which the proposed Consent Order
becomes final. The proposed Consent Order also prohibits Insilco from
engaging in the pre-consummation transfer of competitively-sensitive
information.
A. Divestiture Provisions
Under the proposed Consent Order, Insilco is required to divest two
welded-seam aluminum tube mills from the former Helima Duncan, South
Carolina facility. One of the mills to be divested must be capable of
producing welded-seam aluminum CAC tubes, and one must be capable of
producing radiator tubes. In addition, the package of assets to be
divested includes one set of tooling that is capable of being used on
both mills, as well as additional ancillary assets such as machinery,
fixtures, equipment, and software used in the maintenance and operation
of the assets to be divested. Further, Insilco must provide the
acquirer access to Insilco employees with knowledge of the Helima mills
for the purposes of training, and must sell to the acquirer sole-source
spare and replacement parts. Pursuant to a customer's request, Insilco
would be required to divest to the acquirer the tooling used to make
that customer's tubes. If Insilco fails to divest the package of assets
within four months after the date on which the proposed Consent Order
becomes final, the Commission may appoint a trustee to divest all five
of the mills located at the former Helima plant in Duncan, South
Carolina.
To help ensure that the acquirer has access to customers, the
proposed Consent Order includes a provision prohibiting Insilco's
enforcement of any supply contracts that were entered into after the
acquisition and that are operative for a period grater than one year.
Further, the proposed Consent Order requires Commission approval of the
acquirer, and requires a potential acquirer to submit a five year
business plan showing how it will use the divested assets, how it will
compete in the markets, and that the divested assets will remain and be
competitive in North America. The purpose of the divestiture is to
ensure the reinstitution of a viable, ongoing competitor to Insilco in
the markets for welded-seam aluminum CAC tubes and welded-seam aluminum
radiator tubes.
The proposed Consent Order also requires Insilco to provide the
Commission a report of compliance with the divestiture provisions of
the Consent Order within 30 days following the date the proposed
Consent Order becomes final, and every 30 days thereafter until Insilco
has completed the required divestiture.
Finally, Insilco will be required to provide prior notification to
the Commission for certain acquisitions involving tube mills or tube
producers.
B. Bar on Information Transfer
The proposed Consent Order prohibits Insilco from obtaining, or
providing, prior to the consummation of an acquisition or sale of an
interest in any of its businesses, customer-specific price and cost
information, current or future pricing plans, current or future
strategies or policies relating to competition, and analyses or
formulas used to determine costs or prices. The proposed Consent Order
thus prohibits the exchange of specific types of information that would
likely harm competition in any market. The proposed Consent Order does,
however, acknowledge that a situation might arise wherein Insilco, or a
future acquisition partner, may benefit from having access to
competitively-sensitive information in order to assess a proposed
acquisition. In such a case, the party possessing such information
would be allowed under the proposed Consent Order to transfer the
information to an independent agent who will mask the customer-specific
and/or competitor-specific nature of the information before providing
it to its acquisition partner. Transferring this type of information
through an independent agent permits the benefits of the information
transfer while avoiding the potential for injury to competition.
Public Comment
The proposed Consent Order has been placed on the record for 60
days for reception of comments by interested persons. Comments received
during this period will become part of the public record. After 60
days, the Commission will again review the agreement and the comments
received, and will decide whether to withdraw from the agreement or
make final the agreement's proposed Order.
The purpose of this analysis is to facilitate the public comment on
the proposed Consent Order, and it is not
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intended to constitute an official interpretation of the agreement and
proposed Consent Order or to modify in any way its terms.
Donald S. Clark,
Secretary.
[FR Doc. 97-23680 Filed 9-5-97; 8:45 am]
BILLING CODE 6750-01-M