[Federal Register Volume 67, Number 32 (Friday, February 15, 2002)]
[Notices]
[Pages 7198-7200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3804]


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DEPARTMENT OF JUSTICE

Antitrust Division

[Civil No. 01-01696 GK]


Public Comments and Response on Proposed Final Judgment in United 
States v. Premdor Inc., et al.

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States of America hereby publishes below the 
comment received on the proposed Final Judgment in United States v. 
Premdor Inc., et al, Civil Action No. 01-01696 GK, filed in the United 
States District Court for the District of Columbia, together with the 
United States' response to the comment.
    Copies of the comment 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, E. Barrett Prettyman United States Courthouse, 
Room 1225, 333 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 and Merger Enforcement.
    United States of America, 1401 H Street, NW., Suite 3000, 
Washington, DC 20530, Plaintiff, v. Premdor Inc., 1600 Britannia 
Road East, Mississauga, Ontario, Canada L4W 1J2, Premdor U.S. 
Holdings, Inc., One North Dale Mabry Highway, Suite 950, Tampa, 
Florida 33609, International Paper Company, 400 Atlantic Street, 
Stamford, Connecticut 06921, and Masonite Corporation, 1 South 
Wacker Drive, Chicago, Illinois 60606, Defendants.

Plaintiff's Response to Public Comment

    The United States, pursuant to the Antitrust Procedures and 
Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), hereby responds to the 
single public comment received, attached hereto as Exhibit A, regarding 
the proposed Final Judgment in this case.

I. Background

    On August 3, 2001, the United States filed a Complaint alleging 
that the proposed acquisition of the Masonite business of International 
Paper Company (``IP'') by Premdor Inc. (``Premdor'') would 
substantially lessen competition in violation of Section 7 of the 
Clayton Act, as amended, 15 U.S.C. 18. The Complaint alleges that 
Premdor and IP, through its subsidiary Masonite Corporation 
(``Masonite''), are two of the three largest firms involved in the 
production of interior molded doors. As alleged in the Complaint, the 
transaction will substantially lessen competition in the development, 
manufacture and sale of interior molded doorskins and interior molded 
doors in the United States, thereby harming consumers. Accordingly, the 
Complaint seeks among other things: (1) A judgment that the proposed 
acquisition would violate Section 7 of the Clayton Act; and (2) 
permanent injunctive relief that would prevent defendants from carrying 
out the acquisition or otherwise combining their businesses or assets.
    At the same time the Complaint was filed, the United States also 
filed a proposed, stipulated Final Judgment and Hold Separate 
Stipulation and Order that would permit Premdor to acquire the Masonite 
business, provided that Premdor divests its Towanda, Pennsylvania 
doorskin manufacturing facility, along with intellectual property, 
research capabilities and other assets needed to be a viable doorskin 
manufacturer. The proposed Final Judgment orders defendants to divest 
the Towanda facility to an acquirer approved by the United States. 
Defendants must complete the divestiture within 150 calendar days after 
the filing of the Complaint in this matter, or within 120 calendar days 
after the closing of Premdor's acquisition of the Masonite business, 
whichever is earlier. If defendants do not complete the divestiture 
within the prescribed time, then, under the terms of the proposed Final 
Judgment, this Court will appoint a trustee to sell the Towanda 
facility.
    The Hold Separate Stipulation and Order and the proposed Final 
Judgment require defendants to preserve, maintain and continue to 
operate the North American operations of the Masonite business as an 
independent, ongoing, economically viable competitive business, with 
the management, sales and operations held separate from Premdor's other 
operations. The Hold Separate Stipulation and Order allows the 
defendants to submit to the United States a plan for partitioning the 
Towanda facility from the remainder of Masonite's North American 
operations. The United States has approved defendants' partition plan, 
and in accord with the Hold separate Stipulation and Order, Premdor now 
controls all of Masonite's North American operations other that the 
Towanda facility and other partitioned assets. The partitioned assets 
will continue to be held separate until they are divested to a suitable 
acquirer.
    The United States and defendants 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'') on August 3, 2001. The Complaint, proposed 
Final Judgment and the CIS were published in the Federal Register on 
August 28, 2001. The 60 day comment period required by the APPA expired 
with the United States having received only one public comment, from 
Lifetime Doors, Inc. In light of the recent disruption to mail 
delivery, the United States published a supplemental notice in the 
Federal Register on Dec. 21, 2001, and in the Washington Post from 
December 19, 2001 to December 25, 2001. The supplemental notice 
extended the comment period required by the APPA by fifteen days. The 
fifteen day supplemental comment period has now expired with the United 
States having received no additional public comments.

