[Federal Register Volume 65, Number 120 (Wednesday, June 21, 2000)]
[Notices]
[Pages 38574-38584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15594]


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DEPARTMENT OF JUSTICE

Antitrust Division


Proposed Final Judgment and Competitive Impact Statement; United 
States v. Alcoa Inc., et al.

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the U.S. District Court for the District of 
Columbia in United States v. Alcoa Inc., et al., Civil No. 00-CV-954 
(RMU). On May 3, 2000, the United States filed a Complaint alleging 
that the proposed acquisition of Reynolds Metals Company by Alcoa Inc. 
would substantially lessen competition in the manufacture and sale of 
smelter grade alumina (``SGA'') worldwide and chemical grade alumina 
(``CGA'') in North America in violation of section 7 of the Clayton 
Act, 15 U.S.C. 18.
    The proposed Final Judgment orders Alcoa and Reynolds to sell 
Reynolds' controlling interest in an alumina refinery in Worsley, 
Western Australia, and Reynolds' alumina refinery located near Corpus 
Christi, Texas. Public comment is invited within the statutory sixty-
day comment period. Such comments, and responses thereto, will be 
published in the Federal Register and filed with the Court. Written 
comments should be directed to Roger W. Fones, Chief, Transportation, 
Energy, and Agriculture Section, Antitrust Division, 325 Seventh 
Street, NW, Suite 500, Washington, DC 20530 (telephone: (202) 307-
6351).
    Copies of the Complaint, Hold Separate Stipulation and Order, 
proposed Final Judgment, and Competitive Impact Statement are available 
for inspection in Room 215 of the U.S. Department of Justice, Antitrust 
Division, 325 Seventh Street, NW, Washington, DC 20530 (telephone: 
(202) 514-2481) and at the office of the Clerk of the U.S. District 
Court for the District of Columbia, 333 Constitution Avenue, NW, 
Washington, DC 20001. Copies of any of these materials may be obtained

[[Page 38575]]

upon request and payment of a copying fee.

Constance K. Robinson,
Director of Operations, Antitrust Division.

Hold Separate Stipulation and Order

    It is hereby stipulated by and between the undersigned parties, 
subject to approval and entry by the Court, that:

I. Definitions

    As used in this Hold Separate Stipulation and Order:
    A. ``Alcoa'' means defendant Alcoa Inc., a Pennsylvania corporation 
with its headquarters in Pittsburgh, Pennsylvania, and its successors, 
assigns, subsidiaries, divisions, groups, affiliates, partnerships, 
joint ventures, directors, officers, managers, agents, and employees.
    B. ``Reynolds'' means defendant Reynolds Metals Company, a Delaware 
corporation with its headquarters in Richmond, Virginia, its 
successors, assigns, subsidiaries, divisions, groups, affiliates, 
partnerships, joint ventures, directors, officers, managers, agents, 
and employees.
    C. ``Hold Separate Assets'' means the Corpus Christi Assets and the 
Worsley Interest required to be divested under the proposed Final 
Judgment, as defined in Sections II.C and II.G of the proposed Final 
Judgment, collectively.
    D. The terms ``Chemical Grade Alumina'' or ``CGA'' have the meaning 
defined in Section II.B of proposed Final Judgment.
    E. The terms ``Smelter Grade Alumina'' or ``SGA'' have the meaning 
defined in Section II.F of proposed Final Judgment.

II. Objectives

    The Final Judgment filed in this case is meant to ensure 
defendants' prompt divestiture of certain assets for the purpose of 
maintaining a viable competitor in the manufacture and sale of Smelter 
Grade Alumina (``SGA'') and Chemical Grade Alumina (``CGA'') to remedy 
the effects that the United States alleges would otherwise result from 
Alcoa's proposed acquisition of Reynolds. This Hold Separate 
Stipulation and Order ensures that, prior to such divestitures, the 
Hold Separate Assets be maintained and operated as independent, 
economically viable, ongoing business concerns, and that competition is 
maintained during the pendency of the divestiture.

III. Jurisdiction and Venue

    The Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto, and venue of this action is proper 
in the United States District Court for the District of Columbia.

IV. Compliance With and Entry of Final Judgment

    A. The parties stipulate that a Final Judgment in the form attached 
hereto may be filed with and entered by the Court, upon the motion of 
any party or upon the Court's own motion, at any time after compliance 
with the requirements of the Antitrust Procedures and Penalties Act (15 
U.S.C. 16), and without further notice to any party or other 
proceedings, provided that the United States has not withdrawn its 
consent, which it may do at any time before the entry of the proposed 
Final Judgment by serving notice thereof on defendants and by filing 
that notice with the Court.
    B. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment pending entry of the Final Judgment by the 
Court, or until expiration of time for all appeals of any Court ruling 
declining entry of the proposed Final Judgment, and shall, from the 
date of the signing of this Hold Separate Stipulation and Order by the 
parties, comply with all the terms and provisions of the proposed Final 
Judgment as though the same were in full force and effect as an Order 
of the Court.
    C. This Hold Separate Stipulation and Order shall apply with equal 
force and effect to any amended proposed Final Judgment agreed upon in 
writing by the parties and submitted to the Court.
    D. In the event the United States has withdrawn its consent, as 
provided in paragraph IV.A above, or if the proposed Final Judgment is 
not entered pursuant to this Hold Separate Stipulation and Order, or if 
the time has expired for all appeals of any Court ruling declining 
entry of the proposed Final Judgment, and the Court has not otherwise 
ordered continuing compliance with the terms and provisions of the 
proposed Final Judgment, then the parties are released from all further 
obligations under this Hold Separate Stipulation and Order, and the 
making of this Hold Separate Stipulation and Order shall be without 
prejudice to any party in this or any other proceeding.
    E. Defendants represent that the divestitures ordered in the 
proposed Final Judgment can and will be made, and that defendants will 
later raise no claim of hardship or difficulty as grounds for asking 
the Court to modify any of the divestiture provisions contained 
therein.

V. Hold Separate Provisions

    Until the divestiture required by the Final Judgment has been 
accomplished:
    A. Alcoa shall preserve, maintain, and operate the Hold Separate 
Assets as independent competitors, with management, research, 
development, production, sales, and operations held entirely separate, 
distinct, and apart from those of Alcoa. Alcoa shall not coordinate the 
manufacture, marketing, or sale of any products with that of any of the 
Hold Separate Assets that Alcoa will own as a result of the acquisition 
of Reynolds. To the extent that the Hold Separate Assets are supplying 
or have current plans to supply Reynolds' smelters with SGA, Alcoa may 
continue to receive such supply in comparable volumes. Within twenty 
calendar days of the filing of the Complaint in this matter, Alcoa will 
inform the United States of the steps taken to comply with this 
provision.
    B. Alcoa shall take all steps necessary to ensure that the Hold 
Separate Assets will be maintained and operated as independent, 
ongoing, economically viable, and active competitors in the manufacture 
and sale of SGA and CGA, that the management of the Hold Separate 
Assets will not be influenced by Alcoa, and that the books, records, 
competitively sensitive sales, marketing, and pricing information, and 
decision-making associated with the Hold Separate Assets will be kept 
separate and apart from the operation of Alcoa. Alcoa's influence over 
the Hold Separate Assets shall be limited to that necessary to carry 
out Alcoa's obligations under this Hold Separate Stipulation and Order 
and the Final Judgment. Alcoa may receive historical aggregate 
financial information (excluding capacity or pricing information) 
relating to the Hold Separate Assets to the extent necessary to allow 
Alcoa to prepare financial reports, tax returns, personnel reports, and 
other necessary or legally required reports.
    C. Alcoa shall use all reasonable efforts to maintain manufacturing 
at the Hold Separate Assets, and shall maintain at current or 
previously approved levels, whichever are higher, internal research and 
development funding, promotional, advertising, sales, technical 
assistance, marketing, and merchandising support for the Hold Separate 
Assets.
    D. Alcoa shall provide and maintain sufficient working capital to 
maintain the Hold Separate Assets as economically viable, ongoing 
businesses.

