[Federal Register Volume 71, Number 139 (Thursday, July 20, 2006)]
[Notices]
[Pages 41237-41249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6361]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Inco Limited and Falconbridge Limited--Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b) through (h), that a Complaint, proposed 
Final Judgment, Hold Separate Stipulation and Order, and Competitive 
Impact Statement have been filed with the United States District Court 
for the District of Columbia in United States v. Inco Limited and 
Falconbridge Limited, Civil Action No. 1:06CV01151. On June 23, 2006, 
the United States filed a Complaint which sought to enjoin Inco Limited 
(``Inco'') from acquiring Falconbridge Limited (``Falconbridge''). The 
Complaint alleged that Inco's acquisition of Falconbridge would 
substantially lessen competition in the development, manufacture, and 
sale of High-Purity Nickel in violation of Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18, throughout the United States. The 
proposed Final Judgment, filed June 26, 2006, requires defendants to 
divest Falconbridge's Nikkelverk Refinery located in Kristiansand, 
Norway, and certain marketing offices and related assets, to preserve 
competition in the sale of High-Purity Nickel. A Hold Separate 
Stipulation and Order, entered by the Court on June 28, 2006, requires 
defendants to maintain, prior to divestiture, the competitive 
independence and economic viability of the assets subject to 
divestiture under the proposed Final Judgment. A Competitive Impact 
Statement filed by the United States describes the Complaint, proposed 
Final Judgment, Hold Separate Stipulation and Order, and the remedies 
available to private litigants who may have been injured by the alleged 
violations.
    Copies of the Complaint, proposed Final Judgment, Hold Separate 
Stipulation and Order, and Competitive Impact Statement are available 
for inspection at the United States Department of Justice, Antitrust 
Division, 325 Seventh Street, NW., Room 215, Washington, DC 20530, 
(telephone: 202-514-2481), and at the Clerk's Office of the United 
States District Court for the District of Columbia, Washington, DC. 
Copies of these materials may be obtained upon request and payment of a 
copying fee.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses thereto will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, 
U.S. Department of Justice, 1401 H Street, NW., Suite 3000, Washington, 
DC 20530, (telephone: 202-307-0924).

J. Robert Kramer II,
Director of Operations.

United States District Court for the District of Columbia

United States of America Department of Justice, Antitrust Division, 
1401 H Street, NW., Suite 3000, Washington, DC 20530, Plaintiff v. INCO 
Limited, 145 King Street West, Suite 1500, Toronto, ON, Canada M5H 4B7, 
and Falconbridge Limited, 207 Queens Quay West Suite 800 Toronto, ON, 
Canada M5J lA7, Defendants.

    Case Number: 1:06CV01151, Judge: Rosemary M. Collyer, Deck Type: 
Antitrust, Date Stamp: 06/23/2006.

Complaint

    Plaintiff United States of America (``United States''), acting 
under the direction of the Attorney General of the United States, 
brings this civil antitrust action to obtain equitable relief against 
defendants, Inco Limited (``Inco'') and Falconbridge Limited 
(``Falconbridge''). Plaintiff complains and alleges as follows:

I. Introduction

    1. The United States brings this action for injunctive relief 
under Section 15 of the Clayton Act, as amended, 15 U.S.C. 25, to 
prevent and restrain Inco and Falconbridge from violating Section 7 
of the Clayton Act, 15 U.S.C. 18. The United States seeks to prevent 
the proposed acquisition of Falconbridge by Inco because that 
acquisition would substantially lessen competition in the 
development, manufacture, and sale of refined nickel of sufficient 
purity and chemical composition that it can be utilized in super 
alloys used for safety-critical applications (hereinafter ``High-
Purity Nickel''). The use of High-Purity Nickel is particularly 
important in making such

