[Federal Register Volume 65, Number 73 (Friday, April 14, 2000)]
[Notices]
[Pages 20178-20180]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9264]


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FEDERAL TRADE COMMISSION

[File No. 991 0218]


FMC 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 May 8, 2000.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Ave., NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Robert Tovsky, FTC/S-3105, 600 
Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-2634.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 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 April 7, 2000), on the World Wide Web, at ``http://www.ftc.gov/
ftc/formal.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 
Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR 
4.9(b)(6)(ii)).

Analysis To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') form FMC Corp. (``FMC''), Solutia Inc. (``Solutia''), and 
Astaris LLC (``Astaris''). The Consent Agreement is intended to resolve 
anticompetitive effects stemming from the proposed joint venture 
between FMC and Solutia to combine their respective phosphates and 
phosphorus derivatives businesses. The Consent Agreement includes a 
proposed Decision and Order (the ``Order''), which would require FMC 
and Solutia to divest to Societe Chimique Prayon-Rupel (``Prayon'') the 
portion of Solutia's phosphates business based in Augusta, Georgia, and 
to divest to Peak Investment, L.L.C. (``Peak'') FMC's phosphorus 
pentasulfide business based in Lawrence, Kansas. The Consent Agreement 
also includes an Order to Maintain Assets which requires respondents to 
preserve the assets they are required to divest as viable, competitive, 
and ongoing operations until the divestitures are achieved.
    The Order, if issued by the Commission, would settle charges that 
the proposed joint venture between FMC and Solutia may have 
substantially lessened competition in the United States markets for 
pure phosphoric acid and phosphorus pentasulfide. The Commission has 
reason to believe that the proposed joint venture would have violated 
Section 7 of the Clayton Act and Section 5 of the Federal Trade 
Commission Act. The Commission's complaint, described below, relates 
the basis for this belief.
    The proposed 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 review the agreement and 
comments received and decide whether to withdraw its acceptance of the 
agreement or make the Order final.
    According to the Commission's complaint, one relevant line of 
commerce in which to analyze the effects of the proposed joint venture 
between FMC and Solutia is pure phosphoric acid, and the relevant 
geographic market for this product is the United States. Pure 
phosphoric acid is used as an input into a wide variety of consumer and 
industrial products, ranging from cola beverages to cleaning compounds 
and metal treatments. The complaint describes FMC's and Solutia's 
production and sale of pure phosphoric acid, and further describes how 
each of the companies sells pure phosphoric acid directly to end-
customers and uses it internally in the manufacture of different types 
of phosphate salts. According to the Commission's complaint, FMC and 
Solutia compete with each other in the manufacture and sale of pure 
phosphoric acid directly to end-customers, and in the manufacture and 
sale of phosphate salts.
    The compliant alleges that the pure phosphoric acid market in the 
United States already is highly concentrated, and that the proposed 
joint venture would increase concentration in that market, as measured 
by the Herfindahl-Hirschman Index, by over 450 points, to a level over 
2500. Furthermore, according to the complaint, new entry into this 
market is not likely.
    The Commission's complaint further states that the market for pure 
phosphoric acid is conducive to coordination, that producers already

[[Page 20179]]