[[Page 38576]]

    E. Alcoa shall provide and maintain sufficient lines and sources of 
credit to maintain the Hold Separate Assets as economically viable, 
ongoing businesses.
    F. Alcoa shall take all steps necessary to ensure that the Hold 
Separate Assets are fully maintained in operable condition at no lower 
than their current rated capacity plus, at the time such expansions are 
scheduled to be completed, all future expansions in rated capacity, and 
shall maintain and adhere to normal repair and maintenance schedules 
for the Hold Separate Assets.
    G. Alcoa shall not, except as part of a divestiture approved by 
plaintiff, remove, sell, lease, assign, transfer, pledge, or otherwise 
dispose of or pledge as collateral for loans, any assets of the Hold 
Separate Assets.
    H. Alcoa shall maintain, in accordance with sound accounting 
principles, separate, true, accurate and complete financial ledgers, 
books, and records that report, on a periodic basis, such as the last 
business day of every month, consistent with past practices, the 
assets, liabilities, expenses, revenues, income, profit, and loss of 
the Hold Separate Assets.
    I. Until such times as the Hold Separate Assets are divested, 
except in the ordinary course of business or as is otherwise consistent 
with this Hold Separate Stipulation and Order, Alcoa shall not hire, 
and defendants shall not transfer or terminate, or alter, to the 
detriment of any employee, any current employment or salary agreements 
for any employee who, on the date of the signing of this Hold Separate 
Stipulation and Order by the parties, works for Reynolds and whose 
primary responsibilities relates to the Hold Separate Assets.
    J. Alcoa shall take no action that would interfere with the ability 
of any trustee appointed pursuant to the Final Judgment to complete the 
divestiture pursuant to the Final Judgment to a suitable purchaser.
    K. This Hold Separate Stipulation and Order remain in effect until 
the divestitures required by the Final Judgment are compete, or until 
further Order of the Court.
    Respectfully submitted,
    Dated: May 3, 2000.
    For Plaintiff United States: Allee A. Ramadhan, D.C. Bar #162131. 
Bruce Pearson, Connecticut Bar #372598. Janet R. Urban, Mark S. 
Hegedus, D.C. Bar #435525. Andrew K. Rosa, Hawaii Bar #6366. Michelle 
J. Livingston, D.C. Bar #461268. Attorneys, U.S. Department of Justice, 
Antitrust Division, 325 7th Street, N.W. Suite 500, Washington, D.C. 
20530 (202) 307-6470.
    For Defendant Alcoa Inc.: Mark Leddy, D.C. Bar #404833. David I. 
Gelfand, D.C. Bar #416596. Steven J. Kaiser, D.C. Bar #454251. Patricia 
M. McDermott, D.C. Bar #429776. Cleary, Gottlieb, Steen & Hamilton, 
2000 Pennsylvania Avenue, N.W., Washington, DC 20006-1801, (202) 974-
1570.
    For Defendant Reynolds Metals Company: Michael H. Byowitz, D.C. Bar 
#214703. Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, 
NY 10019-6150, (212) 403-1268.
Order
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    It is so ordered, this ______ day of ____________, 2000.

United States District Judge

Final Judgment

    Whereas, Plaintiff, the United States of America (``United 
States''), filed its complaint in this action on May 3, 2000, and 
Plaintiff and Defendants Alcoa Inc. (``Alcoa'') and Reynolds Metals 
Company (``Reynolds''), by their respective attorneys, having consented 
to the entry of this Final Judgment without trial or adjudication of 
any issue of fact or law herein, and without this Final Judgment 
constituting any evidence against or an admission by any party with 
respect to any issue of law of fact herein;
    And whereas, Defendants have agreed to be bound by the provisions 
of this Final Judgment and the provisions of the Hold Separate 
Stipulation and Order pending their approval by the Court;
    And whereas, the essence of the Final Judgment is the prompt and 
certain divestiture of the identified assets to assure that competition 
is not substantially lessened;
    And whereas, Plaintiff requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, Defendants have represented to the Plaintiff that the 
divestitures ordered herein can and will be made and that Defendants 
will later raise no claims of hardship or difficulty as grounds for 
asking the Court to modify any of the provisions contained below;
    Now, therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law herein, and upon 
consent of the parties hereto, it is hereby ordered, adjudged, and 
decreed as follows:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto. The Complaint states a claim upon 
which relief may be granted against the Defendants, as hereinafter 
defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. 
Sec. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Alcoa'' means defendant Alcoa Inc., a Pennsylvania corporation 
with its headquarters in Pittsburgh, Pennsylvania, and its successors, 
assigns, subsidiaries, divisions, groups, affiliates, partnerships and 
joint ventures, and directors, officers, managers, agents, and 
employees.
    B. ``Chemical Grade Alumina'' or ``CGA'' means the alumina product 
resulting from the refining of bauxite ore in alumina refineries, 
except that the alumina is removed from the production stream prior to 
calcining in kilns used to produce SGA. This uncalcined alumina is 
known as Chemical Grade Alumina or CGA, and is sold as ``wetcake'' or 
is dried and sold as ``dry hydrate.'' CGA is used in numerous 
downstream products.
    C. ``Corpus Christi Assets'' means all assets, interests and rights 
owned by Reynolds at Reynolds' alumina refinery located near Corpus 
Christi, Texas, which are used or held for use for alumina refining 
(the ``Corpus Christi Refinery'', a/k/a the ``Sherwin Refinery''), 
including:
    1. All tangible assets, including the alumina refining facility 
located at the Corpus Christi Refinery and the real property on which 
the Corpus Christi Refinery is situated; the real property to which the 
Corpus Christi Refinery is adjacent and that is reasonably necessary to 
the refining and sale of SGA or CGA from the Corpus Christi Refinery; 
refining assets relating to the Corpus Christi Refinery, including 
capital equipment, vehicles, supplies, personal property, inventory, 
office furniture, fixed assets and fixtures, materials, on-site 
warehouses or storage facilities, railcars, port facilities, ships, 
boats, barges and other tangible property or improvements; all 
licenses, permits and authorizations issued by an governmental 
organization relating to the Corpus Christi Refinery; all contracts, 
agreements, leases, commitments and understandings pertaining to the 
operations of the Corpus Christi Refinery; all supply agreements 
relating to the Corpus Christi Refinery, including, at the purchaser's 
option, all agreements,

