[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