[Federal Register Volume 63, Number 165 (Wednesday, August 26, 1998)]
[Notices]
[Pages 45508-45510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22893]


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FEDERAL TRADE COMMISSION

[File No. 971-0007]


Exxon Corporation, 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 October 26, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: William Baer or Joseph Krauss, FTC/H-
374, Washington, DC 20580. (202) 326-2932 or 326-2713.

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

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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 August 
20, 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, NW., 
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 Exxon Corporation (``Exxon''), and from The Shell 
Petroleum Company Limited and Shell Oil Company (collectively 
``Shell'').
    The proposed Consent 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.
    Both Exxon and Shell develop, manufacture, market and sell 
additives used in the production of fuels and lubricants, including 
viscosity index improvers used in lubricants for crankcase applications 
(``motor oil'' and ``engine oil''.) Viscosity index improvers (``VII'') 
(also known as ``viscosity modifiers'') are added to motor oil to 
improve the ability of the motor oil to flow properly. The viscosity of 
a fluid is its internal resistance to flow; the higher the viscosity, 
the more resistance to flow. The viscosity of lubricating oil is 
affected by temperature, higher temperatures lowering the viscosity. 
Motor oil must have sufficient viscosity to adhere to the internal 
surfaces of the engine even after the engine temperature rises and 
reduces the oil's viscosity. Motor oil must also have low enough 
viscosity to flow through the engine when the engine is cold, 
particularly in winter weather. Viscosity index improvers give motor 
oil the ability to have the appropriate high viscosity at high 
temperatures and the appropriate low viscosity at low temperatures.
    The market for the viscosity index improvers in North America is 
highly concentrated. Exxon and Shell collectively account for over one-
half of the sales of VII for use in motor oil in North America.
    On July 10, 1996, Exxon and Shell announced an intention to form a 
joint venture to own and operate their businesses engaged in the 
development, manufacture, marketing and sale of additives used in the 
production of fuels and lubricants (the ``Joint Venture''). Among other 
products, the Joint Venture proposed to include the portions of the 
businesses of Exxon and Shell that are in the viscosity index improver 
business.

The Proposed Complaint

    The proposed complaint alleges that the proposed acquisition may 
substantially lessen competition in the development, manufacture, 
marketing and sale of viscosity index improvers. The proposed complaint 
also alleges that North America is the relevant geographic market for 
evaluating the Joint Venture's effect on the viscosity index improver 
market.
    The proposed complaint alleges that Exxon and Shell account for 
over one-half of the sales of VII in the relevant market. The complaint 
further alleges that the proposed transaction would increase the 
likelihood of or facilitate collusion or coordinated interaction 
between the Joint Venture and the remaining competitors in viscosity 
index improvers.
    The proposed complaint alleges that entry into the alleged market 
would not be timely, likely, and sufficient to deter or offset the 
adverse effects of the Joint Venture on competition in these markets. 
Entry into the market for viscosity index improvers requires developing 
a viscosity index improver that meets industry standards. This is 
difficult and time consuming and takes over two years. Entry into the 
market for viscosity index improvers also requires that the entrant 
either build a plant to manufacture synthetic rubber or find an 
operating plant that will supply the new entrant synthetic rubber that 
can be used for viscosity index improver for motor oil. The proposed 
complaint alleges that building a new manufacturing facility for the 
production of synthetic rubber of the type that can be used in the 
production of VII would take over two years and that there are few, if 
any, producers of synthetic rubber of the types that can be used for 
VII that could supply a new entrant.

The Proposed Order

    The proposed Order would remedy the alleged violation by preserving 
the competition that would otherwise be lost as a result of the 
formation of the Joint Venture, by requiring the sale of Exxon's 
viscosity index improver business to a Commission-approved buyer prior 
to consummation of the Joint Venture or within 6 months of signing the 
Agreement. Exxon has come forward with a prospective purchaser, Chevron 
Chemical Company LLC (``Chevron''), a subsidiary of Chevron Oil 
Company. The Oronite division of Chevron already develops, 
manufactures, markets and sells lubricant additives. Exxon and Chevron 
have negotiated an agreement of sale. Under the proposed order, Exxon 
may either proceed to sell its viscosity index improver business to 
Oronite, including in the sale those assets that Oronite and Exxon have 
negotiated, or sell to another buyer that the Commission approves. If 
Exxon sells to another buyer, it must include in the sale the assets 
enumerated in the proposed Order. Another buyer that, unlike Chevron, 
does not have a division already producing additives for lubricants may 
need assets that are part of Exxon's viscosity index improver business 
that Chevron did not need.
    Under the proposed Order, Exxon may complete the proposed 
divestiture to Chevron and then consummate the Joint Venture with Shell 
once the Commission has accepted the Agreement. If Exxon completes the 
sale to Chevron before the proposed Order is made final, the proposed 
Order requires that Exxon rescind the sale to Oronite if the Commission 
determines after the public comment period that the proposed sale to 
Oronite is not appropriate relief. In such a situation, if Exxon and 
Shell have consummated the Joint Venture, the proposed Order requires 
that the assets then be held under a hold separate agreement until they 
can be divested. If the divestiture is not completed within six months 
of the date the parties signed the Agreement, then the Commission may 
appoint a trustee to effect the sale of the assets.
    The proposed Order does not require the sale of a plant to 
manufacture synthetic rubber to make viscosity index improvers. It does 
require that if Exxon sells to a party other than Oronite, it provides 
the purchaser a supply of synthetic rubber. Moreover, if Exxon 
completes the proposed sale to Chevron, Exxon may not sell its 
synthetic rubber for viscosity index improver applications to parties 
other than

[[Page 45510]]

Chevron, except to the extent that Exxon's proposed sales agreement 
with Chevron would permit such sales. Finally, the proposed Order 
contains a firewall provision prohibiting the transfer of competitively 
sensitive information from Chevron, through Exxon, to the Joint Venture 
or to Shell.
    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 or the proposed Order.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-22893 Filed 8-25-98; 8:45 am]
BILLING CODE 6750-01-M