[Federal Register Volume 64, Number 243 (Monday, December 20, 1999)]
[Notices]
[Pages 71141-71142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32893]
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FEDERAL TRADE COMMISSION
[File No. 991 0071]
Hoechst AG, 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 January 6, 2000.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 600 Pennsylvania Ave., NW, Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT: Richard Parker or Elizabeth Jex, FTC/
H-374, 600 Pennsylvania Ave., NW, Washington, D.C. 20580. (202) 326-
2574 or 326-3273.
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 thirty (30) 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 December 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,
D.C. 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, D.C. 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
provisionally an agreement containing a proposed consent order from
Hoechst AG (``Hoechst'') and Rhone-Poulenc S.A. (``RP'') under which RP
would be required: (1) To divest the assets relating to RP's direct
thrombin inhibitor drug Revasc; and (2) to divest its interest in
Rhodia, its specialty chemicals subsidiary which produces cellulose
acetate, to a level of 5% or less and to sequester that interest
pending its divestiture, thereby preserving competition in the
manufacture, marketing, and sale of cellulose acetate thermoplastics.
The proposed Consent Order has been placed on the public record for
thirty (30) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After thirty (30) 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
Consent Order.
In a proposed merger agreement, Hoechst and RP will combine most of
their respective businesses through an exchange offer by RP for all of
Hoechst's outstanding shares, with Hoechst shareholders receiving one
RP share for each 1.33 outstanding Hoechst shares. Thereafter, the
merged entity will be renamed Aventis S.A. (``Aventis''). The proposed
complaint alleges that the proposed merger, if consummated, would
constitute a violation of Section 7 of the Clayton Act, as amended, 15
U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45, in
the markets for: (1) Cellulose acetate; and (2) direct thrombin
inhibitors. The proposed Consent Order would remedy the alleged
violations by replacing the lost competition that would result from the
merger.
Cellulose Acetate
Cellulose acetate is a thermoplastic that is used to produce, among
other products, cigarette filters, tool handles, tapes and films. In
applications where it is used, there are no cost effective substitutes.
U.S. consumers purchase approximate $1 billion worth of cellulose
acetate yearly.
The market for cellulose acetate is highly concentrated. Three
companies currently produce cellulose acetate in the United States: (1)
Eastman Chemical Company (``Eastman''); (2) Primester, a joint venture
whose shares are owned 50% by Eastman and 50% by Rhodia (a specialty
chemicals company that is itself 67% owned by RP); and (3) Celanese
Limited (``Celanese''), until recently a wholly-owned subsidiary of
Hoechst. Celanese controls approximately 46% of U.S. production
capacity, Eastman owns approximately 44% of U.S. production capacity,
and Primester holds the remaining 10%. Eastman and Rhodia are each
entitled to one-half of the production of Primester. Rhodia currently
sells cellulose acetate only outside the United States; thus Celanese
and Eastman are the only companies currently selling cellulose acetate
in the United States.
There are significant barriers to entry into the cellulose acetate
market. In order to enter the market, a firm must incur substantial
sunk costs to build a dedicated production facility. Moreover,
reductions in the demand for this material and its limited growth
potential create disincentives to new entry.
The merger of RP and Hoechst will increase the likelihood of
coordinated interaction in the market for cellulose acetate. The Kuwait
Petroleum Company (``PC'') will hold significant interests in Celanese
and Aventis after the merger. Because the remaining shareholders of
Celanese and Aventis are (and will remain) widely diversified, KPC
currently owns a controlling interest in Celanese, and will acquire
working control (defined as 10% or more interest in a corporation whose
stock is widely held) of Aventis. These shareholdings could permit KPC
to
[[Page 71142]]
coordinate the activities of Celanese and, through Aventis, Rhodia and
Primester after the merger. In addition, Aventis' indirect holding,
through Rhodia, of 50% of the Primester joint venture with Easement may
facilitate coordination between the KPC-controlled entities and
Easement following the merger. For these reasons, the proposed
transaction could create conditions that increase the likelihood of
collusion in the cellulose acetate market.
