[Federal Register Volume 69, Number 89 (Friday, May 7, 2004)]
[Notices]
[Pages 25582-25584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10409]


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FEDERAL TRADE COMMISSION

[File No. 041 0020]


American Air Liquide, Inc., et al.; Analysis to Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before May 29, 2004.

ADDRESSES: Comments should refer to ``American Air Liquide, Inc., et 
al., File No. 041 0020,'' to facilitate the organization of comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed or delivered to the 
following address: Federal Trade Commission/Office of the Secretary, 
Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580. 
Comments containing confidential material must be filed in paper form, 
as explained in the Supplementary Information section. The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions. Comments filed in electronic form 
(except comments containing any confidential material) should be sent 
to the following e-mail box: [email protected].

FOR FURTHER INFORMATION CONTACT: Christina Perez, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2048.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), 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 desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for April 29, 2004), on the World Wide Web, at ``http://www.ftc.gov/os/2004/04/index.htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Written comments must be submitted 
on or before May 29, 2004. Comments should refer to ``American Air 
Liquide, Inc., et al., File No. 041 0020,'' to facilitate the 
organization of comments. A comment filed in paper form should include 
this reference both in the text and on the envelope, and should be 
mailed or delivered to the following address: Federal Trade Commission/
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. If the comment contains any material for which 
confidential treatment is requested, it must be filed in paper (rather 
than electronic) form, and the first page of the document must be 
clearly labeled ``Confidential.'' \1\ The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions. 
Comments filed in electronic form should be sent to the following e-
mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from L'Air Liquide, S.A., which is designed to remedy the 
anticompetitive effects resulting from L'Air Liquide, S.A.'s 
acquisition of the entire share capital of Messer Griesheim GmbH 
(``Messer'') and the subsequent transfer of Messer Griesheim 
Industries, Inc. (``MGI'') to its wholly-owned subsidiary American Air 
Liquide.
    Under the terms of the Consent Agreement, American Air Liquide is 
required to divest the air separation units (``ASUs'') and related 
assets currently owned and operated by MGI in the following six 
locations: (1) Vacaville, California; (2) Irwindale, California; (3) 
San Antonio, Texas, (4) Westlake, Louisiana; (5) DeLisle, Mississippi; 
and (6) Waxahachie, Texas. The divestiture will take place no later 
than six months from the date the Consent Agreement becomes final. The 
Consent Agreement also includes an Agreement to Hold Separate that 
requires American Air Liquide to preserve the ASUs as viable, 
competitive and ongoing operations until the divestiture is achieved.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After thirty

[[Page 25583]]

(30) days, the Commission will again review the proposed Consent 
Agreement and the comments received, and will decide whether it should 
withdraw from the proposed Consent Agreement or make it final.
    Pursuant to a sale and purchase agreement dated January 19, 2004, 
L'Air Liquide, S.A. agreed to acquire the entire share capital of 
Messer. The aggregate purchase price of the transaction is 
approximately $3.5 billion and includes $1.3 billion of Messer's debt 
that L'Air Liquide, S.A. has agreed to assume. As a result of this 
agreement, L'Air Liquide, S.A. will immediately transfer MGI, a wholly-
owned subsidiary of Messer, which produces and sells industrial gases 
in the United States, to American Air Liquide. The Commission's 
complaint alleges that the proposed acquisition and subsequent transfer 
of MGI, if consummated, would violate 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, by lessening competition in the market 
for liquid argon in the continental United States and certain regional 
markets in the United States for liquid oxygen and nitrogen.

II. The Parties

    L'Air Liquide, S.A. is a world leader in industrial and medical 
gases and related equipment. American Air Liquide is the parent 
corporation of the United States subsidiary that produces and supplies 
oxygen, nitrogen, and argon as well as many other industrial gases to 
customers for numerous applications in a variety of industries, 
including the petrochemical, manufacturing and fabrication industries 
as well as the medical field. American Air Liquide's subsidiary is the 
fourth largest supplier of industrial gases in the United States, with 
twenty seven (27) ASUs throughout the United States, most of which are 
in Texas and the Gulf Coast region.
    Messer's U.S. subsidiary, MGI, is currently the fifth largest 
producer of liquid atmospheric gases (oxygen, nitrogen and argon) in 
the United States. MGI owns and operates twenty four (24) ASUs, 
including several located in Texas and the Gulf Coast region, as well 
as in northern and southern California.