price independently of industry operating rates, and that producers 
target competitors' customers in retaliation against aggressive bidding 
as a means of deterring future competition. Furthermore, according to 
the complaint, prices for pure phosphoric acid are already the highest 
in the world. The complaint also describes how Solutia's agreement to 
purchase pure phosphoric acid from Emaphos, S.A. (``Emaphos''), a new 
producer of pure phosphoric acid in Morocco, makes Solutia the 
exclusive distributor in North America for Emaphos' pure phosphoric 
acid and restricts Emaphos from selling pure phosphoric acid to end-
customers. According to the complaint, this provision of Solutia's 
agreement with Emaphos reduced the impact of potential competition from 
Emaphos in the United States market.
    According to the Commission's complaint, another line of commerce 
in which to analyze the effects of the proposed joint venture is 
phosphorus pentasulfide. Phosphorus pentasulfide, which is typically 
sold in a solid, flake form to customers, is used primarily in the 
manufacture of chemical additives for engine lubricating oils, and also 
is used to a smaller extent in the manufacture of different types of 
insecticides. The complaint alleges that the only three companies that 
manufacture and sell phosphorus pentasulfide in the United States are 
Solutia, FMC and Rhodia, and Rhodia has announced that it is exiting 
the market. Therefore, the proposed joint venture would create a 
monopoly in this line of commerce. The complaint also states that the 
entry of new producers into this market is not likely. The complaint 
therefore alleges that the proposed joint venture would likely be able 
to exercise market power on a unilateral basis.
    The proposed Order is designed to remedy the alleged 
anticompetitive effects of the joint venture in the United States 
markets for pure phosphoric acid and phosphorus pentasulfide, by 
requiring the divestiture to Prayon of Solutia's phosphates plant in 
Augusta, Georgia, and the divestiture to Peak of FMC's phosphorus 
pentasulfide plant in Lawrence, Kansas.
    The Order would require respondents to divest the Augusta plant to 
Prayon within six months of the date that the Consent Agreement was 
accepted by the Commission. The Order would also require the 
respondents to provide Prayon with technology Solutia has used for 
manufacturing phosphates at the Augusta plant, and to divest other 
assets relating to the Augusta plant, including customer lists, 
contracts, and other intangible assets.
    Prayon, based in Belgium, is one of the world's leading and lowest-
cost producers of pure phosphoric acid. It operates two low-cost 
solvent-extraction plants to produce pure phosphoric acid in Belgium, 
and also is a partner in Emaphos, which operates a new low-cost 
solvent-extraction plant in Morocco. Prayon currently imports small 
volumes of pure phosphoric acid into the United States. With the 
acquisition of Solutia's Augusta plant, Prayon's presence in the United 
States would become much stronger, providing it with a base from which 
to expand its sales of pure phosphoric acid. Its competitive presence 
will also be enhanced by the Order's requirement that respondents 
revise the existing contract between Solutia and Emaphos so as to 
remove the restrictions that prevent Emaphos from selling pure 
phosphoric acid to end-customers. Emaphos' expansion in the United 
States through acquisition of the Augusta plant, and by virtue of the 
other provisions in the Order, will offset the loss of competition that 
would otherwise occur as a result of the joint venture.
    The Order would also require respondents to divest FMC's phosphorus 
pentasulfide plant in Lawrence, Kansas to Peak within 30 days of the 
date that the joint venture is formed. The Order would require the 
respondents to provide Peak with technology FMC has used for 
manufacturing phosphorus pentasulfide at the Lawrence plant, and to 
divest other assets relating to the Lawrence plant, including customer 
lists, contracts, and other intangible assets. Because Peak will 
operate the phosphorus pentasulfide plant in Lawrence as part of a 
larger site that the joint venture will continue to own, and because 
Peak will rely on the joint venture for certain facilities and 
services, the proposed Order also contains several provisions designed 
to safeguard Peak's competitive position, in part by providing Peak 
with the opportunity to provide for itself the services and facilities 
it needs to operate the phosphorus pentasulfide plant. The proposed 
Order also contains a provision requiring the appointment of an interim 
trustee who would, for a period of two years, monitor the relationship 
at Lawrence to ensure that Peak has fair and full access to the 
services and facilities needed to operate the phosphorus pentasulfide 
plant.
    If the Commission, at the time that it issues the Order, notifies 
respondents that it does not approve of the manner of either 
divestiture, or of either Prayon or Peak as purchasers of the Assets To 
Be Divested, the proposed Order provides that respondents would have 
five months to divest either the Augusta plant or the phosphorus 
pentasulfide business to a different acquirer. If respondents do not 
complete such divestiture in that period, a trustee would be appointed.
    The Order to Maintain Assets that is also included in the Consent 
Agreement requires that respondents preserve the Assets To Be Divested 
as viable and competitive operations until they are transferred to the 
Commission-approved acquirers. It requires the respondents to maintain 
the viability and competitiveness of the Assets To Be Divested, and to 
conduct the businesses to be divested in the ordinary course of 
business. Furthermore, it includes an obligation on respondents to 
build and maintain inventories of products at the Augusta and Lawrence 
plants consistent with regular business practice. The Order to Maintain 
Assets also requires respondents to provide certain support to Prayon 
in advance of the divestiture of the Augusta plant, including 
agreements to toll produce phosphates at Augusta, to allow Prayon to 
maintain an engineer at the Augusta site, and to provide certain 
information to Prayon regarding the Augusta operations.
    The Consent Agreement requires respondents to provide the 
Commission, within thirty (30) days of the date the Agreement is 
signed, with an initial report setting forth in detail the manner in 
which respondents will comply with the provisions relating to the 
divesture of assets. The proposed Order requires respondents to provide 
the Commission with a report of compliance with the Order within thirty 
(30) days following the date the Order becomes final and every thirty 
(30) days thereafter until they have complied with the divesture 
requirements of the Order,and also requires annual compliance reports 
for 10 years.
    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 Consent Agreement or the proposed Order or in any 
way to modify the terms of the Consent Agreement or the proposed Order.

    By direction of the Commission.
Donald S. Clark,
Secretary.

Statement of Chairman Robert Pitofsky and Commissioners Sheila F. 
Anthony, Mozelle W. Thompson, Orson Swindle, and Thomas B. Leary

    We believe that the divestitures and other relief mandated by the 
proposed

[[Page 20180]]

Commission order should restore the competition lost through the joint 
venture between FMC Corporation and Solutia Inc. Nevertheless, we 
recognize that both divestitures are somewhat out of the ordinary.
    When remedying a Clayton Section 7 violation, the Commission 
usually orders a complete divestiture of one merging party's assets 
that produce the relevant product. In the pure phosphoric acid 
(``PPA'') market, though, the Commission requires the divestiture to 
Prayon of a plant that manufactures phosphate salts but not PPA. And in 
the phosphorus pentasulfide market, the Commission orders the 
divestiture to Peak of what is essentially a ``plant within a plant.'' 
Due to the novelty of the relief, the Commission will monitor closely 
the respondents' compliance with their obligations under the order and 
will ascertain whether the relief ordered in this case effectively 
restores competition in each of the markets.

[FR Doc. 00-9264 Filed 4-13-00; 8:45 am]
BILLING CODE 6750-01-M