[Federal Register Volume 66, Number 37 (Friday, February 23, 2001)]
[Notices]
[Pages 11328-11332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4516]


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DEPARTMENT OF JUSTICE

Antitrust Division

[Civil No. 00-CV-954 (RMU)]


Public Comments and Response on Proposed Final Judgment United 
States v. Alcoa Inc. and Reynolds Metals Company

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
Sec. 16(b)-(h), the United States of America hereby publishes below the 
comments received on the proposed Final Judgment in United States v. 
Alcoa Inc., et al., Civil Action No. 00-CV-954 (RMU), filed in the 
United States District Court for the District of Columbia, together 
with the United States' response to the comments.
    Copies of the comments and response are available for inspection in 
Room 215 of the U.S. Department of Justice, Antitrust Division, 325 7th 
Street, NW., Washington, DC 20530, telephone: (202) 514-2481, and at 
the office of the Clerk of the United States District Court for the 
District of Columbia, United States Courthouse, Third Street and 
Constitution Avenue, NW., Washington, DC 20001. Copies of any of these 
materials may be obtained upon request and payment of a copying fee.

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

United States' Response to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (``APPA'' or ``Tunney Act''), 15 U.S.C. 16(b)-(h), the 
United States hereby responds to the two public comments received 
regarding the proposed Final Judgment in this case.

I. Background

    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 alleged that 
the proposed merger would 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 benefited consumers through lower prices 
and higher output. The proposed merger of Alcoa and Reynolds would 
substantially increase the concentration of the SGA and CGA markets, 
and the loss of competition would substantially enhance Alcoa's control 
over the prices of SGA and CGA, while also increasing the likelihood of 
anticompetitive coordination among the few remaining competitors in the 
SGA and CGA markets.
    Simultaneously with the filing of the Complaint, the United States 
filed a proposed Final Judgment and Hold Separate Stipulation and Order 
that would permit Alcoa to complete its acquisition of Reynolds, but 
would require divestitures to preserve competition in the relevant 
markets.\1\ The proposed Final Judgment requires Alcoa and Reynolds to 
divest all of Reynolds' interest in the Worsley Joint Venture, 
established by agreement dated February 7, 1980, and subsequently 
amended (the ``Worsley Interest'') and 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 (the ``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'' or 
``Department''). The Worsley Interest must be divested within two 
hundred seventy (270) days after the filing of the Complaint, or five 
(5) days after notice of entry of the Final Judgment by the Court, 
whichever is later. The Corpus Christi Assets must be divested within 
one hundred eighty (180) days after the filing of the Complaint, or 
five (5) days after notice of entry of the Final Judgment by the Court, 
whichever is later.
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    \1\ The Court entered the Hold Separate Stipulation and Order on 
May 12, 2000.
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    Until the required divestitures are completed, the terms of a 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.
    On December 14, 2000, the United States notified Alcoa, pursuant to 
Part VI of the proposed Final Judgment, that it had no objection to 
Alcoa's proposed sale of the Corpus Christi Assets to BPU Reynolds, 
Inc., and no objection to Alcoa's proposed sale of the Worsley Interest 
to Billiton plc.
    The United States, Alcoa and Reynolds have stipulated that the 
proposed Final Judgment may be entered after compliance with the APPA. 
In compliance with the APPA, the United States filed the Competitive 
Impact Statement (``CIS'') in this docket on June 6, 2000. The 
Complaint, proposed Final Judgment and CIS were published in the 
Federal Register on June 21, 2000. The 60-day comment period required 
by the APPA has now expired with the United States having received two 
comments: one from the American Antitrust Institute and one from Mr. 
Charles A. Stille.

II. Response to the Public Comments

A. Legal Standard Governing the Court's Public Interest Determination

    The Tunney Act directs the Court to determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 16(e). 
In making that determination, the ``court's function is not to 
determine whether the resulting array of rights and liabilities is one 
that will best serve society, but only to confirm that the resulting 
settlement is within the reaches of the public interest.'' United 
States v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.), cert. 
denied, 510 U.S. 984 (1993). The Court should evaluate the relief set 
forth in the proposed Final Judgment and should enter the Judgment if 
it falls within the government's ``rather broad discretion to settle 
with the defendant