III. Liquid Oxygen, Liquid Nitrogen, and Liquid Argon

    Both American Air Liquide and MGI own and operate ASUs in the 
United States to provide customers with liquid atmospheric gases, 
including liquid oxygen, liquid nitrogen, and liquid argon. Each gas 
has specific properties that make it uniquely suited for the 
applications in which it is used. For most of these applications, there 
is no substitute for the use of oxygen, nitrogen, or argon. Customers 
would not switch to another gas or product even if the price of liquid 
oxygen, liquid nitrogen or liquid argon increased by five to ten 
percent.
    Additionally, customers have three distinct distribution methods to 
choose from in receiving oxygen, nitrogen, or argon. These gases are 
available in cylinders, in liquid form, and through an on-site ASU or a 
pipeline. Customers choose a distribution method based on the volume of 
gas required. Customers who use liquid oxygen, liquid nitrogen, or 
liquid argon generally require volumes of these gases that are too 
large to purchase economically in cylinders, but too small to justify 
the expense of an on-site ASU or pipeline. In fact, even if the price 
of liquid oxygen, liquid nitrogen or liquid argon increased by five to 
ten percent, customers would not switch to another method of 
distribution.
    Due to high transportation costs, liquid oxygen and liquid nitrogen 
may only be purchased economically from a supplier with an ASU located 
within one hundred and fifty (150) to two hundred and fifty (250) miles 
of the customer. Therefore, it is appropriate to analyze the 
competitive effects of the proposed acquisition using local geographic 
markets for liquid oxygen and liquid nitrogen. The relevant local 
markets in which to analyze the effects of this proposed acquisition 
are: Southern California, Northern California, Southern Texas, Western 
Louisiana, and the Central Gulf Coast. Because liquid argon is a more 
rare and more expensive gas than liquid oxygen and liquid nitrogen, it 
may be economically transported much greater distances. Therefore, the 
continental United States and regions of the United States are the 
appropriate geographic markets in which to analyze the competitive 
effects of the proposed acquisition for liquid argon.
    The markets for liquid oxygen and liquid nitrogen are highly 
concentrated. In three of the five relevant geographic markets 
(Southern California, Northern California, and the Central Gulf Coast) 
American Air Liquide and MGI are two of only five companies supplying 
liquid oxygen and liquid nitrogen to customers. Additionally, MGI has 
been an aggressive participant in the market for these gases, offering 
low prices to customers and serving as a price restraint on the other 
suppliers. As a result, the proposed acquisition would enhance the 
likelihood of collusion or coordinated action between or among the 
remaining firms in each market. Furthermore, in the Southern Texas and 
Western Louisiana markets, MGI and American Air Liquide are the only 
producers capable of supplying liquid oxygen and liquid nitrogen to 
customers in those markets economically. By eliminating competition 
between these two suppliers in these areas, the proposed acquisition 
would allow American Air Liquide to exercise market power unilaterally, 
thereby increasing the likelihood that purchasers of liquid oxygen or 
liquid nitrogen would be forced to pay higher prices in these areas.
    The market for liquid argon is also highly concentrated, with only 
five suppliers producing sufficient amounts of liquid argon to supply 
customers around the United States. The remaining firms are very small 
and local in nature, and produce liquid argon primarily to meet 
internal needs. Additionally, the five large suppliers of liquid argon 
all transport the product from ASUs in the middle and eastern part of 
the United States to customers on the West Coast, where the ASUs owned 
and operated by these suppliers do not produce enough argon to meet 
customers' demands. Over the past few years, MGI has had excess 
capacity in liquid argon which it has used to win new customers by 
offering low prices, especially to customers in Texas, Gulf Coast and 
California. By eliminating MGI as a competitor in the liquid argon 
market, particularly on the West Coast, the proposed acquisition would 
enhance the likelihood of coordinated action or collusion between or 
among the remaining firms, and could result in customers paying higher 
prices for liquid argon.
    Significant impediments to new entry exist in the markets for 
liquid oxygen, liquid nitrogen, and liquid argon. In order to be cost 
competitive in these markets, an ASU must produce at least two hundred 
and fifty (250) to three hundred (300) tons per day of liquid product. 
The cost to construct a plant of this size can be thirty ($30) to forty 
($40) million, most of which is sunk and cannot be recovered. While an 
ASU can theoretically be constructed within two years, it is not 
economically justifiable to build an ASU before contracting to sell a 
substantial portion of the plant's daily capacity, either to an on-site 
customer or to several liquid customers. On-site customers normally 
sign long-term contracts, and as such opportunities to contract with 
these customers are rare, it is uncertain whether such an opportunity 
would arise at any time in the near future in

