[Federal Register Volume 63, Number 64 (Friday, April 3, 1998)]
[Notices]
[Pages 16552-16553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-8764]



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FEDERAL TRADE COMMISSION

[File No. 971-0118]


Degussa Aktiengesellschaft, et al.; 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 June 2, 1998.

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:
Joseph Krauss, FTC/H-386, Washington, D.C. 20580. (202) 326-2713.

SUPPLEMENTARY INFORMATION: Pursuant to Section 69(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 complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 30, 1998), 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 To Aid Public Comment on the Provisionally Accepted 
Consent Order

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order from Degussa 
Aktiengesellschaft and Degussa Corporation (collectively ``Degussa''). 
The proposed Order is designed to remedy anticompetitive effects 
stemming from a proposed transaction between Degussa and E.I. du Pont 
de Nemours & Co. (``DuPont''). On July 30, 1997, representatives of 
Degussa and DuPont signed a Letter of Intent setting out the elements 
of a proposed transaction whereby Degussa would require, inter alia, 
the assets of DuPont's worldwide hydrogen peroxide business, including 
its North American production facilities in Memphis, Tennessee; 
Maitland, Ontario; and Gibbons, Alberta, in exchange for $325 million. 
The parties have since proposed a modified transaction, whereby Degussa 
will acquire only DuPont's production facility in Gibbons, Alberta, and 
DuPont will retain its facilities in Memphis, Tennessee, and Maitland, 
Ontario.
    The Agreement Containing Consent Order, if finally accepted by the 
Commission, would settle charges that the acquisition, as originally 
proposed, may have substantially lessened competition in the North 
American hydrogen peroxide market. The Commission has reason to believe 
that Degussa's original proposal to acquire DuPont's hydrogen perxide 
business, if consummated, would have violated Section 7 of the Clayton 
Act and Section 5 of the Federal Trade Commission Act. The proposed 
complaint, described below, relates the basis for this belief.
    The proposed Order has been placed on the public record for sixty 
(60) days for reception of comments from interested persons. 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 Proposed Complaint

    According to the Commission's proposed complaint, Degussa 
Aktiengesellschaft is a German corporation with worldwide sales 
exceeding $8.7 billion in 1997, which is engaged in, inter alia, the 
development and manufacture of chemicals, pharmaceutical specialties, 
and precious metals. Degussa Corporation, a wholly-owned subsidiary of 
Degussa A.G., manufactures and distributes widely diverse products in 
the markets for chemicals, pigments, metals, and dental materials in 
the United States, Canada, and Mexico. Among these products is hydrogen 
peroxide. In 1996, Degussa has sales in excess of $2.3 billion, to 
which sales of hydrogen peroxide contributed $65 million. DuPont is a 
publicly-traded corporation with reported revenues in 1996 of $43.8 
billion and net income of $3.6 billion. DuPont is one of the largest 
chemical companies in the world, operating about 175 manufacturing and 
processing facilities in approximately 70 countries. DuPont is engaged 
in diverse businesses, including chemicals, fibers, films, polymers, 
petroleum, agricultural products, biotechnology, and pharmaceuticals. 
In 1996, DuPont posted sales of hydrogen peroxide of $156 million in 
North America.
    According to the proposed complaint, the relevant line of commerce 
in which to analyze the effects of Degussa's proposed acquisition of 
Dupont's hydrogen peroxide production assets is the market for hydrogen 
peroxide, and the relevant geographic market is North America. The 
Commission's proposed complaint further alleges that the North American 
market for hydrogen peroxide is highly concentrated, and that the 
originally proposed acquisition would have increased concentration, as 
measured by the Herfindahl-Hirschman Index, by close to 600 points, to 
a level of over 2500. With the acquisition as modified, in which 
Degussa would acquire only DuPont's Gibbons plant, the level of the HHI 
would actually decrease. The proposed complaint charges that de novo 
entry or fringe expansion into the relevant market would require a 
substantial sunk investment and a significant period of time, such that 
new entry would be neither timely, likely, nor sufficient to deter or 
counteract anticompetitive effects of the originally proposed 
acquisition.
    The proposed complaint alleges that the acquisition, as originally 
proposed, would likely lead to a substantial lessening of competition 
in the North American hydrogen peroxide market. The acquisition would 
substantially increase concentration in a market that is already highly 
concentrated. The increased concentration would enable the firms 
remaining in the market to engage more successfully and more completely 
in coordinated interaction. The complaint cites several bases for this 
conclusion. Significantly, there is a long history of collusion, both 
tacit and express, among the firms that would remain after the proposed 
acquisition, involving hydrogen peroxide and its derivative products. 
In addition, evidence demonstrates that competitive information in the 
North American hydrogen peroxide market is sufficiently available to 
allow producers to engage in coordinated interaction. Practices

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such as public announcement of price increases, and the use of meeting 
competition clauses in contracts, serve to make competitive information 
available. There is also evidence of a strong degree of mutual 
interdependence among hydrogen peroxide producers, and evidence of 
market tendencies toward coordination and forbearance. For example, 
sales of hydrogen peroxide among producers are made with some 
frequency, and in some cases appear to be intended to avoid competitive 
conflicts. Finally, the complaint also cites projections in documents 
that prices would be higher after the acquisition than they otherwise 
would have been.

The Proposed Order

    The proposed Order contains a provision that requires Degussa to 
obtain the prior approval of the Commission of an acquisition of either 
of the two plants that DuPont would retain. In addition, it contains a 
provision that requires Degussa to provide prior notification to the 
Commission before consummating an acquisition of any other North 
American hydrogen peroxide production facilities, unless such 
acquisition must be reported under the Hart-Scott-Rodino Antitrust 
Improvement Act of 1976, 15 U.S.C. 18a (``HSR''). This provision 
specifically requires that Degussa comply with HSR-like premerger 
notification and waiting periods.
    In accord with the Commission's Statement of Policy Concerning 
Prior Approval and Prior Notice Provisions, 60 FR 39,745 (Aug. 3, 
1995), reprinted in 4 Trade Reg. Rep. (CCH) para. 13,241, the prior 
approval provision ensures that the Commission will have the 
appropriate mechanism with which to review the originally proposed 
acquisition, which appeared likely to have anticompetitive effects. The 
prior notice provision, in addition, ensures that the Commission will 
obtain notification of hydrogen peroxide acquisitions by Degussa, 
including potential acquisitions in Canada, that may raise antitrust 
concerns but would not be reportable under HSR. The prior approval and 
prior notification provisions therefore afford the Commission ample 
opportunity to guard against such potentially anticompetitive 
acquisitions.
    The purpose of this analysis is to invite public comment concerning 
the proposed order. This analysis is not intended to constitute an 
official interpretation of the agreement and order or to modify their 
terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-8764 Filed 4-2-98; 8:45 am]
BILLING CODE 6750-01-M