[[Page 38577]]

commitments and understandings for the supply of bauxite to the Corpus 
Christi Refinery; all customer lists, accounts, and credit records; and 
other records maintained by Reynolds in connection with the operations 
of the Corpus Christi Refinery.
    2. All intangible assets, including but not limited to all patents, 
licenses and sublicenses, trademarks, trade names, service marks, 
service names (except to the extent such trademarks, trade names, 
service marks and service names contain the trademark Reynolds and 
Knight, Horse and Dragon Design; or the names ``Reynolds,'' ``Reynolds 
Metals Company,'' ``Reynolds, Rey, Reyno, or a Knight, Horse and Dragon 
Design); intellectual property, technical information, know-how, trade 
secrets, drawings, blueprints, designs, design protocols; 
specifications for materials, specifications for parts and devices, 
safety procedures for the handling of materials and substances; quality 
assurance and control procedures; design tools and simulation 
capability; all research data concerning historic and current research 
and development efforts relating to the operations of the Corpus 
Christi Refinery, including design of experiments and the results of 
unsuccessful designs and experiments; all plans pertaining to output 
and production of the Corpus Christi Refinery; and all manuals and 
technical information Reynolds provides to its employees, customers, 
suppliers, agents or licensees in connection with the operations of the 
Corpus Christi Refinery.
    D. ``Divestiture Assets'' means the Worsley Interest and the Corpus 
Christi Assets.
    E. ``Reynolds'' means defendant Reynolds Metals Company, a Delaware 
corporation with its headquarters in Richmond, Virginia, and its 
successors, assigns, subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and directors, officers, managers, 
agents, and employees.
    F. ``Smelter Grade Alumina'' or ``SGA'' means the alumina product 
resulting from the refining and calcining of bauxite ore in alumina 
refineries that is smelted to make aluminum metal.
    G. ``Worsley Interest'' means all Reynolds' interest in the Worsley 
Joint Venture, established by agreement dated February 7, 1980, and 
subsequently amended; provided, however, that the Worsley Interest does 
not include the trademarks Reynolds and Knight, Horse and Dragon 
Design; or the names ``Reynolds,'' ``Reynolds Metals Company,'' 
``Reynolds Aluminum'' or any variation thereof, or any trademark 
containing Reynolds, Rey, Reyno, or a Knight, Horse, and Dragon Design.

III. Applicability

    A. The provisions of this Final Judgment apply to Alcoa and 
Reynolds, as defined above, and all other persons in active concert or 
participation with any of them who shall have received actual notice of 
this Final Judgment by personal service or otherwise.
    B. Defendants shall require, as a condition of the sale or other 
disposition of all or substantially all of the Divestiture Assets, that 
the acquiring party or parties agree to be bound by the provisions of 
this Final Judgment.

IV. Divestiture of Assets

    A. Defendants are hereby ordered and directed in accordance with 
the terms of this Final Judgment, within two hundred seventy (270) days 
from either the filing of the Complaint in this matter or five (5) days 
after notice of entry of this Final Judgment by the Court, whichever is 
later, to divest the Worsley Interest as an interest in a viable, 
ongoing business. Defendants are further ordered and directed in 
accordance with the terms of this Final Judgment, within one hundred 
eighty (180) days from either the filing of the Complaint in this 
matter or five (5) days after notice of entry of this Final Judgment by 
the Court, whichever is later, to divest the Corpus Christi Assets as a 
viable, ongoing business, to a purchaser or purchasers acceptable to 
the United States in its sole discretion.
    B. Defendants shall use their best efforts to accomplish the 
divestitures as expeditiously and timely as possible. The United 
States, in its sole discretion, may extend the time period for any 
divestiture by an additional period of time not to exceed sixty (60) 
calendar days.
    C. In accomplishing the divestitures ordered by this Final 
Judgment, Defendants promptly shall make known, by usual and customary 
means, the availability of the Divestiture Assets described in this 
Final Judgment. Defendants shall inform any person making an inquiry 
regarding a possible purchase that the sale is being made pursuant to 
this Final Judgment and provide such person with a copy of this Final 
Judgment. Defendants shall also offer to furnish to all prospective 
purchasers, subject to customary confidentiality assurances, all 
information regarding the Divestiture Assets customarily provided in a 
due diligence process except such information subject to attorney-
client privilege or attorney work-product privilege. Defendants shall 
make available such information to the Plaintiff at the same time that 
such information is made available to any other person.
    D. Defendants shall permit prospective purchasers of the 
Divestiture Assets to have reasonable access to personnel and to make 
inspection of the Divestiture Assets; access to any and all 
environmental, zoning, and other permit documents and information 
relating to the Divestiture Assets; and access to any and all 
financial, operational, or other documents and information relating to 
the Divestiture Assets customarily provided as part of a due diligence 
process, subject to customary confidentiality assurances.
    E. Defendants shall provide to any purchaser or purchasers of the 
Divestiture Assets information relating to the Reynolds personnel 
involved in the refining and sale of SGA and/or CGA in connection with 
the Worsley Interest and the Corpus Christi Assets to enable the 
purchaser or purchasers to make offers of employment. Defendants shall 
not interfere with any negotiations by any purchaser or purchasers to 
employ and Reynolds employee who works at the Worsley refinery or the 
Corpus Christi Refinery, or whose principal responsibility involves the 
refining and sale of alumina at the Worsley refinery or the Corpus 
Christi Refinery.
    F. Defendants shall warrant to the purchaser or purchasers of the 
Divestiture Assets that the Divestiture Assets will be operational on 
the date of the divestiture.
    G. Defendants shall warrant to the purchaser of the Divestiture 
Assets that all necessary environmental, zoning, export and other 
permits relating to the Divestiture Assets are in order in all material 
respects. Defendants will not undertake, directly or indirectly, 
following the divestiture of the Divestiture Assets, any challenges to 
the environmental, zoning, export or other permits pertaining to the 
operation of the Divestiture Assets.
    H. Defendants shall not take any action, direct or indirect, that 
will impede in any way the operation of the Divestiture Assets.
    I. Unless the United States otherwise consents in writing, the 
divestiture undertaken pursuant to Section IV or undertaken by a 
trustee appointed pursuant to Section V of this Final Judgment shall 
include all of the Divestiture Assets. Prior to divestiture, the 
Divestiture Assets that are the subject of the Hold Separate 
Stipulation and Order shall be operated pursuant to such Hold Separate 
Stipulation and

[[Page 38578]]