[[Page 25584]]

any of the areas affected by the acquisition. It is even more difficult 
and time-consuming for a potential new entrant to try to contract with 
enough liquid gas customers to justify building a new ASU in a market. 
These customers are generally locked into contracts with existing 
suppliers that typically last between five (5) and seven (7) years. 
Even if the new entrant was able to contract with enough liquid 
customers to justify constructing a new ASU in any of the affected 
markets, the new entrant would still need to rely on suppliers already 
in the market to obtain liquid gases to service the new entrant's 
customers while the ASU was constructed. Given the difficulties of 
entering the market, it is unlikely that new entry could be 
accomplished in a timely manner in any of the markets for liquid oxygen 
or liquid nitrogen, and even more unlikely that entry would occur in a 
timely manner in all of the relevant markets. Additionally, as an ASU 
must produce large amounts of oxygen and nitrogen in order to produce 
any argon, a new entrant into the liquid argon market would not be able 
to economically build an ASU to produce only liquid argon, rather it 
would need to find customers to purchase all three gases. Therefore, it 
is unlikely that new entry would occur in the liquid argon market 
absent concurrent new entry in the liquid oxygen and nitrogen markets.

IV. The Consent Agreement

    The Consent Agreement effectively remedies the acquisition's 
anticompetitive effects in the markets for liquid oxygen, liquid 
nitrogen and liquid argon. Pursuant to the Consent Agreement, American 
Air Liquide will divest the six (6) air separation units listed in 
Section I to a single purchaser that will operate the ASUs as a going 
concern. The Consent Agreement provides that American Air Liquide must 
find a buyer for the assets, at no minimum price, that is acceptable to 
the Commission, no later than six (6) months from the date the Consent 
Agreement becomes final. If the Commission determines that American Air 
Liquide has not provided an acceptable buyer within this time period or 
that the manner of the divestiture is not acceptable, the Commission 
may appoint a trustee to divest the assets. The trustee will have the 
exclusive power and authority to accomplish the divestiture.
    The Commission's goal in evaluating possible purchasers of divested 
assets is to maintain the competitive environment that existed prior to 
the acquisition. A proposed buyer of divested assets must not itself 
present competitive problems. Numerous entities are interested in 
purchasing the divested assets, including industrial gas suppliers that 
currently have a regional presence in the industry, but do not compete 
in the areas affected by the acquisition, as well as entities in 
related fields that are interested in entering into the production and 
sale of industrial gases. The Commission is therefore satisfied that 
sufficient potential buyers for the divested assets exist.
    The Consent Agreement also contains an Agreement to Hold Separate. 
This will serve to protect the viability, marketability, and 
competitiveness of the divestiture asset package until it is divested 
to a buyer approved by the Commission. The Agreement to Hold Separate 
became effective on the date the Commission accepted the Consent 
Agreement for placement on the public record and will remain in effect 
until American Air Liquide successfully divests the divestiture asset 
package according to the terms of the Decision and Order.
    The Consent Agreement contains a provision for the Commission to 
appoint a monitor-trustee to oversee the management of the divestiture 
asset package until the divestiture is complete, and for a brief 
transition period after the sale. In order to ensure that the 
Commission remains informed about the status of the asset package 
pending divestiture, about the efforts being made to accomplish the 
divestiture, and the provision of services and assistance during the 
transition period, the Consent Agreement requires the monitor-trustee 
to file periodic reports with the Commission until the divestiture is 
accomplished and the transition period has ended.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and it is not intended to constitute an official 
interpretation of the proposed Decision and Order or the Agreement to 
Hold Separate, or to modify their terms in any way.

By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-10409 Filed 5-6-04; 8:45 am]
BILLING CODE 6750-01-P