II. Response to the Public Comment

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 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

[[Page 7199]]

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, 118F.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 Lifetime Doors, Inc.

    Lifetime Doors, Inc. (``Lifetime'') urges the United States to 
rescind the proposed Final Judgment and move to block Premdor's 
acquisition of Masonite's doorskin business. Lifetime argues that the 
proposed Final Judgment, in its present form, fails to guarantee a 
viable buyer for the divested assets, and allows for irreparable damage 
to the market while Premdor seeks a buyer for the Towanda facility. In 
the alternative, Lifetime argues that the proposed Final Judgment is 
inadequate because it does not require the buyer of the Towanda 
facility to produce the exact line of products that was available 
before Premdor acquired Masonite.
    The United States has considered Lifetime's concerns, but remains 
convinced that the proposed Final Judgment is in the public interest. 
Before the divestiture is complete, the Hold Separate Stipulation 
ensures that the Towanda facility will be operated as an independent 
and viable economic entity, and in the judgment of the Monitoring 
Trustee and the United States. Premdor has fulfilled its obligations to 
date. While there is no guarantee that a viable purchaser will be found 
for the Towanda facility, Premdor has taken all appropriate steps to 
locate an acceptable purchaser. See Report to U.S. District Court for 
the District of Columbia and Department of Justice on Premdor and 
Masonite Compliance with Court Ordered Consent Decree, submitted by 
Accenture, filed November 2, 2001. Moreover, there is no evidence that 
the sale of Masonite to Premdor, and the subsequent partition of the 
Towanda facility from the remainder of Masonite, has in fact resulted 
in ``damage to the market,'' as feared by Lifetime.
    Lifetime also urges that the purchaser of the Towanda facility be 
forced to sell ``all product designs and sizes currently produced by 
Masonite'' to independent door manufacturers. Lifetime acknowledges 
that Premdor is required to make all current designs and sizes of 
molded door skins available to the purchaser of the Towanda facility, 
but still fears that all designs will not be purchased by the ultimate 
owner of Towanda, and that the lack of a full line will harm 
independent door manufacturers. The United States disagrees with the 
comment. The eventual owner of the Towanda facility will have the 
incentive to determine the most profitable product line to offer door 
manufacturers, and further, will have every incentive to ensure the 
profitable continuation of the independent door manufacturers, its 
likely largest customer base. If the purchaser of Towanda fails to 
offer a certain design or color of doorskin to its customers, despite 
having access to the full means of production for that model, the 
United States presumes that the market mechanism will ensure that 
consumers' interests are adequately protected.

III. Conclusion

    After careful consideration of the comment, 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.

    Dated: January 23, 2002, Washington, DC.

    Respectfully submitted,

Karen Y. Douglas, Joseph M. Miller (DC Bar 439965),
Attorneys, U.S. Department of Justice, Antitrust Division, 
Litigation II Section, 1401 H Street, NW., Suite 4000, Washington, 
DC 20530, 202-305-4762.

