[Federal Register Volume 65, Number 194 (Thursday, October 5, 2000)]
[Notices]
[Pages 59424-59425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25570]


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FEDERAL TRADE COMMISSION

[File No. 001 0100]


Agrium, Inc., and Union Oil Company of California and Unocal 
Corporation; 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 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 October 30, 2000.

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

FOR FURTHER INFORMATION CONTACT: John B. Kirkwood, FTC Northwest 
Region, 915 Second Avenue, Suite 2896, Seattle, Washington 98174, (206) 
220-4484.

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 desists, 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 September 29, 2000), on the World Wide Web, at ``http://
www.ftc.gov/os/2000/09/index.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 Avenue, NW., 
Washington, DC 20580. Two paper copies of each comment should be filed, 
and should be accompanied, if possible, by a 3\1/2\ inch diskette 
containing an electronic copy of the comment. Such comments or views 
will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of the Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted for 
public comment an Agreement Containing Consent Order with Agrium, Inc. 
(``Agrium'') and Union Oil Company of California and Unocal Corp. 
(``Unocal''). The purpose of the agreement is to remedy the 
anticompetitive effects of Agrium's proposed acquisition of Unocal's 
nitrogen fertilizer business. The proposed order would require that 
Agrium divest assets that are integral to the sale of nitrogen 
fertilizers in the Northwest (Washington, Oregon, and Idaho).
    Nitrogen fertilizers are used by farmers around the world to 
improve crop yields by supplying the nitrogen essential to plant 
growth. Agrium, with production facilities in Texas and near its 
headquarters in Alberta, Canada, is one of the world's largest 
producers of nitrogen fertilizers. In 1998, Agrium's wholesale sales of 
nitrogen fertilizers were $501 million. Unocal produces and sells 
nitrogen fertilizers through its subsidiaries Alaska Nitrogen Products 
LLC and Prodica LLC, which have production and distribution facilities 
in Alaska, Washington, Oregon and California. Unocal's 1998 wholesale 
sales of nitrogen fertilizers were approximately $377 million.
    Agrium and Unocal are the leading sellers of anhydrous ammonia, 
urea, and UAN 32% solution, which are the most popular nitrogen 
fertilizers in the Northwest. Substitution among these fertilizers, and 
between them and other nitrogen fertilizers, is limited because of 
agricultural considerations (they differ in their suitability for 
particular crops, soils, weather conditions, etc.) and commercial 
factors (e.g., each of these fertilizers requires different storage and 
application equipment). In the manufacture of an important resin, there 
is no substitute for urea.
    The complaint alleges that Agrium's proposed acquisition of Unocal, 
if consummated, may substantially lessen competition in violation of 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 
of the Federal Trade Commission Act, as amended, 15 U.S.C. 45. The 
complaint identifies three relevant lines of commerce (product markets) 
in which to analyze the effects of this acquisition: urea, ammonia, and 
UAN 32%. The Relevant Section of the country (geographic market) 
alleged in the complaint is the Northwest, which consists of the states 
of Washington, Oregon, and Idaho. In urea, Agrium's acquisition of 
Unocal would result in an increase in the Herfindahl-Hirschman Index 
(commonly referred to as ``HHI'') from 2200 to over 4800; in ammonia, 
the HHI rises from 1922 to over 4200; and in UAN 32% it rises from 1560 
to over 3800. By eliminating competition between Agrium and Unocal, who 
are the top two suppliers of each of these products in the Northwest, 
the acquisition would enable Agrium to unilaterally increase the prices 
of ammonia, urea, and UAN 32% in that geographic market.
    It is unlikely that the competition eliminated by the proposed 
acquisition would be replaced by new entry into the Northwest. The 
construction of a new nitrogen fertilizer plant to supply the Northwest 
appears to be uneconomic. One recent attempt at building a plant in the 
region was abandoned four years after it was first announced. Design, 
site selection, permitting and construction of a new plant to supply 
the Northwest would require considerably more than two years. Producers 
with plants in the Northwest cannot expand output because these plants 
are operating at capacity. Importers of offshore fertilizers are 
unlikely to ship significantly more