[[Page 41238]]

products as the rotating parts of jet engines, which are often 
called ``safety-critial parts.''
    2. Inco and Falconbridge are two of the world's leading 
producers of refined nickel, a metallic element that is valued for 
its resistance to corrosion, stress, and high temperatures. Inco and 
Falconbridge are also by far the world's two largest producers of 
High-Purity Nickel.
    3. High-Purity Nickel is primarily distinguished from other 
refined nickel because it contains lower amounts of certain 
impurities commonly referred to as trace elements. In safety-
critical parts, for example, the presence of trace elements can make 
the parts less resistant to the extreme stresses and temperatures 
under which they operate and may eventually lead to engine failure.
    4. Inco's proposed acquisition of Falconbridge would reduce the 
number of significant worldwide High-Purity Nickel suppliers from 
three to two and create a company with over 80 percent of the 
world's sales of High-Purity Nickel.
    5. Unless the proposed acquisition is enjoined, competition in 
High-Purity Nickel that has benefitted customers will be 
substantially reduced. The proposed acquisition would likely result 
in higher prices, lower quality, less innovation, and less favorable 
delivery terms in the High-Purity Nickel market.

II. The Defendants

    6. Defendant Inco is a Canadian corporation with its principal 
place of business in Toronto, Ontario, Canada. Inco's High-Purity 
Nickel sales in the United States are made through its wholly-owned 
subsidiary, International Nickel, Inc. (``INI''). INI is a Delaware 
corporation with its principal place of business in Saddlebrook, New 
Jersey.
    7. Inco is one of the largest mining companies in the world. 
Inco mines, processes, and refines various minerals, including 
nickel. Inco also produces cobalt and platinum group metals 
(``PGMs'') as by-products of its nickel production. In 2005, Inco 
reported total sales of approximately $4.7 billion.
    8. Inco's main nickel mining, processing, and refining 
operations are located in Canada, although it owns mines and 
processing facilities worldwide. Inco's High-Purity Nickel refining 
operations are located in Ontario, Canada, and Wales, United 
Kingdom. Inco's High-Purity Nickel is shipped to customers 
worldwide, including the United States.
    9. Defendant Falconbridge is a Canadian corporation with its 
principal place of business in Toronto, Ontario, Canada. 
Falconbridge's High-Purity Nickel sales in the United States are 
made through its wholly-owned subsidiary, Falconbridge U.S., Inc. 
(``FUS''). FUS is a Pennsylvania corporation with its principal 
place of business in Pittsburgh, Pennsylvania.
    10. Like Inco, Falconbridge is one of the world's largest mining 
companies. Falconbridge mines, processes, and refines various 
minerals, including nickel and copper. Falconbridge also produces 
cobalt and PGMs as by-products of both its nickel and copper 
production. In 2005, Falconbridge reported total sales of 
approximately $7.7 billion.
    11. Falconbridge's primary nickel mining and processing 
facilities are located in Ontario, Canada, although it also has such 
facilities worldwide. Falconbridge's only High-Purity Nickel 
refining operation is located in Kristiansand, Norway. 
Falconbridge's High-Purity Nickel is shipped to customers worldwide, 
including the United States.

III. Jurisdiction and Venue

    12. Plaintiff United States brings this action against 
defendants Inco and Falconbridge under Section 15 of the Clayton 
Act, as amended, 15 U.S.C. 25, to prevent and restrain the violation 
by defendants of Section 7 of the Clayton Act, 15 U.S.C. 18.
    13. Defendants produce and sell High-Purity Nickel in the flow 
of interstate commerce. Their activities in developing, producing, 
and selling High-Purity Nickel substantially affect interstate 
commerce. This Court has subject matter jurisdiction over this 
action pursuant to Section 12 of the Clayton Act, 15 U.S.C. 22; and 
28 U.S.C. 1331, 1337(a), and 1345.
    14. Venue is proper in this District pursuant to 28 U.S.C. 
1391(d). Inco and Falconbridge have consented to venue and personal 
jurisdiction in this judicial district.