Certificate of Service

    I hereby certify that I served a copy of the foregoing Response to 
Public Comment via First Class United States Mail and facsimile 
transmission, this 23d day of January 2002, on:
    Counsel for International Paper, James R. Loftis, III, Esq., 
Gibson, Dunn & Crutcher LLP, 1050 Connecticut Avenue, NW., Washington, 
DC 20036.
    Counsel for Premdor Inc. and Masonite Corporation, Keith Shugarman, 
Esq., Goodwin, Procter, LLP, 1717 Pennsylvania Avenue, NW., Washington, 
DC 20006.

Karen Y. Douglas,
Attorney, U.S. Department of Justice, Antitrust Division, 1401 H 
Street, NW., Suite 3000, Washington, DC 20530, (202) 305-4762.
August 30, 2001.

    Mr. J. Robert Kramer, II., Chief, Litigation II Section, 
Antitrust Division, United States Department of Justice, 1401 H 
Street, N.W., Suite 3000, Washington D.C. 20530.

Re: Premdor Acquisition of Masonite

    Dear Mr. Kramer: This letter shall serve as our response to the 
Complaint in the matter of United States of America v. Premdor, 
Inc., et. al. filed with the United States District Court for the 
District of Columbia on August 3, 2001 and the Competitive Impact 
Statement and proposed Final Judgment.
    It has been the position of Lifetime Doors, Inc. that the sale 
of Masonite Corporation to Premdor, Inc. would pose a serious threat 
to competition in the wood door industry. We have stressed that the 
divestiture of a part of the Masonite operation would also result in 
significant and irreparable damage to the competitive marketplace 
for molded doors, and seriously affect the wood door industry as a 
whole. After reviewing the Complaint and proposed Final Judgment, 
our position remains unchanged.
    While we remain doubtful that Premdor will find a viable 
purchaser for Towanda, we remain more doubtful that should it find a 
purchaser, that the purchaser will be in a position to compete with 
the two vertically integrated companies. Given that the stated 
purpose of the Final Judgment is to ``require defendants to make 
certain divestitures for the purpose of remedying the loss of 
competition alleged in the Complaint'' (page 2), the Consent Decree, 
Hold Separate Stipulation and Order, and the Final Judgment fail as 
a remedy, in that:
    1. There is not a provision for the possibility that neither 
Premdor, nor the Department of Justice can guarantee that a viable 
buyer for the ``Towanda facility'' will be found;
    2. In the event no buyer is found, there is not a means to undo 
the damage already done to lessen competition (as alleged in the 
Complaint) while attempting to identify a buyer.

For divestiture (including partition) to be an effective remedy to 
insure that Premdor's acquisition of Masonite does not lessen 
competition, it must be a pre-closure, not post-closure remedy. 
Under no circumstance should divestiture (including partition) of 
Masonite's North American Molded Doorskin Business take place until 
such time as a viable buyer for the ``Towanda Facility'' is 
identified and in place.
    For these reasons we urge in the strongest possible terms that 
the Department of Justice rescind this Judgment, and move to block 
the Premdor acquisition of the Masonite Molded Doorskin business.
    Should the Department of Justice not block the acquisition and 
should the Final Judgement be approved by the court, it is 
absolutely necessary in order for the non-

[[Page 7200]]