[[Page 11329]]

within the reaches of the public interest.'' United States v. Microsoft 
Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); accord United States v. 
Associated Milk Producers, 534 F.2d 113, 117-18 (8th Cir.), cert. 
denied, 429 U.S. 940 (1976). The Court should review the proposed Final 
Judgment ``in light of the violations charged in the complaint and * * 
* withhold approval only (a) if any of the terms appear ambiguous, (b) 
if the enforcement mechanism is inadequate, (c) if third parties will 
be positively injured, or (d) if the decree otherwise makes a `mockery 
of judicial power.''' Massachusetts Sch. of Law at Andover, Inc. v. 
United States, 118 F.3d 776 783 (D.C. Cir. 1997) (quoting Microsoft, 56 
F.3d at 1462). The Tunney Act does not empower the Court to reject the 
remedies in the proposed Final Judgment based on the belief that 
``other remedies were preferable,'' Microsoft, 56 F.3d at 1460, nor 
does it give the Court authority to impose different terms on the 
parties. See, e.g., United States v. American Tel. & Tel. Co., 552 F. 
Supp 131, 153, n.95 (D. D.C. 1982) (``AT&T''), aff'd sub nom. Maryland 
v. United States, 460 U.S. 1001 (1983) (mem.); accord H.R. Rep. No. 93-
1463, at 8 (1974).

B. Response to American Antitrust Institute

    The American Antitrust Institute (``AAI'') is ``pleased'' with the 
proposed Final Judgment but requests a second round of public comment 
once specific buyers have been found for the Divestiture Assets. AAI 
expresses concern that Alcoa will sell the assets to a ``weak or 
otherwise inappropriate buyer'' and believes that an additional round 
of comments ``will help us avoid this result.''
    The Department objects to AAI's proposed second round of comments 
for three principal reasons. First, such a procedure would be 
inconsistent with procedures that courts have routinely applied in 
reviewing proposed Final Judgments. Second, such a procedure is 
unnecessary given the incentives and ability that the Department has to 
assure that divestitures are accomplished in a manner that protects 
competition. Third, the procedure proposed by AAI would itself create 
problems that might make divestitures in antitrust cases more difficult 
to accomplish.
    1. The Tunney Act was enacted in 1974. Since that time, the 
Department has negotiated hundreds of consent decrees in merger cases 
that call for the divestiture of assets. In each instance, the public 
has been accorded an opportunity to comment upon the terms of the 
proposed Final Judgment. Often the court has proceeded to review and 
then enter the proposed Final Judgment before the purchaser of the to-
be-divested assets has been selected, relying upon the Department to 
monitor the divestiture process. The Department has been unable to 
identify a single instance in which a court deferred entry of a 
proposed Final Judgment that was otherwise in the public interest in 
order to receive a second round of comments regarding the divestiture 
selection process.
    AII has offered no basis for subjecting this case to a different 
process. Without explanation, AAI contends that the Department is 
subject to ``institutional pressure'' to accept ``any typically 
competent buyer'' and argues that this is not a ``sufficiently high 
standard.'' Yet, the test that the Department will apply to prospective 
purchasers in this case is no different than it applies in any other 
case. The Department is no less interested in assuring the preservation 
of competition in the SGA and CGA markets than is AAI, but AAI has 
simply provided the Court with no reason to deviate from the procedures 
that are routinely followed in other cases that are subject to the 
Tunney Act.
    2. The procedures urged upon the Court by AAI are unnecessary 
because the Department has the incentives and ability to assure that 
the divestiture process is conducted in a proper manner. After 
concluding that the proposed transaction between Alcoa and Reynolds 
would be anticompetitive, the Department agreed to the proposed Final 
Judgment as a way to preserve the competition that existed prior to 
Alcoa's acquisition of Reynolds. Accordingly, the proposed Final 
Judgment is designed to ensure that the buyers of the divested assets 
will compete effectively against Alcoa and others in the industry, and 
the Department conducts a thorough investigation, as described below, 
before approving any particular purchaser.
    The proposed Final Judgment contains provisions that (1) give the 
United States sole approval of the purchaser(s) of all the divested 
assets, (2) set forth the standards that the United States applies in 
evaluating proposed purchasers, and (3) require defendants Alcoa and 
Reynolds to provide information to the United States about the process 
undertaken by the defendants to select a buyer, as well as requiring 
information from defendants and the prospective purchaser for 
evaluation of the purchaser.
    With regard to the standards that the proposed buyers must satisfy 
to be approved by the United States, Section IV.I. of the Proposed 
Final Judgment states:

    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 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.