IV. The Proposed Transaction

    15. Pursuant to a Support Agreement dated October 10, 2005, Inco 
stated that it intended to offer to purchase all of the common 
shares of Falconbridge not currently owned by it. Also pursuant to 
that Support Agreement, Falconbridge's Board of Directors stated 
that it had determined that it is in the best interests of 
Falconbridge to support the offer, recommend acceptance of Inco's 
offer to holders of the common shares of Falconbridge, and use its 
reasonable best efforts to permit Inco's offer to be successful, on 
the terms and conditions contained in the Support Agreement.
    16. On October 24, 2005, Inco made a forinal offer to purchase 
all of the outstanding common shares of Falconbridge, a transaction 
now valued at over $15 billion dollars. Inco's offer to purchase, 
originally open for acceptance until December 23, 2005, has been 
extended until June 30, 2006.

V. Reduced Competition in the High-Purity Nickel Market

A. The Relevant Product Market

    17. Nickel is a metallic element that is particularly resistant 
to high temperatures, high stresses, and corrosion. Nickel is often 
combined with other materials to form alloys with particular 
performance characteristics. These performance characteristics 
depend on the amount of nickel and other elements contained in the 
particular alloy.
    18. As a general proposition, as the amount of nickel in the 
alloy increases, the more resistant the alloy is to heat and stress. 
The most common alloy using nickel is stainless steel, which 
contains, on average, approximately 10 percent nickel and is used in 
applications demanding the least amount of the resistence to heat 
and stress that nickel provides.
    19. At the other end of the spectrum are so-called super alloys. 
Super alloys generally contain between 50 and 70 percent nickel, as 
well as specific amounts of other elements, including iron, cobalt, 
and chromium, that combine to give the alloy specific performance 
characteristics. Super alloys are primarily used in chemical 
processing plants, medical applications, industrial power 
generation, and various aerospace applications.
    20. Certain products made from super alloys, such as the 
rotating parts of jet engines, are considered safety-critical parts. 
For these parts, it is vital that, in addition to containing the 
proper amount of nickel, the super alloy be as free as possible from 
certain trace elements that could compromise the performance of the 
product and result in serious problems, like engine failure. For 
example, designers of jet engines severely restrict the maximum 
amounts of trace elements that can be contained in superalloys used 
to produce moving parts for jet engines.
    21. The nickel that meets demanding safety-critical requirements 
is High-Purity Nickel. High-Purity Nickel is refined nickel of 
sufficient purity and chemical composition that it can be utilized 
in super alloys used for safety-critical applications. Only a small 
portion of the refined nickel produced in the world has sufficient 
metal content and purity to qualify as High-Purity Nickel.
    22. Super alloy makers must use High-Purity Nickel to meet the 
specifications for safety-critical parts. Super alloy makers do not 
have the in-house capability to remove sufficient quantities of 
undesirable trace elements from non-High-Purity Nickel to permit 
them to produce alloys that meet the specifications for safety-
critical parts.
    23. A small but significant post-acquisition increase in the 
price of High-Purity Nickel would not cause the purchasers of 
safety-critical parts to substitute non-High-Purity Nickel or 
elements other than nickel so as to make such a price increase 
unprofitable.
    24. Accordingly, the development, manufacture, and sale of High-
Purity Nickel is a line of commerce and a relevant product market 
for purposes of analyzing this acquisition under Section 7 of the 
Clayton Act.

B. The Relevant Geographic Market

    25. All of the High-Purity Nickel sold in the world is mined, 
processed, and refined outside of the United States. Both Inco and 
Falconbridge sell High-Purity Nickel throughout the world. Both 
companies import High-Purity Nickel into the United States and sell 
that nickel to customers located throughout the United States.
    26. Accordingly, the world is the relevant geographic market 
within the meaning of Section 7 of the Clayton Act.

