[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