Order entered by the Court. The divestitures shall be accomplished by 
selling or otherwise conveying the Divestiture Assets to a purchaser or 
purchasers in such a way as to satisfy the United States, in its sole 
discretion, that the Divestiture Assets can and will be used by the 
purchaser or purchasers as part of a viable, ongoing business or 
businesses engaged in the refining and sale of SGA or CGA. The 
divestitures, whether pursuant to Section IV or Section V of this Final 
Judgment, shall be made to a purchaser or purchasers with respect to 
whom it is demonstrated to the United States' sole satisfaction that 
(a) the purchasers have the intent to compete effectively in the 
refining and sale of SGA or CGA; and (b) the purchaser or purchasers 
have the managerial, operational, and financial capability to compete 
effectively in the refining and sale of SGA or CGA. In addition, none 
of the terms of any agreement between the purchaser or purchasers and 
Defendants, including any joint venture, governance, operation or 
shareholder agreements, shall give Defendants the ability to limit the 
purchaser's capacity or output, to raise a purchaser's costs, to lower 
a purchaser's efficiency, or otherwise to interfere in the ability of 
the purchaser or purchasers to compete effectively.
    J. In connection with the divestiture of the Corpus Christi Assets 
and the Worsley Interest, whether pursuant to Section IV of the Final 
Judgment or by a trustee appointed pursuant to Section V, Defendants 
may negotiate a transitional supply agreement or agreements with the 
purchaser or purchasers of these divested assets for the supply of SGA 
to Reynolds' smelters previously supplied by these refineries. Any such 
agreement shall be on commercially reasonable terms and may have a term 
of up to three (3) years. Volume requirements during the first year of 
any such agreement may be up to 100% of the annual volumes supplied by 
these refineries to such smelters during the year prior to the closing 
of the merger transaction, up to 75% during the second year and you to 
50% during the third year.
    K. In connection with the divestiture of the Worsley Interest, 
whether pursuant to Section IV of this Final Judgment or by a trustee 
pursuant to Section V, Defendants shall assign to the purchaser or 
purchasers of the Worsley Interest Reynolds' existing contractual 
obligations to supply SGA to Billiton. If Alcoa is unable to obtain any 
necessary consent of Billiton or is otherwise unable to effect such an 
assignment, Alcoa shall enter into an agreement with the purchaser or 
purchasers of the Worsley Interest for the supply of such amount of SGA 
and on such terms as are called for by the Reynolds/Billiton SGA 
contract, to be resold by Alcoa to Billiton in fulfillment of that 
contract.
    L. In connection with the divestiture of the Corpus Christi Assets, 
whether pursuant to Section V, Defendants shall offer the purchaser a 
contract for a term of at least two (2) years for the supply of bauxite 
from Reynolds' interest in ABC (Aroaima) Guyana. Such agreement shall 
be on commercially reasonable terms and for annual volumes 
substantially similar to the annual volumes supplied by ABC (Aroaima) 
Guyana to the Corpus Christi Refinery during the year prior to the 
closing of the transaction.

V. Appointment of Trustee

    A. In the event that Defendants have not divested any of the 
Divestiture Assets within the time period specified for that asset in 
Section IV.A of this Final Judgment and for which the time period has 
not been extended pursuant to Section IV.B, the Court shall appoint, on 
application of the United States, a trustee selected by the United 
States and approved by the Court to effect the divestiture of that 
Divestiture Asset.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to divest the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestitures at the best price then obtainable upon a reasonable effort 
by the trustee, subject to the provisions of Sections IV, V, and VI of 
this Final Judgment, and shall have such other powers as the Court 
shall deem appropriate. Subject to Section V(C) of this Final Judgment, 
the trustee shall have the power and authority to hire at the cost and 
expense of Defendants any investment bankers, attorneys, or other 
agents reasonably necessary in the judgment of the trustee to assist in 
the divestitures, and such professionals and agents shall be 
accountable solely to the trustee. The trustee shall have the power and 
authority to accomplish the divestitures at the earliest possible time 
to a purchaser or purchasers acceptable to the United States in its 
sole discretion. Defendants shall not object to a sale by the trustee 
on any grounds other than the trustee's malfeasance. Any such 
objections by Defendants must be conveyed in writing to Plaintiff and 
the trustee within ten (10) days after the trustee has provided the 
notice required under Section VI of this Final Judgment.
    C. The trustee shall serve at the cost and expense of Defendants, 
on such terms and conditions as the Plaintiff approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to Defendants and the trust shall then be 
terminated. The compensation of such trustee and of professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the divested business and based on a fee arrangement providing 
the trustee with an incentive based on the price and terms of the 
divestitures and the speed with which they are accomplished, but 
timeliness is paramount.
    D. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestitures, including their best efforts 
to effect all necessary regulatory approvals. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the businesses to be divested, and 
Defendants shall develop financial or other information relevant to the 
businesses to be divested customarily provided in a due diligence 
process as the trustee may reasonably request, subject to customary 
confidentiality assurances. Defendants shall permit prospective 
acquirers of the Divestiture Assets to have reasonable access to 
personnel and to make such inspection of physical facilities and any 
and all financial, operational or other documents and other information 
as may be relevant to the divestitures required by this Final Judgment. 
Defendants shall take no action to interfere with or to impede the 
trustee's accomplishment of the divestitures.
    E. After its appointment, the trustee shall file monthly reports 
with the parties and the Court setting forth the trustee's efforts to 
accomplish the divestitures ordered under this Final Judgment; provided 
however, that to the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the business to be divested, 
and shall describe in detail each contact with any such person during 
that period. The

[[Page 38579]]

trustee shall maintain full records of all efforts made to divest the 
businesses to be divested.
    F. If the trustee has not accomplished such divestitures within six 
(6) months after its appointment, the trustee thereupon shall file 
promptly with the Court a report setting forth: (1) The trustee's 
efforts to accomplish the required divestitures; (2) the reasons, in 
the trustee's judgment, why the required divestitures have not been 
accomplished; and (3) the trustee's recommendations; provided, however, 
that to the extent such report contains information that the trustee 
deems confidential, such report shall not be filed in the public docket 
of the Court. The trustee shall at the same time furnish such report to 
the Plaintiff, the Court and to Defendants. Plaintiff and Defendants 
shall each have the right to be heard and to make additional 
recommendations consistent with the purpose of this Final Judgment. The 
Court shall enter thereafter such orders as it shall deem appropriate 
in order to carry out the purpose of the Final Judgment, which may, if 
necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.