integrated companies to compete, that all product designs and sizes 
currently produced by Masonite be made available. To the extent that 
given product designs or sizes are not available to the non-
vertically integrated companies, the two vertically integrated 
companies will have a material and significant advantage over the 
independent non-vertically integrated door manufacturers. The 
downstream customers of the wood door manufacturers are of a single 
mind in that all products must be available for purchase from a door 
manufacturer for that manufacturer to be a viable line of supply. If 
any product, no matter how insignificant in terms of its numbers or 
percentage, is unavailable, it will cause the downstream buyer to go 
to a manufacturer that has all required products available for 
purchase. No buyer will change its buying pattern by going elsewhere 
to find 15 doors of a unique design or size for a special order, as 
opposed to including the special order as part of the normal full 
truckload (1080 door) order, assuming the entire order can be 
purchased from a single source.
    Unless the Towanda plant is able to provide all designs and all 
sizes of molded panel doorskins, it is likely that our customers 
will look to do business with either Premdor, Inc. or Jeld-wen, the 
only two molded panel doorskin manufacturers with a full line of 
designs and sizes. These two companies, if Premdor, Inc. acquires 
Masonite Corporation, will be the only vertically integrated door 
manufacturers. As such they will certainly have the capability of 
coordination with regard to doorskins and doors to the detriment of 
the non-vertically integrated companies and the marketplace in 
general. Further, for those distributors and users who require the 
Masonite product, Premdor, Inc. will hold a monopoly in regard to 
designs and sizes not available to non-vertically integrated 
manufacturers (Complaint, paragraph 35).
    At the present time Masonite's Laurel, Mississippi plant 
produces eleven (11) product designs, eighty-nine (89) product sizes 
and the Craftcore profiled core that its Towanda, Pennsylvania 
facility is not able to produce. While the Competitive Impact 
Statement leads the reader to believe that Premdor will divest 
assets, including the Towanda plant, intellectual property, dies 
necessary to manufacture all designs and sizes of molded door skins, 
and services to operate the facility, there is no assurance 
contained in the Final Judgment that the acquirer will purchase the 
additional dies necessary to produce all products currently 
available through Masonite Corporation. In fact, the acquirer is not 
required to make all products nor is Premdor required to provide all 
product dies at the time of sale of the Towanda facility.
    It is also erroneous to assume that price alone is a determining 
factor (Complaint, paragraph 28). In fact, even if we are able to 
sell the most commonly used designs and sizes of molded panel doors 
at a lesser price (even a significantly lesser price) we could not 
compete with the manufacturer that is able to provide all designs 
and all product sizes. By the Justice Department's own admission, 
the lack of all sizes and designs has been a significant deterrent 
to entry into the U.S. market by off-shore molded panel doorskin 
manufactures (Complaint, paragraph 26). The lack of a full line (all 
sizes and designs) would serve as the same deterrent to any entity 
that may acquire and attempt to operate the Towanda plant, and to 
any non-integrated manufacturer attempting to compete with a 
vertically integrated manufacturer.
    Since downstream door buyers frequently treat doors as a 
commodity and often switch purchases from one manufacturer to 
another, the two year constraint placed on the defendants in the 
Final Judgment will do no more than postpone the opportunities for 
coordination by the two vertically integrated companies thereby 
creating the exact monopolistic marketplace described by the 
Department of Justice in the Competitive Impact Statement.
    Further, the Final Judgment fails to insure continued free 
competition as it presently exists, and thereby fails as a 
satisfactory remedy, because: it does not guarantee the non-
vertically integrated companies with a source for all items 
presently produced by Masonite; Premdor, Inc. is not required to 
make available all items to the non-integrated companies; and the 
Department of Justice cannot force Premdor to sell those items 
produced in Laurel to the non-integrated companies.
    The Final Judgment in its present form is anti-competitive 
because it: (1) forces a buyer to go to a different supplier to 
obtain the full range of products necessary to meet its needs; (2) 
harms a buyer by positioning a vertically integrated manufacturer in 
a manner that would allow that manufacturer to charge more for a 
product because it is not available through a non-vertically 
integrated manufacturer; (3) harms a buyer by establishing an 
environment conducive to coordination between the vertically 
integrated manufacturers based on Premdor's access to designs and/or 
sizes presently available from Masonite that will not be available 
to the non-vertically integrated manufacturers (Complaint, paragraph 
39).
    For these reasons we again urge that the Department of Justice 
rescind this Judgment, and move to block the Premdor acquisition of 
the Masonite Molded Doorskin business, including the post 
acquisition divestiture of the Towanda facility.
    Respectfully yours,

James K. Mitchell,
Vice President Administration.
[FR Doc. 02-3804 Filed 2-14-02; 8:45 am]
BILLING CODE 4410-11-M