[Federal Register Volume 62, Number 235 (Monday, December 8, 1997)]
[Notices]
[Pages 64590-64591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32033]


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FEDERAL TRADE COMMISSION

[File No. 971-0105]


The Dow Chemical Company; 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--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before February 6, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. & Pennsylvania Ave., N.W., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
William Baer, Federal Trade Commission, 6th & Pennsylvania Ave., N.W., 
H-374, Washington, DC 20580. (202) 326-2932, or Howard Morse, Federal 
Trade Commission, 6th & Pennsylvania Ave., N.W., S-3627, Washington, DC 
20580. (202) 326-2949.

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 November 28, 
1997), on the World Wide Web, at ``http://www.ftc.gov/os/
actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, DC 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 (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order 
(``Agreement'') from The Dow Chemical Company.
    The proposed Order has been placed on the public record for sixty 
(60) days for reception of comments by interested persons. Comments 
received during this period will become part of the public record. 
After sixty (60) days, the Commission will again review the Agreement 
and the comments received and will decide whether it should withdraw 
from the Agreement or make final the Agreement's proposed Order.
    The Dow Chemical Company, a Midland, Michigan based company and 
producer of chemicals, plastics, and agricultural and consumer 
products, announced on August 5, 1997, a cash tender offer to acquire 
all of the share of Sentrachem Limited, a South African chemical 
company that operates in the U.S. through its wholly-owned subsidiary, 
Hampshire Chemical Company, Hampshire and Dow, through its Chemical 
Division, produce aminopolycarboxylic chelating agents, also known as 
chelants. Hampshire produces chelants in Nashua, New Hampshire and Deer 
Park, Texas, and chelant intermediates in Lima, Ohio. Dow produces 
chelants in Freeport, Texas.
    The proposed administrative complaint alleges that the proposed 
acquisition may substantially lessen competition in the research, 
development, manufacture, and sale of chelants, which are chemicals 
used in cleaners, pulp and paper, water treatment, photography, 
agriculture, and food and pharmaceutical applications to neutralize and 
inactivate metal ions. The proposed complaint alleges that the United 
States is the relevant geographic market for evaluating the 
acquisition's effect on chelants because the shipping costs of 
chelants, which are sold mostly in a liquid solution, are high and 
there are too many uncertainties and delays inherent in long distance 
shipping.
    The proposed complaint alleges that Hampshire and Dow are the two 
leading

[[Page 64591]]

of only three producers of chelants in the United States, with a 
combined market share of over 70 percent. With only one competitor, the 
acquisition would likely lead to an unilateral price increase, 1992 
Horizontal Merger Guidelines Sec. 2.22.
    Entry into the chelant market would not be timely, likely, or 
sufficient to deter or offset the adverse effects of the acquisition on 
competition because a new entrant would have to build both a chelant 
production plant and a plant to produce hydrogen cyanide (``HCN''), a 
key input in the production of chelants, which would take over two 
years and entail large fixed, and mostly sunk, costs. In order to 
recoup its investment, a new entrant would need to obtain a market 
share at least as large as that held by any of the current domestic 
producers, which would be difficult because of the significant amount 
of chelant sales that are subject to long term supply agreements.
    The proposed Order would remedy the alleged violation by preserving 
the competition that would otherwise be lost as a result of Dow's 
acquisition. The proposed Order requires Dow, simultaneously with its 
acquisition of Sentrachem, to divest Hampshire's Chelant Business to 
Akzo Nobel N.V., a Dutch chemical company that is a leading European 
producer of chelants with strong chelant technology. Dow must divest, 
among other things, all rights of Hampshire relating to the research, 
development and manufacture of chelants in the United States and the 
distribution and sale of chelants in North America, including 
Hampshire's Lima, Ohio facility and its contract for the supply of HCN 
at Lima. Once it acquires the Hampshire Chelant Business, Akzo will 
build additional chelant capacity at the Lima, Ohio facility, which 
will curtail the need for inefficient, hazardous HCN shipments from the 
site.
    The proposed Order sets certain Milestones that must be met to 
accomplish the construction of the additional chelant capacity at Lima. 
The Milestones include the submission of complete permits for the 
additional capacity within one year after the Order becomes final, and 
the installation of the structural steel within one year after the 
additional capacity is permitted. In the event any of the Milestones 
has not been achieved, Dow must reacquire the Hampshire Chelant 
Business from Akzo. The proposed Order further requires that upon its 
reacquisition of the business, Dow or a trustee will divest the 
Hampshire Business Unit, which, in addition to the Hampshire Chelant 
Business, includes other Hampshire businesses and Hampshire facilities 
at Nashua, New Hampshire and Deer Park, Texas. The proposed Order 
requires Dow to maintain the viability and marketability of the 
Hampshire Business Unit in the interim. This crown jewel provision 
provides an incentive for realizing the additional chelant capacity at 
the Lima, Ohio facility in a timely manner. The crown jewel also 
ensures that the Order will result in effective relief by requiring a 
divestiture of all of Hampshire in the event that any Milestone is not 
achieved.
    The proposed Order requires Dow to toll manufacture chelants for 
Akzo from Hampshire's Nashua and Deer Park facilities while Akzo builds 
additional chelant capacity at Lima. The proposed Order also contains a 
firewall provision that requires Dow to maintain the confidentiality of 
the Hampshire Chelant Business form Dow's Competing Chelant Business.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order. This analysis is not intended to constitute an official 
interpretation of the Agreement or the proposed Order or in any way to 
modify the terms of the Agreement of the proposed Order.
Donald S. Clark,
Secretary.
[FR Doc. 97-32033 Filed 12-5-97; 8:45 am]
BILLING CODE 6750-01-M