VI. Notification

    A. Within two (2) business days following execution of a definitive 
agreement Defendants or the trustee, whichever is then responsible for 
effecting the divestitures, shall notify Plaintiff of the proposed 
divestitures. If the trustee is responsible, it shall similarly notify 
Defendants. The notice shall set forth the details of the proposed 
transaction and list the name, address, and telephone number of each 
person not previously identified who offered to, or expressed an 
interest in or a desire to, acquire any ownership interest in the 
business to be divested that is the subject of the binding contract, 
together with full details of same.
    B. Within fifteen (15) calendar days of receipt by Plaintiff of 
such notice, the United States, in its sole discretion, may request 
from Defendants, the trustee, the proposed purchaser or purchasers, or 
any other third party additional information concerning the proposed 
divestitures, the proposed purchasers, and any other potential 
purchaser. Defendants and the trustee shall furnish any additional 
information requested from them within fifteen (15) calendar days of 
the receipt of the request, unless the parties shall otherwise agree. 
Within thirty (30) calendar days after receipt of the notice or within 
twenty (20) calendar days after the Plaintiff has been provided the 
additional information requested from Defendants, the trustee, proposed 
purchaser or purchasers, or any third party, whichever is later, the 
United States shall provide written notice to Defendants and the 
trustees, if there is one, stating whether or not it objects to the 
proposed divestures. If the United States provides written notice to 
Defendants and the trustee that it does not object, then the 
divestitures may be consummated, subject only to Defendants' limited 
right to object to the sale under Section V(B) of this Final Judgment. 
Absent written notice that the United States does not object to the 
proposed purchaser or purchasers or upon objection by the United 
States, a divestiture proposed under Section IV or Section V shall not 
be consummated. upon objection by Defendants under the provision in 
Section V(B), a divestiture proposed under Section V shall not be 
consummated unless approved by the Court.

VII. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter and every thirty (30) calendar days thereafter until the 
divestitures have been completed, whether pursuant to Section IV or 
Section V of this Final Judgment, Defendants shall deliver to Plaintiff 
an affidavit as to the fact and manner of compliance with Section IV or 
Section V of this Final Judgment. Each such affidavit shall include, 
inter alia, the name, address, and telephone number of each person who, 
at any time after the period covered by the last such report, made an 
offer to acquire, expressed an interest in acquiring, entered into 
negotiation to acquire, or was contacted or made an inquiry about 
acquiring, any interest in the business to be divested, and shall 
describe in detail each contact with any such person during that 
period. Each such affidavit shall also include a description of the 
efforts that the Defendants have taken to solicit a purchaser for the 
Divesture Assets and to provide required information to prospective 
purchasers.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Defendants shall deliver to Plaintiff an affidavit 
which describes in detail all actions Defendants have taken and all 
steps Defendants have implemented on an on-going basis to preserve the 
Divestiture Assets pursuant to Section VIII of this Final Judgment and 
the Hold Separate Stipulation and Order entered by the Court. The 
affidavit also shall describe, but not be limited to, Defendants' 
efforts to maintain and operate the Divestiture Assets as active 
competitors, maintain the management, staffing, research and 
development activities, sales, marketing, and pricing of the 
Divestiture Assets, and to maintain the Divestiture Assets in operable 
condition at current capacity configurations. Defendants shall deliver 
to Plaintiff and affidavit describing any changes to the efforts and 
actions outlined in Defendants' earlier affidavit(s) filed pursuant to 
this Section VII(B) within fifteen (15) calendar days after the change 
is implemented.
    C. Until one year after such divestitures have been completed, 
Defendants shall preserve all records of all efforts made to preserve 
the businesses to be divested and effect the divestitures.

III. Hold Separate Order

    Until the divestitures required by the Final Judgment have been 
accomplished, Defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court and to 
preserve in all material respects the Divestiture Assets. Defendants 
shall take no action that would jeopardize the divestiture of the 
Divestiture Assets.

IX. Financing

    Defendants are ordered and directed not to finance all or any part 
of any purchase by an acquirer made pursuant to Sections IV or V of 
this Final Judgment.

X. Compliance Inspection

    For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time:
    A. Duly authorized representatives of the United States Department 
of Justice, upon written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, and 
on reasonable notice to Defendants, shall be permitted:
    1. Access during office hours of Defendants to inspect and copy, or 
at Plaintiff's option demand Defendants provide copies of, all books, 
ledgers, accounts, correspondence, memoranda, and other records and 
documents in the possession or under the control of Defendants, who may 
have counsel present, relating to any matters contained in this Final 
Judgment and the Hold Separate Stipulation and Order; and
    2. To interview, either informally or on the record, their 
officers, employees, and agents, who may have their

[[Page 38580]]

individual counsel present, regarding any such matters. The interviews 
shall be subject to the interviewee's reasonable convenience and 
without restraint or interference from the Defendants.
    B. Upon the written request of the Assistant Attorney General in 
charge of the Antitrust Division Defendants shall submit written 
reports, under oath if requested, with respect to any of the matters 
contained in this Final Judgment and the Hold Separate Stipulation and 
Order.
    C. No information nor any documents obtained by the means provided 
in Sections VII or X of this Final Judgment shall be divulged by a 
representative of the United States to any person other than a duly 
authorized representative of the Executive Branch of the United States, 
except in the course of legal proceedings to which the United States is 
a party (including grand jury proceedings), or for the purpose of 
securing compliance with this Final Judgment, or as otherwise required 
by law.
    D. If at the time information or documents are furnished by 
Defendants to Plaintiff, Defendants represent and identify in writing 
the material in any such information or documents for which a claim of 
protection may be asserted under Rule 26(c)(7) of the Federal Rules of 
Civil Procedure, and Defendants mark each pertinent page of such 
material, ``Subject to claim of protection under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure,'' then Plaintiff shall give ten (10) 
days notice to Defendants prior to divulging such material in any legal 
proceeding (other than a grand jury proceeding) to which Defendants are 
not a party.

XI. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders and directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violations hereof.

XII. Termination

    Unless this Court grants an extension, this Final Judgment will 
expire on the tenth anniversary of the date of its entry.

XIII. Public Interest

    Entry of this Final Judgment is in the public interest.

Dated-----------------------------------------------------------------
    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.
----------------------------------------------------------------------
United States District Judge

Certificate of Service

    I hereby certify that I have caused a copy of the foregoing Hold 
Separate Stipulation and Order and attached proposed Final Judgment to 
be served on counsel for defendants in this matter in the manner set 
forth below:
    By first class mail, postage prepaid, and by hand:

Mark Leddy, Cleary, Gottlieb, Steen & Hamilton, 2000 Pennsylvania 
Avenue, N.W., Washington, DC 20006-1801
Michael H. Byowitz, Wachtell, Lipton, Rosen & Katz, 51 West 52nd 
Street, New York, NY 10019-6150

    Dated: May 3, 2000.
Andrew K. Rosa,
Hawaii Bar #6366, Trial Attorney, Antitrust Division, U.S. Department 
of Justice, 325 Seventh Street, N.W., Suite 500, Washington, D.C. 
20530, (202) 307-0886, (202) 616-2441(Fax).

