[Federal Register Volume 64, Number 181 (Monday, September 20, 1999)]
[Notices]
[Pages 50815-50816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-24308]
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FEDERAL TRADE COMMISSION
[File No. 991 0288]
The Associated Octel Company Limited; 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 November 19, 1999.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pennsylvania Ave., NW, Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: William Baer, FTC/H-374, 600
Pennsylvania, Ave., NW, Washington, DC 20580. (202) 326-2932.
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 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 September
7, 1999), 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, 600 Pennsylvania Avenue, NW., Washington,
DC 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW,
Washington, DC 20580. Two paper copies of each comment should be filed,
and should be accompanied, if possible, by a 3\1/2\ inch diskette
containing an electronic copy of the comment. 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 a proposed Consent Order
from The Associated Octel Company Limited (``Octel''), which is
designed to resolve competitive concerns arising out of Octel's
proposed acquisition of Oboadler Company Limited (``Oboadler''). Under
the terms of the agreement, Octel will be required, among other things,
to supply lead antiknock compounds to Oboadler's current U.S.
distributor, Allchem Industries, Inc., for resale in the United States.
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
[[Page 50816]]
proposed Consent Order and the comments received, and will decide
whether it should withdraw from the proposed Consent Order or make
final the proposed Order.
Pursuant to a Share Purchase Agreement dated June 1, 1999, Octel
has agreed to acquire 100 percent of the share capital of Oboadler for
approximately $100 million. Oboadler controls three operating companies
that, collectively, are engaged in the business of manufacturing and
selling lead antiknock compounds: Alcor Chemie AG, Alcor Chemie
Vertriebs AG, and Novoktan GmbH. The proposed Complaint alleges that
the acquisition of Oboadler, if consummated, would violate Section 7 of
the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal
Trade Commission Act, as amended, 15 U.S.C. 45, in the world market for
lead antiknock compounds.
Lead antiknock compounds are gasoline additives that contain
tetraethyl lead. The product is used to increase the octane rating of
gasoline, and thereby eliminate engine knock during the combustion
cycle and improve fuel efficiency. Worldwide use of lead antiknocks has
declined substantially since the early 1970's, and a continuing decline
in demand is forecast. Driven by public health concerns, nations around
the world are requiring refiners to adopt alternative methods of
increasing the octane level of gasoline. Currently in the United
States, lead antiknock compounds are added to aviation fuel for piston
engine aircraft, and to certain motor gasoline for racing cars.
The proposed Complaint alleges that the world market for the
manufacture and sale of lead antiknock compounds is highly
concentrated. Octel and Oboadler are two of only three firms in the
world that manufacture lead antiknock compounds. In the United States,
lead antiknock compounds manufactured by Octel are distributed by two
firms: Octel America Inc. (a subsidiary of Octel) and Ethyl Corporation
(``Ethyl'').\1\ In the United States, lead antiknock compounds
manufactured by Oboadler are distributed by Allchem Industries, Inc.
(``Allchem'').
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\1\ See The Associated Octel Company Limited and Great Lakes
Chemical Corporation, FTC Docket No. C-3815 (1998) (Commission order
requiring, inter alia, that Octel supply Ethyl with whatever volumes
of lead antiknock compounds Ethyl requires for resale to U.S.
customers).
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The proposed Complaint further alleges that entry into the market
would not be timely, likely and sufficient to deter or counteract the
adverse competitive effects of the acquisition on competition. Entry is
unlikely to occur because of the length of time and expense necessary
to construct production facilities, environmental regulations, and
ongoing decline in worldwide demand for lead antiknock compounds, and
the cost of environmental remediation at the manufacturing site when,
due to decline in demand, production is no longer commercially
practicable.
According to the proposed Complaint, the effect of the proposed
acquisition may be substantially to lessen competition by, among other
things, eliminating direct actual competition between Octel and
Oboadler in the relevant market, increasing the likelihood of
coordinated interaction between the remaining competitors in the
relevant market, and increasing the likelihood that consumers of lead
antiknock compounds will be forced to pay higher prices.
The proposed Consent Order is designed to protect U.S. consumers of
lead antiknock compounds from the exercise of market power resulting
from Octel's proposed acquisition. The foundation for the Consent Order
is a long-term supply agreement that Octel has entered into with
Allchem, Oboadler's U.S. distributor.\2\ The Supply Agreement provides
that Octel shall provide Allchem with unlimited quantities of lead
antiknock compounds for resale to customers in the United States.
Further, Allchem shall have the sole right to determine the customers
in the U.S. to whom the product will be resold, as well as the terms
and conditions of such resale.
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\2\ Agreement for the Supply of Tetra Ethyl Lead Additive dated
July 19, 1999, as amended by the Supplemental Agreement for the
Supply of Tetra Ethyl Lead Additive dated July 30, 1999 (hereinafter
collectively referred to as the ``Supply Agreement''). The Supply
Agreement goes into effect when Octel acquires Oboadler.
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The proposed Consent Order requires Octel to supply product to
Allchem for fifteen years in accordance with the terms and conditions
of the Supply Agreement, and subject to the termination provision
thereof.\3\ (Paragraph II) In addition, Octel is prohibited from
modifying certain key terms of the Supply Agreement except with the
prior approval of the Commission.\4\ (Paragraph III)
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\3\ At any time after year ten, Octel can terminate the Supply
Agreement provided that Octel has ceased to manufacture lead
antiknocks and has exited from the worldwide lead antiknocks
business.
\4\ The purpose of this provision is to prevent Octel and
Allchem from modifying the Supply Agreement in a manner that is
beneficial to each of them but harmful to U.S. consumers. To take an
extreme example, the Commission would likely disapprove a proposed
modification in which Allchem received a cash payment in return for
surrendering its right to purchase and resell lead antiknocks.
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The wholesale price to be charged to Allchem for lead antiknock
compounds is the product of negotiations between Octel and Allchem. If
the wholesale price is too high (relative to the price at which
Allchem, absent the acquisition, could have obtained product from
Oboadler), then prices to U.S. consumers may likewise be supra-
competitive. The proposed remedy relies upon Allchem's incentive to
negotiate the lowest possible price. The Supply Agreement negotiated by
the parties, should it take effect, will afford Allchem a reduction in
the wholesale price of lead antiknock compounds (relative to Allchem's
existing agreement with Oboadler).
The purpose of this analysis is to facilitate public comment on the
proposed Order, and it is not intended to constitute an official
interpretation of the agreement and proposed Order or to modify their
terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-24308 Filed 9-17-99; 8:45 am]
BILLING CODE 6750-01-M