    The proposed Final Judgment also gives the United States the means 
to obtain information necessary to assess the process by which the 
buyer or buyers are selected, the capability of the buyers, and the 
transaction terms. Section VI.A. states that notice shall be given 
that:

    [S]ets forth the details of the proposed transaction and lists 
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 the same.

    One the United States receives such notice, Section VI.B. provides 
that:

    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 purchaser or purchasers, and any other 
potential purchaser.

    The provision also establishes deadlines by which time the 
information must be provided.\2\
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    \2\ Section IV.I. also provides protections against Alcoa's 
using any agreements with the purchaser or purchasers to prevent 
them from competing to the fullest extent against Alcoa:
    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.
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    After obtaining notice that the defendants have entered into a 
proposed transaction with a prospective purchaser of the divested 
assets, the Department begins an investigation into the transaction and 
prospective purchaser to review the selection process and analyze the 
managerial and financial ability of each purchaser.\3\ Typically, 
Department staff requests from the defendants detailed information 
about the transaction, any previous or ongoing association with the

[[Page 11330]]

purchaser, and financial information about the assets. From the 
purchaser, staff typically will obtain financial statements, the 
proposal business plan, financing plans, and information about the 
proposed purchaser's assets. Interviews of relevant personnel, other 
bidders, competitors, and investment bankers are also often conducted. 
The Department's team of lawyers, economists, and financial analysts 
examines this information and makes a recommendation to approve or 
disapprove the purchaser. This recommendation typically whether the 
purchaser has the operational, managerial, and financial capacity to 
compete effectively over the long term, and whether the purchase 
agreement is free of any terms that might limit the purchaser's ability 
to compete effectively. This recommendation is reviewed within the 
Department and approved or disapproved. The parties are informed of the 
decision and, only if the decision is positive, may they proceed with 
the sale.
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    \3\ For example, in Fiscal Year 1999 and 2000, the Department 
resolved 38 merger cases by consent decree, 36 of which involved 
divestitures.
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    Other provisions permit the United States to review Alcoa's and 
Reynolds' adherence to the proposed Final Judgment's terms, both before 
and after the divestitures occur, by imposing obligations on Alcoa and 
Reynolds to provide information about their compliance with the 
proposed Final Judgment's divestiture provisions. Section VII.A. 
requires periodic affidavits ``as to the fact and manner of compliance 
with Section IV or Section V of this Final Judgment.'' The affidavits 
must include specific information about the defendants' attempts to 
solicit a purchaser or purchasers for the divested assets.\4\
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    \4\ In addition to these provisions requiring that information 
be provided to the United States, Section X.A.1. of the proposed 
Final Judgment obligates Alcoa and Reynolds to permit compliance 
inspections by representatives of the Department of Justice of their 
``books, ledgers, accounts, correspondence, memoranda, and other 
records and documents in the possession or under the control of the 
Defendants * * * relating to any matters contained in this Final 
Judgment and the Hold Separate Stipulation and Order.'' Pursuant to 
Section X.A.2., the United States may also interview, informally or 
on the record, ``officers, employees, and agents * * * regarding any 
such matters.'' Section X.B. states that: ``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.''
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    In sum, the proposed Final Judgment's provisions empower the United 
States to review and approve the proposed purchaser or purchasers of 
the assets to be divested, and with these provisions, the United States 
is able to ensure that the purchasers of the assets are capable of 
competing effectively in the relevant markets. The various factors that 
AAI suggests are relevant to assessing a proposed purchaser, including 
``financial strength, operational experience, and management quality of 
the new owners, as well as their history of competitive (or collusive) 
behavior,'' are examined by the United States under the provisions of 
the proposed Final Judgment.
    3. The procedures proposed by AAI could actually have a 
counterproductive effect of making divestitures more difficult to 
accomplish. In conducting its investigation of proposed divestitures, 
the Department routinely obtains and relies upon highly sensitive 
competitive and financial information that a proposed purchaser is 
willing to provide to the Department on a confidential basis but would 
not be willing to make available publicly. The procedure envisioned by 
AAI, requiring the Department to provide a public explanation of why it 
approved a particular purchaser so that the public could comment, would 
inevitably require the Department to disclose such information, even 
though disclosure of such information could itself be competitively 
undesirable.\5\
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    \5\ For example, the Department reviews a prospective 
purchaser's business plan. Disclosure of such information could 
itself be anticompetitive by revealing to the defendants the 
purchaser's strategy for competing against them. It is precisely to 
guard against this risk that Section X.C. of the proposed Final 
Judgment provides protections against disclosure of the information 
obtained by the United States in the course of the approval process.
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    Moreover, the procedures proposed by AAI would potentially delay 
the achievement of effective remedies to anticompetitive mergers. A 
second round of comments could delay entry of the proposed Final 
Judgment, which would extend the divestiture deadlines contained 
therein.
    Any needless delay in the consummation of the divestitures would 
deny the public the benefits of the competition contemplated by the 
proposed Final Judgment.
    A second round of public comment would also risk involving the 
Court in an inquiry that is not envisioned by the Tunney Act. Courts 
have repeatedly held that it is not within the ``public interest'' 
standard of Tunney Act to determine the ``best'' remedy or buyer. See 
Western Electric, 999 F.2d at 1516 (``the court's function is not to 
determine whether the resulting array of rights and liabilities ``is 
one that will best serve society,'' but only to confirm that the 
resulting ``settlement is, within the reaches of the public interest., 
(citing and quoting United States v. Bechtel Corp., 648 F.2d 660, 666 
(9th Cir. 1981).'') There is no suggestion in the AAI request that the 
public comment process would be confined to consideration of the 
purchaser approved by the Department; indeed its comments suggest that 
it would want the Department to provide information from which AAI 
could evaluate the competitive potential of all potential buyers and 
urge the Court to second-guess the Department's decision. This is not 
an inquiry contemplated by the Tunney Act. See Microsoft, 56 F.3d at 
1461.
    For all of the foregoing reasons, the Court should reject AAI's 
proposal for a second round of public comments.