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files 
this Competitive Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On May 3, 2000, the United States filed a civil antitrust Complaint 
alleging that the proposed acquisition by Alcoa Inc. (``Alcoa'') of 
Reynolds Metals Company (``Reynolds'') would, if consummated, violate 
Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint alleges that 
the proposed merger will substantially lessen competition in the 
refining and sale of both smelter grade alumina (``SGA''), which is 
used to produce aluminum ingots, and chemical grade alumina (``CGA'' or 
``hydrate''), an ingredient used in numerous industrial and consumer 
products. This competition has benefitted consumers through lower 
prices and higher output. The proposed merger of Alcoa and Reynolds 
would substantially increase the concentration of SGA and CGA markets. 
Unless the merger is blocked, the loss of competition will 
substantially enhance Alcoa's control over the prices of SGA and CGA, 
while also increasing the likelihood of anticompetitive coordination in 
the SGA and CGA markets.
    The prayer for relief in the Complaint seeks: (1) a judgment that 
the proposed acquisition would violate Section 7 of the Clayton Act; 
(2) a permanent injunction preventing Alcoa from acquiring Reynolds; 
(3) an award to the United States of its costs in bringing the lawsuit; 
and (4) such other relief as the Court deems proper.
    When the Complaint was filed, the United States also filed a 
proposed settlement that would permit Alcoa to complete its acquisition 
of Reynolds, but would require divestitures that will preserve 
competition in the relevant markets. This settlement consists of a Hold 
Separate Stipulation and Order and a proposed Final Judgment.
    The proposed Final Judgment orders Defendants to divest, (1) within 
two hundred seventy (270) days after the filing of the complaint in 
this matter, or five (5) days after notice of entry of the Final 
Judgment by the Court, whichever is later, all of Reynolds' interest in 
the Worsley Joint Venture, established by agreement dated February 7, 
1980, and subsequently amended (``Worsley Interest''), and (2) within 
one hundred eighty (180) days after the filing of the complaint in this 
matter, or five (5) days after notice of entry of the final Judgment by 
the Court, whichever is later, all assets, interests, and rights owned 
by Reynolds at Reynolds' alumina refinery located near Corpus Christi, 
Texas, that are used or held for use for alumina refining (``Corpus 
Christi Assets'') (collectively referred to as ``the Divestiture 
Assets'') to an acquirer or acquirers acceptable to the Antitrust 
Division of the Department of Justice (``DOJ'').
    Until the required divestitures are completed, the terms of the 
Hold Separate Stipulation and Order entered into by the parties apply 
to ensure that the Divestiture Assets shall be maintained and operated 
as independent, ongoing, economically viable, and active competitors in 
the manufacture and sale of SGA and CGA.
    The Plaintiff and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate the action, except that the 
Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

[[Page 38581]]

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction
    Alcoa is a Pennsylvania corporation, with its principal offices 
located in Pittsburgh, Pennsylvania. Alcoa is the largest integrated 
aluminum company in the United States and the world with 1999 revenues 
of over $16 billion. Alcoa engages in all stages of aluminum 
production, including mining raw aluminum ore (``bauxite''), refining 
bauxite into alumina powder, smelting alumina into metal ingots, and 
utlimately fabricating the metal ingots into end products.
    Alcoa produces SGA at several facilities around the world. Alcoa 
owns alumina refineries in Kwinana, Pinjarra, and Wagerup, Western 
Australia; Pocos de Caldas, Brazil; San Ciprian, Spain; St. Croix, U.S. 
Virgin Islands; and Pt. Comfort, Texas. Alcoa also manages the 
operations of three alumina refinery joint ventures in which it has an 
ownership interest: Paranam, Suriname (55 percent Alcoa ownership); Sao 
Luis, Brazil (54 percent Alcoa ownership); and Clarendon, Jamaica (50 
percent Alcoa ownership). Alcoa produces CGA for North America at its 
Pt. Comfort refinery.
    Reynolds is a Virginia corporation with its principal offices in 
Richmond, Virginia. Reynolds is the second largest integrated aluminum 
company in the United States and the third largest in the world with 
1999 revenues of over $4.6 billion. Reynolds engages in all stages of 
aluminum production, including mining bauxite, refining bauxite into 
alumina powder, smelting alumina into metal ingots, and ultimately 
fabricating the metal ingots into end products.
    Reynolds produces SGA at several facilities around the world. 
Reynolds owns the Corpus Christi Refinery and owns a 56 percent 
interest along with operating control of the management of the Worsley 
refinery. Reynolds also owns a 50 percent interest in a refinery in 
Stade, Germany, and manages and is entitled to 10 percent of the 
production of the Friguia, Guinea alumina refinery. Reynolds produces 
CGA for North America at its Corpus Christi refinery.
    On August 18, 1999, Alcoa and Reynolds entered into an agreement 
under which Alcoa would acquire Reynolds in a stock exchange. This 
transaction, which would substantially increase concentration in the 
markets for SGA and CGA, precipitated the government's suit.
B. Affected Markets
    1. The World SGA Market. The fabrication of aluminum products 
begins with the mining of bauxite. Bauxite is processed at refineries 
to extract alumina. SGA is alumina that is used by aluminum smelters to 
make aluminum metal. About two-thirds of total SGA production is 
internally consumed by smelters owned by SGA producers. Surplus SGA 
refined by vertically integrated firms is sold to third-party 
purchasers. Some of the third-party purchasers are themselves 
vertically integrated firms that have a deficit of internal SGA 
production; other purchasers of SGA are independent smelters with no 
alumina operations.
    There is no product that can be substituted for SGA to make 
aluminum metal. If aluminum smelters were confronted with a small but 
significant SGA price increase, smelter owners would have to pay the 
higher price or close their smelters.
    Aluminum smelters purchase alumina from refineries located 
throughout the world. Alcoa, Reynolds, and other alumina refiners 
refine and sell SGA throughout the United States and the world.
    It is extremely costly and inefficient to shut down a smelting 
operation; smelters therefore require a stable and steady supply of SGA 
to maintain production. A small decrease in the supply of SGA will 
cause a significant increase in the price of SGA (i.e., demand for SGA 
is highly inelastic). When the July 1999 explosion at Kaiser Aluminum 
Corporation's Gramercy, Louisiana, refinery removed 2 percent of world 
alumina capacity, SGA ``spot'' prices nearly tripled, and long-term SGA 
contract prices increased 20 percent to 30 percent.
    2. The North American CGA Market. Alumina refineries produce two 
different products--SGA and CGA. Until the last stage of the refining 
process, SGA and CGA undergo the identical refining process. At that 
stage, SGA is calcined in kilns. CGA is removed prior to calcining and 
sold as ``wetcake'' or dried and sold as dry hydrate.
    CGA is an important ingredient in numerous products such as 
zeolites (used in detergents), solid surface counter tops, catalysts 
for oil refineries and bus exhaust systems, white pigments in the paper 
industry, flame retardants, and water treatment chemicals. Other 
products are not reasonable substitutes for CGA. If the price of CGA 
were to increase by a small but significant amount, a significant 
number of current purchasers are unlikely to switch to alternative 
products in sufficient numbers to undermine the price increase. In 
order to substitute another less suitable product, the product in which 
CGA was used would have to reformulated, a lengthy and expensive 
process.
    Prices of CGA vary in different regions throughout the world. CGA 
is sold in North America, and North American producers of CGA compete 
for sales to customers located throughout North America. Imports of CGA 
into North America account for less than 5 percent of the CGA sold in 
North America.
    Importation of CGA into North America is unlikely to increase 
significantly in response to a small but significant anticompetitive 
increase in the price of CGA in North America. The additional handling 
of the product that occurs in importing CGA increases the likelihood 
that it will become contaminated. Also, the costs of freight, handling, 
and storage are too high to import the product economically in the 
quantities required by customers in North America.
    C. Harm to Competition as a Consequence of the Acquisition. By 
merging with Reynolds, Alcoa's market share will increase approximately 
from 29 to 38 percent of world SGA capacity and from 39 to 59 percent 
of North American CGA production. These increases in market shares will 
significantly enhance Alcoa's incentive and ability to exercise market 
power unilaterally by reducing its output in the world SGA and North 
American CGA markets. Alcoa's increased market shares resulting from 
the acquisition would give it larger sales bases on which is can profit 
from the higher prices.
    The proposed transaction will also increase the likelihood of 
anticompetitive coordination among the remaining firms in the world SGA 
and North American CGA markets. The SGA market has certain 
characteristics conducive to anticompetitive coordination, including 
product homogeneity; stable, predictable, and inelastic demand and 
supply; and transparency of actions by suppliers and customers. The CGA 
market also has certain characteristics conducive to coordinated 
interaction, including product homogeneity and high concentration 
(there are only five producers of CGA in North America and post-merger 
the top three CGA producers will account for 90 percent of the market).
    An increase in output of SGA or CGA in response to anticompetitive 
price