[[Page 59425]]

to the Northwest because the transfer and storage terminals they need 
are either unavailable or more expensive to use than Unocal's Rivergate 
terminal. Midwest producers face obstacles to increasing shipments to 
the Northwest, including high transportation costs, commitments to 
local customers, the attractiveness of netbacks closer to their plants, 
and differences in seasonal demand that often make California a better 
market for their product.
    The proposed consent order would require that Agrium divest 
Unocal's deepwater terminal at Rivergate, part of its upriver terminal 
at Hedges (containing urea storage and land for expansion and road 
access), and leases on three UAN terminals (including one with 
deepwater access) to J.R. Simplot Company. The order would also require 
Agrium to provide Simplot with a long-term lease on the ammonia storage 
at Hedges and perpetual access to the Hedges dock, roadway, rail spur 
and weight scales.
    The Commission is preliminarily satisfied that Simplot is well 
qualified to reproduce Unocal's competitive role in the Northwest. 
Simplot is a $2.8 billion agribusiness that, among other things, 
produces, wholesales and retails nitrogen and other fertilizers around 
North America. It operates a large nitrogen fertilizer production 
facility in Manitoba, numerous phosphate plants, and a chain of retail 
outlets. In the Northwest, Simplot is a substantial source of phosphate 
fertilizers, but its wholesaling of nitrogen fertilizers is very 
limited. The proposed divestiture would enable Simplot to become a 
major wholesaler of nitrogen fertilizers in the Northwest.
    The proposed order requires that respondents divest the specified 
assets to Simplot, in accordance with the agreement between Agrium and 
Simplot, immediately after Agrium acquires Unocal. If, at the time the 
Commission decides to make the proposed consent order final, the 
Commission notifies the respondents that Simplot is not an acceptable 
acquirer, or that the agreement with Simplot is not an acceptable 
manner of divestiture, the respondents must immediately rescind the 
transaction and divest those assets to an acceptable acquirer, and in 
an acceptable manner, within four months of the date the proposed 
consent order becomes final.
    For a period of ten (10) years from the date the proposed order 
becomes final, respondents are required to provide written notice to 
the Commission prior to acquiring any interest in (1) any asset to be 
divested or (2) any terminal with deepwater access used in the transfer 
and storage of UAN 32 in the Northwest. These appear to be the only 
assets in the Northwest whose acquisition might substantially affect 
competition in the sale of the relevant products but not trigger a 
reporting obligation under the Hart-Scott-Rodino Act. Respondents are 
required to provide to the Commission a report of compliance with the 
proposed order within thirty (30) days of the date the order becomes 
final every sixty (60) days thereafter until respondents have complied 
with the divestiture obligations. Respondents are also required to 
provide annual reports during the term of the order. For Agrium the 
term of the order would be ten years; for Unocal it would be until the 
assets to be divested are transferred to Agrium.
    The Agreement Containing Consent Order has been placed on the 
public record for thirty (30) days for receipt 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 proposed order and the comments received and will 
decide whether it should withdraw from the order or make it final. By 
accepting the proposed order subject to final approval, the Commission 
anticipates that the competitive problems alleged in the complaint will 
be resolved. The purpose of this analysis is to invite public comment 
on the proposed order, including the specified divestitures, to aid the 
Commission in its determination of whether it should make the order 
final. This analysis is not intended to constitute an official 
interpretation of the proposed order, nor is it intended to modify the 
terms of the order in any way.

    By direction of the Commission, Commissioner Swindle not 
participating.
Donald S. Clark,
Secretary.
[FR Doc. 00-25570 Filed 10-4-00; 8:45 am]
BILLING CODE 6750-01-M