C. Response to Mr. Stille

    Mr. Stille questions whether Alcoa, as the world's largest aluminum 
company, is a monopoly and whether there is competition in the aluminum 
industry in the United States, but does not provide a basis to reject 
the proposed Final Judgment. In its investigation into what Mr. Stille 
refers to as the overall ``aluminum industry,'' the Department 
determined that the industry consists of numerous separate product 
markets with varying geographic dimensions--some are local, some are 
worldwide. The Department then assessed the competitive implications of 
the loss of an independent Reynolds in those markets in which the 
merging firms compete with each other. After a thorough investigation, 
the Department concluded that competition would likely be substantially 
lessened in two markets, the worldwide for SGA and the North American 
market for CGA. Accordingly, the Department brought a case alleging 
that anticompetitive effects would be likely in those markets, and 
obtained relief in those markets designed to remedy the competitive 
harms posed by the proposed acquisition. Mr. Stille's comment does not 
offer any basis to conclude that the relief obtained is inadequate to 
redress the harm alleged in the complaint.
    Because he argues for a case--one focused on the ``aluminum 
industry''--different from the one that the Department brought and does 
not address the relief ordered by the proposed Final Judgment, Mr. 
Stille's comment raises issues not relevant to this Tunney Act 
proceeding. The Tunney Act does not contemplate a judicial reevaluation 
of the government's determination of which violations to allege in the 
Complaint. ``Constitutional questions * * * would be raised if courts 
were to subject the government's exercise of its

[[Page 11331]]

prosecutorial discretion to non-deferential review.'' Massachusetts 
Sch. of Law at Andover, Inc., 118 F.3d at 783 (citing Microsoft, 56 
F.3d at 1457-59). The government's decision not to bring a particular 
case based on the facts and law before it at a particular time, like 
any other decision not to prosecute, ``involves a complicated balancing 
of a number of factors which are peculiarly within [the government's] 
expertise.'' Heckler v. Chaney, 470 U.S. 821, 831 (1985). Thus, the 
Court may not look beyond the Complaint ``to evaluate claims that the 
government did not make and to inquire as to why they were not made.'' 
Microsoft, 56 F.3d at 1459; see also Milk Producers, 534 F.3d at 117-
18.
    The legal precedent discussed above holds that the scope of a 
Tunney Act proceeding is limited to whether entry of this particular 
proposed Final Judgment, agreed to by the parties as settlement of this 
case, is in the public interest. Thus, the entry of a governmental 
antitrust decree forecloses no private party from seeking and obtaining 
appropriate antitrust remedies for defendants' activities. Defendants 
will remain liable for any illegal acts, and any private party may 
challenge such conduct if and when appropriate.