[[Page 38582]]

increases is unlikely to be timely or sufficient to undermine the price 
increases. Firms are currently operating at or near capacity and are 
expected to continue to do so during at least the next two years. 
Successful entry through the construction of a new ``greenfield'' 
alumina refinery or through the expansion of an existing ``brownfield'' 
refinery is slow, costly, and difficult. A minimum efficient scale 
greenfield refinery could cost $1 billion and take four years or longer 
from planning to operation. Reynolds' expansion of its Worsley refinery 
is costing $700 million and was scheduled to take thirty-two months. No 
company attempted entry or expansion in response to the Gramercy 
closure despite the significant increase in SGA prices after the 
closure.
    In the world market for SGA and the North American market for CGA, 
the proposed merger threatens substantial and serious harm to 
consumers. By substantially increasing Alcoa's market shares of SGA and 
CGA capacity in the relevant markets, the proposed merger will provide 
Alcoa with substantially enhanced control over the prices of SGA and 
CGA, while also increasing the likelihood of anticompetitive 
coordination in these markets.
    The Complaint alleges that the effect of Alcoa's proposed 
acquisition of Reynolds would be to eliminate actual and potential 
competition between Alcoa and Reynolds; to lessen substantially 
competition in the production and sale of SGA and CGA; to increase 
prices for SGA and CGA; and to decrease the amount of SGA and CGA 
produced.

III. Explanation of the Proposed Final Judgment

     The provisions of the proposed Final Judgment are designed to 
eliminate the anticompetitive effects of the acquisition of Reynolds by 
Alcoa. The divestitures required by the Final Judgment will ensure that 
competition will continue and be preserved in the SGA and CGA markets. 
Divestiture of the Divestiture Assets preserves competition because it 
will restore the world SGA and North American CGA markets to the 
structures that existed prior to the acquisition and will preserve the 
existence of independent competitors in these markets.
    Divestiture of the Worsley Interest and the Corpus Christi Assets 
preserves competition in the SGA market by requiring Alcoa to sell 
virtually all of the world-wide SGA refining capacity owned by 
Reynolds.\1\ Divesting the Corpus Christi Assets also preserves 
competition in the North American CGA market by requiring Alcoa to sell 
all of Reynolds' refining capacity used to supply the North American 
CGA market. Without the divestitures, consumers of SGA and CGA would 
suffer from higher prices for these products.
---------------------------------------------------------------------------

    \1\ Reynolds' relatively small SGA output at its Stade, Germany, 
refinery will be divested pursuant to an undertaking with the 
European Commission. After the divestitures required by the European 
Commission and the proposed Final Judgment, all of the alumina 
refining capacity owned by Reynolds will have been divested.
---------------------------------------------------------------------------

    The proposed Final Judgment provides that Alcoa must divest, (1) 
the Worsley Interest within two hundred seventy (270) days after the 
filing of the complaint in this matter, or five (5) days after notice 
of entry of the Final Judgment by the Court, whichever is later; and, 
(2) the Corpus Christi Assets within one hundred eighty (180) days 
after the filing of the Complaint in this matter, or five days (5) 
after notice of entry of the Final Judgment by the Court, whichever is 
later, to an acquirer or acquirers acceptable to the DOJ. The time 
period for the divestiture of the Worsley Interest is longer than that 
for the Corpus Christi Assets in order to allow for the exercise of 
certain rights of Reynolds' co-venturers in the Worsley Joint Venture. 
The assets to be divested are defined in detail in Section II of the 
Final Judgment.
    The divestitures shall be accomplished by selling or otherwise 
conveying the Divestiture Assets to a purchaser or purchasers in such a 
way as to satisfy the United States, in its sole discretion, that the 
Divestiture Assets can and will be used by the purchaser or purchasers 
as part of a viable, ongoing business or businesses engaged in the 
refining and sale of SGA or CGA. The divestitures shall be made to a 
purchaser or purchasers with respect to whom it is demonstrated to the 
United States' sole satisfaction that (a) the purchaser or purchasers 
have the intent to compete effectively in the refining and sale of SGA 
or CGA and (b) the purchaser or purchasers have the managerial, 
operational, and financial capability to compete effectively in the 
refining and sale of SGA or CGA. In addition, none of the terms of any 
agreement between the purchaser or purchasers and Defendants, including 
any joint venture, governance, operation, or shareholder agreements, 
shall give Defendants, including any joint venture, governance, 
operation, or shareholder agreements, shall give Defendants the ability 
to limit the purchaser's capacity or output, to raise a purchaser's 
costs, to lower a purchaser's efficiency, or otherwise to interfere in 
the ability of the purchaser or purchasers to compete effectively.
    If Defendants fail to divest the Divestiture Assets within the 
prescribed time, a trustee selected by DOJ will be appointed. The Final 
Judgment provides that Defendants will pay all costs and expenses of 
the trustee. At the end of six (6) months, if the divestiture has not 
been accomplished, the trustee and the parties will have the 
opportunity to make recommendations to the Court, which shall enter 
such orders as appropriate in order to carry out the purpose of the 
proposed Final Judgment, including extending the trust or the term of 
the trustee's appointment.
    In connection with the sale of the Divestiture Assets, the Final 
Judgment permits Defendants to enter certain agreements with the new 
owner(s) to purchase SGA under two specified circumstances. Neither of 
the permitted arrangements would give Alcoa any mechanism for limiting 
SGA output by any new owner of Divestiture Assets. First, the Final 
Judgment allows, but does not require, Alcoa to negotiate agreements to 
purchase SGA from the new owner(s) to supply, on a transitional basis, 
the smelters that Reynolds had previously supplied internally from the 
divestiture Assets. Because of the importance of assuring a large, 
reliable supply of SGA, smelter operators that depend on SGA supplies 
from an independent source enter long-term contracts for that supply, 
and often begin negotiations a year or more in advance of the 
expiration of current contracts. In addition, the chemical 
characteristics of SGA vary by source, and a smelter must be 
recalibrated to the specifications of its new SGA supply, a time 
consuming process. Because the sale of the Divestiture Assets would 
remove the historical source of captive SGA supply for a number of 
former Reynolds smelters, the Final Judgment permits Alcoa a transition 
period to locate new SGA supplies. Any agreement entered pursuant to 
this provision may have a term of no more than three (3) years, which 
is significantly shorter than the industry average for SGA supply 
contracts, and may cover only partial requirements for that period. 
Volume requirements during the fist year may be up to 100 percent of 
the annual volumes supplied by the divested refineries to such smelters 
during the year prior to the closing of the merger transaction, up to 
75 percent of that volume during the second year, and up to 50 percent 
during the third year.
    Second, the Final Judgment requires Alcoa to divest, as one of the 
assets included in the Worsley Interest,