On September 15, 1999, the parties entered into undertakings with
the Antitrust Directorate of the European Commission (``EC'') to
resolve competitive concerns raised by the proposed merger of Hoechst
and RP to form Aventis. Among other conditions, the EC undertakings
required Hoechst to spin off Celanese and required RP to divest its
holding in Rhodia. Pursuant to those undertakings, Hoechst spun off the
Celanese division to Hoechst shareholders on October 26, 1999. To date,
RP has not divested Rhodia, and the EC undertakings did not require RP
to divest Rhodia prior to the formation of Aventis.
The proposed Consent Order is designed to supplement the EC
undertakings by preserving interim competition among Celanese, Rhodia
and Eastman in the cellulose acetate market in the United States
pending Aventis' divestiture of Rhodia. The proposed Consent Order
requires the parties to divest their holding of Rhodia to a level of 5%
or less of total outstanding shares within three months of the date the
consent agreement is accepted by the Commission for public comment. In
the case of shares held in escrow as collateral for RP debt
obligations, the shares must be divested within six months of the end
of the exchange period for those shares. The proposed Consent Order
also requires the parties to refrain from participating in the
decisions of, seeking to influence the conduct of, or receiving
confidential business information concerning Rhodia's cellulose acetate
business.
Direct Thrombin Inhibitors
Direct thrombin inhibitors are used in the treatment of various
blood clotting diseases. While certain other products may also be used
for the treatment of blood clotting diseases, direct thrombin
inhibitors are both more effective and safer than any available
alternatives. U.S. sales of direct thrombin inhibitors currently total
only approximately $15 million, but have the potential to increase
significantly in the future.
Hoechst sells the only direct thrombin inhibitor currently on the
U.S. market, Refludan. RP is in the final stages of developing its
direct thrombin inhibitor, Revasc, which is licensed from Novartis AG
(``Novartis'') in 1998. RP plans to submit its New Drug Application for
Revasc to the Food and Drug Administration for approval shortly.
Available evidence indicates the RP and Hoechst are each other's
closest competitors in the direct thrombin inhibitor market. Each party
priced its products in relation to those of the other and based its
product development strategy on the other's development and position in
the market. Other companies currently developing direct thrombin
inhibitors are years behind Hoechst and RP.
The planned merger is likely to create anticompetitive effects in
the direct thrombin inhibitor market by eliminating the actual, direct,
and substantial competition between Hoechst and RP that would otherwise
continue to exist. In addition, the proposed transaction reduces
potential competition and innovation competition among researchers and
developers of direct thrombin inhibitor products by eliminating a
significant competitor and increasing the barriers to entry to others
by, among other results, combining RP and Hoechst's portfolios of
patents and patent applications.
To resolve these anticompetitive concerns, the proposed Consent
Order is designed to transfer all of RP's rights in the direct thrombin
inhibitor Revasc to Novartis or an independent third party. Novartis
(the original licensor) holds a contractual right of prior approval for
any transfer of RP's rights in Revasc to any third party. Thus, while
other companies have expressed interest in acquiring the rights to
Revasc, none may do so without the prior approval of Novartis. The
proposed Consent Order requires the parties to return RP's rights in
Revasc to Novartis or to sublicense all such rights to another company,
subject to Novartis's contractual right of approval. The proposed
Consent Order would also require the parties to enter into a short-term
service contract with the acquirer of the Revasc rights in order to
ensure the continued performance of development work on Revasc. Should
RP be unable to divest Revasc during the allotted time period, the
proposed Consent Order permits the appointment of a trustee to divest
either RP's Revasc assets or the North American rights to Hoechst's own
drug, Refludan. Further, in order to prevent any interim harm to assets
related to Revasc, the parties have signed a trustee agreement and an
Interim Trustee has been approved by the Commission. The proposed
Consent Order would provide for the immediate involvement of the
Interim Trustee to ensure the continued development and viability of
Revasc as an independent competitor to Hoechst's Refludan.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Order, and it is not intended to constitute an
official interpretation of the agreement and proposed Consent Order or
to modify their terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 99-32893 Filed 12-17-99; 8:45 am]
BILLING CODE 6750-01-M