III. Conclusion

    After careful consideration of the comments, the United States 
concludes that entry of the proposed Final Judgment will provide an 
effective and appropriate remedy for the antitrust violation alleged in 
the Complaint and is in the public interest. The United States will 
move the Court to enter the proposed Final Judgment after the public 
comments and this Response have been published in the Federal Register, 
as 15 U.S.C. 16(d) requires.

    For Plaintiff United States of America:
    Dated: January 16th, 2001.
    Respectfully submitted,
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, 
NW., 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 United 
States' Response to Public Comments to be served on counsel for 
Defendants in this matter in the manner set forth below:

By first class mail, postage prepaid, and by facsimile: Mark Leddy, 
Cleary, Gottlieb, Steen & Hamilton, 2000 Pennsylvania Avenue, NW., 
Washington, DC 20006-1801.
Michael H. Byowitz, Wachtell, Lipton, Rosen & Katz, 51 West 52nd 
Street, New York, NY 10019-6150.
    January 16, 2001.
Andrew K. Rosa,

Hawaii Bar #6366, Trial Attorney, Antitrust Division, U.S. 
Department of Justice, 325 Seventh Street, NW., Suite 500, 
Washington, DC 20530, (202) 307-0886, (202) 616-2441 (fax).

The American Antitrust Institute

June 22, 2000.
Roger Fones, U.S. Department of Justice, 325 Seventh Street, NW, 
Suite 500, Washington, DC 20530.

Dear Mr. Fones: We are writing to convey the comments of The 
American Antitrust Institute regarding the proposed Final Judgment 
in United States of America v. Alcoa Inc. and Reynolds Metals 
Company (U.S. District Court, District of Columbia, Civil Action 
Number 1:00CV00954). Prior to a decision in that case, please 
publish these comments in the Federal Register, along with the 
Government's responses to them, pursuant to the Antitrust Procedures 
and Penalties Act, 15 U.S.C. 16(b)-(h).
    We are pleased that the proposed Final Judgment (in conjunction 
with the European Commission's requirement) would have the 
defendants sell off all of Reynolds' current alumina-refining 
capacity as a condition of the lawful merger of these two companies. 
As one can see from the AAI's monograph analyzing the competitive 
impact of this merger, previously provided to the Antitrust Division 
of the U.S. Department of Justice (http://www.antitrustinstitute.org, 2/23 link under ``Recent Activities''), 
we focused on the alumina market in our own analysis, because we 
feel that this market is where the merger poses the largest 
competitive threat.
    Whether the proposed settlement of this investigation will 
preserve competition in the alumina market, however, cannot be 
determined at this time. The United States chose to condition its 
approval of the merger only on certain ``divestitures'' in the 
abstract, without having first approved particular buyers for the 
divested assets, as the antitrust agencies have sometimes done in 
other mergers. Given that decision, we would ask the Justice 
Department and the Court to allow a second phase of public comment 
once specific buyers have been found for the divested assets. At 
this point, the institutional pressure is great for the Justice 
Department to accept any typically competent buyer of the assets, 
and in this industry we feel that that may not be a sufficiently 
high standard. A second--possibly quite brief--public comment period 
would help insure that a higher standard is reached.
    As Federal Trade Commission Chairman Robert Pitofsky noted in a 
February 17, 2000, speech about restructuring (including 
divestitures) in the merger-review process, ``the Commission in 
recent years has often insisted on knowing who the buyer or buyers 
[of divested assets] are likely to be, and on seeing the buyers' 
business plan,'' before entering a consent agreement.\1\ Indeed, 
Chairman Pitofsky noted, ``[a] buyer up-front is now required in 
about 60% of Commission divestitures.''\2\
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    \1\ See Robert Pitofsky, ``The Nature and Limits of 
Restructuring in Merger Review'' (Feb. 17, 2000), or at http://www.ftc.gov/speeches/pitofsky/restruct.htm.
    \2\ Ibid., note 13, citing Richard G. Parker, ``Global Merger 
Enforcement'' (Sept. 28, 1999), available at http://www.ftc.gov/speeches/other/barcelona.htm.
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    In our view, this is a laudable trend. Consider the conclusions 
of a 1999 study conducted by the FTC's Bureau of Competition in 
collaboration with the Bureau of Economics, which Chairman Pitofsky 
discussed in his February speech. The study reviewed 35 orders 
entered into between 1990 and 1994 that required the divestiture of 
assets as a result of FTC action, and determined which ones had 
succeeded in creating viable operations in the relevant market.\3\ 
The result, according to Chairman Pitofsky, was that ``[i]n those 
instances in which divestiture did not work out, it usually was 
because the seller engaged in strategic conduct to seek out 
marginally effective buyers . . . or buyers, because of 
informational disadvantages and lack of experience in the particular 
markets involved, were unduly optimistic about their ability to 
compete effectively with the acquired assets.'' In other words, 
ineffective divestitures are generally caused by a poor selection of 
buyers.\4\
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    \3\ Federal Trade Commission Bureau of Competition Staff, ``A 
Study of the Commission's Divestiture Process'' (1999).
    \4\ As reported in the press release announcing the 1999 study 
of the divestiture process, William Baer, then director of the FTC's 
Bureau of Competition, assessed the study as follows: ``The study 
confirms the importance of one of the approaches currently being 
used by the Commission, the so-called `up-front buyer,' where the 
buyer of the assets to be divested is identified earlier in the 
process. The use of the up-front buyer both reduces the likelihood 
that consumers will be harmed while waiting for the divestiture, and 
also assures that there will be an acceptable buyer.''
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    This is precisely our concern in the Alcoa/Reynolds case. We 
believe the new owners of the divested alumina refineries must be 
able to run them at least as efficiently as Reynolds has done in the 
past, and must be at least as well-positioned as Reynolds has been 
to compete with Alcoa for alumina sales, in order to insure against 
diminished competition. These determinations must be made on a case-
by-case basis, considering the financial strength, operational 
experience, and management quality of the new owners, as well as 
their history of competitive (or collusive) behavior. Our research 
suggests that Alcoa is an unusually well-managed company in an 
industry where poor, high-cost, tradition-bound management is not 
uncommon. Thus, many of the potential buyers of the divested assets 
might have high overhead costs or unsophisticated management 
practices that would prevent them from competing meaningfully 
against a newly strengthened Alcoa.
    Moreover, a buyer's suitability depends on what it is likely to 
do with its new alumina