[[Page 38583]]

Reynolds' long-term contractual right to sell SGA to Billiton Plc 
(``Billiton''). Because Billiton retains a veto over assignment of its 
contract to the new owner, however, Alcoa may remain the party legally 
obligated to supply SGA to Billiton. If and only if Billiton exercises 
its veto, Alcoa may enter an agreement with the new owner of the 
Worsley Interest to purchase the amount of SGA needed to satisfy 
Reynolds' existing contractual obligation to Billiton. The Final 
Judgment requires Alcoa to resell, as an intermediary, any SGA so 
obtained to Billiton in fulfillment of the existing Reynolds-Billiton 
contract. By requiring Alcoa to simply pass through this volume of SGA 
to Billiton, the Final Judgment prevents Alcoa from gaining additional 
control over SGA output by entering into such an arrangement.
    In addition, the Final Judgment requires Defendants to offer the 
purchaser of the Corpus Christi Assets, at that purchaser's option, a 
contract for a term of at least two (2) years to supply bauxite to the 
Corpus Christi Refinery. This requirement may make the Corpus Christi 
Assets more attractive to purchasers by enabling the purchaser to 
negotiate supply arrangements for the Corpus Christi Refinery that are 
substantially similar to existing supply arrangements.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. The United States will 
evaluate and respond to the comments. All comments will be given due 
consideration by the Department of Justice, which remains free to 
withdraw its consent to the proposed Judgment at any time to entry. The 
comments and the response of the United States will be filed with the 
Court and published in the Federal Register. Written comments should be 
submitted to: Roger W. Fones, Chief, Transportation, Energy & 
Agriculture Section, Antitrust Division, United States Department of 
Justice, 325 Seventh Street, N.W., Suite 500, Washington, DC 20004.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against the Defendants.
    The United States is satisfied that the divestitures specified in 
the proposed Final Judgment will preserve viable competition in the 
manufacture and sale of SGA worldwide and of CGA in North America. 
Thus, the proposed Final Judgment will achieve all the relief that the 
United States would have obtained through litigation, but avoids the 
time, expense, and uncertainty of a full trial on the merits of the 
Compliant.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day (60) 
comment period, after which the court shall determine whether entry of 
the proposed Final Judgment ``is in the public interest.'' In making 
that determination, the court may consider--
    (1) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modifications, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) the impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.
15 U.S.C. 16(e). As the Court of Appeals for the District of Columbia 
Circuit held, the APPA permits a court to consider, among other things, 
the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See United 
States v. Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir. 1995).
    In conducting this inquiry, ``the Court nowhere compelled to go to 
trial or to engage in extended proceedings which might have the effect 
of vitiating the benefits of prompt and less costly settlement through 
the consent decree process.'' \2\ Rather,
---------------------------------------------------------------------------

    \2\ 119 Cong. Rec. 24598 (1973). See also United States v. 
Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public 
interest'' determination can be made properly on the basis of the 
Competitive Impact Statement and Response to Comments filed pursuant 
to the APPA. Although the APPA authorizes the use of additional 
procedures, 15 U.S.C. Sec. 16(f), those procedures are 
discretionary. A court need not invoke any of them unless it 
believes that the comments have raised significant issues and that 
further proceedings would aid the court in resolving those issues. 
See H.R. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974) U.S. 
Code Cong. & Ad. News 6535, 6538.
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(a)bsent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making its public interest finding, should . 
. . carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. 
para.61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083 
(1981); see also, Microsoft, 56 F.3d at 1460-62. Precedent requires 
that
[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but

[[Page 38584]]

whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\3\
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    \3\ Bechtel, 648 F.2d at 666 (internal citations omitted) 
(emphasis added); see BNS, 858 F.2d at 463; United States v. 
National Broad. Co., 449 F. Supp. 1127, 1143 (C.D.Cal. 1978); 
Gillette, 406 F. Supp. at 716. See also Microsoft, 56 F.3d at 1461 
(whether ``the remedies [obtained in the decree are] so inconsonant 
with the allegations charged as to fall outside of the `reaches of 
the public interest''') (citations omitted).
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    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest''' \4\
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    \4\ United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 
151 (citations omitted) (D.D.C. 1982), aff'd sub nom. Maryland v. 
United States, 460 U.S. 1001 (1983), quoting Gillette, 406 F. Supp. 
at 716; United States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 
(W.D. Ky. 1985).
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VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

    For Plaintiff United States of America:
    Dated: June 6, 2000.
    Respectfully submitted,
Allee A. Ramadhan,
D.C. Bar # 162131.
Bruce Pearson,
Connecticut Bar # 372598.
Janet R. Urban,
Maryland Bar # 222-32-2468.
Mark S. Hegedus,
D.C. Bar # 435525.
Andrew K. Rosa,
Hawaii Bar # 6366.
Michelle J. Livingston,
D.C. Bar # 461268, Trial Attorneys, U.S. Department of Justice, 
Antitrust Division, 325 Seventh Street, N.W., Suite 500, Washington, DC 
20530, (202) 307-6470, (202) 307-2441 (facsimile).

Certificate of Service

    I hereby certify that I have caused a copy of the foregoing 
Competitive Impact Statement to be served on counsel for Defendants in 
this matter in the manner set forth below:
    By first class mail, postage, and by facsimile:

Mark Leddy, Cleary, Gottlieb, Steen & Hamilton, 2000 Pennsylvania 
Avenue, N.W., Washington, DC 20006-1801
Michael H. Byowitz, Wachtell, Lipton, Rosen & Katz, 51 West 52nd 
Street, New York, NY 10019-6150.

    Dated: June 6, 2000.
Andrew K. Rossa,
Hawaii Bar # 6366, Trial Attorney, Antitrust Division, U.S. Department 
of Justice, 325 Seventh Street, N.W., Suite 500, Washington, (202) 307-
0886, (202) 616-2441 (fax).
[FR Doc. 00-15594 Filed 6-20-00; 8:45 am]
BILLING CODE 4410-11-M