[[Page 11332]]

capacity. Will it sell at least as much alumina to third parties as 
Reynolds did, or will it use more of the alumina in its own aluminum 
smelter? To the extent that the alumina is used internally, will it 
simply substitute for third-party alumina that the owner previously 
purchased on the open market, or will it be used to expand aluminum 
production? The answers to such questions are buyer-specific, and 
could dramatically affect the future competitive dynamics of the 
aluminum industry.
    For the above reasons, we once again urge the United States to 
allow some form of public comment on the proposed Final Judgment 
after buyers are found for the divested assets, even if the comment 
period is relatively brief. This is an industry with huge barriers 
to entry, relatively few large players, highly inelastic demand, and 
a history of antitrust problems. We cannot afford to tip the scales 
in an anticompetitive direction by allowing Alcoa to find weak or 
otherwise inappropriate buyers for the assets it is being asked to 
divest. A public explanation of the Government's reasons for 
approving specific buyers and a brief public comment on the buyers 
will help us avoid this result.
Sincerely,
Albert Foer,
President, American Antitrust Institute.

Matthew Siegel,
Research Fellow, American Antitrust Institute.

cc: The District Court for the District of Columbia, The Hon. Joel 
Klein, Assistant Attorney General for Antitrust.

700 S. Courthouse Road, Arlington, VA, 22204, June 8, 2000.
Ms. Janet Reno, Attorney General, The Department of Justice, 
Constitution Avenue at 10th Street, NW, Washington, DC 20530.

    Dear Ms. Reno: One wonders why the federal government will 
permit the Aluminum Company of America (ALCOA) to take over Reynolds 
Metals Company (REYNOLDS).
    On May 15, 1911, the Supreme Court dissolved Standard Oil 
Company.
    The 13-year-old lawsuit against AT&T by the Justice Department 
was settled on January 8, 1982.
    Now, the Justice Department is trying to break-up Microsoft 
Corporation.
    If the above mentioned companies were and are monopolies, why 
isn't ALCOA included in that category, since it will become the 
world's largest aluminum producer? Where is the competition in the 
aluminum industry in the United States.
Sincerely,
Charles A. Stille.
[FR Doc. 01-4516 Filed 2-22-01; 8:45 am]
BILLING CODE 4410-11-M