C. Concentration

    27. The market for High-Purity Nickel is highly concentrated. 
Inco and Falconbridge are by far the two largest producers of High-
Purity Nickel sold worldwide and in the United States.
    28. Aside from Inco and Falconbridge, only three companies have 
demonstrated any

[[Page 41239]]

ability to produce High-Purity Nickel. One of these companies 
consistently produces High-Purity Nickel, but its available capacity 
is substantially less than that of either Inco or Falconbridge and 
it cannot economically increase its capacity. The other two 
companies are not substantial competitors in the High-Purity Nickel 
market. While both have substantial capacity to make non-High-Purity 
Nickel and both have produced small amounts of High-Purity Nickel, 
their ability to make High-Purity Nickel, and to make it on a 
consistent basis, is very limited.
    29. Inco accounts for at least 40 percent of the worldwide sales 
of High-Purity Nickel. Similarly, Falconbridge accounts for at least 
40 percent of the worldwide sales of High-Purity Nickel.
    30. The market for High-Purity Nickel would become substantially 
more concentrated if Inco acquires Falconbridge. Combined, Inco and 
Falconbridge would account for over 80 percent of worldwide High-
Purity Nickel sales. Using a measure of market concentration called 
the Herfindahl-Hirschman Index (``HHI'') (defined and explained in 
Appendix A), the proposed transaction will increase the HHI in the 
market for High-Purity Nickel by approximately 3,200 points to a 
post-acquisition level of approximately 6,800, well in excess of 
levels that raise significant antitrust concerns.

D. Anticompetitive Effects

1. The Proposed Transaction Will Harm Competition in the Market for 
High-Purity Nickel.

    31. High-Purity Nickel customers generally view Inco's and 
Falconbridge's High-Purity Nickel as their only available options 
and do not view the products of other producers as viable 
alternatives for High-Purity Nickel due to concerns relating to the 
other producers' quality, capacity, and reliability.
    32. The vigorous and aggressive competition between Inco and 
Falconbridge in the production and sale of High-Purity Nickel has 
benefitted customers. Inco and Falconbridge have competed directly 
in terms of price, quality, innovation, and delivery terms.
    33. The proposed acquisition will eliminate the competition 
between Inco and Falconbridge, reduce the number of significant 
suppliers of High-Purity Nickel from three to two, and substantially 
increase the likelihood that Inco will unilaterally increase the 
price of High-Purity Nickel to a significant number of customers.
    34. Inco and Falconbridge have the ability to increase prices to 
certain customers of High-Purity Nickel. Some customers must 
purchase High-Purity Nickel because they use it in super alloys used 
for safety-critical applications. These customers do not have the 
ability to substitute any other product for High-Purity Nickel. Inco 
and Falconbridge are able to determine their High-Purity Nickel 
customers' end-uses and identify which customers are purchasing 
High-Purity Nickel specifically for super alloys used for safety-
critical applications.
    35. Inco and Falconbridge can, therefore, charge customers that 
are purchasing High-Purity Nickel for super alloys used for safety-
critical applications a higher price than customers that are 
purchasing High-Purity Nickel for other uses. Without the 
competitive constraint of head-to-head competition between Inco and 
Falconbridge, Inco post-merger will have a greater ability to 
exercise market-power by raising prices to companies that purchase 
High-Purity Nickel for super alloys used for safety-critical 
applications.
    36. The other High-Purity Nickel producers do not have the 
incentive or the ability, individually or collectively, to 
effectively constrain a unilateral exercise of market power by Inco 
after the acquisition.
    37. The transaction will therefore substantially lessen 
competition in the market for High-Purity Nickel, which is likely to 
lead to higher prices, lower quality, less innovation, and less 
favorable delivery terms for the ultimate consumers of such 
products, in violation of Section 7 of the Clayton Act.

2. Entry Is Not Likely To Deter the Exercise of Market Power

    38. Successful entry or expansion into the development, 
manufacture, and sale of High-Purity Nickel is difficult, time-
consuming, and costly. Companies not currently producing nickel of 
any kind would require roughly three to five years and the 
expenditure of at least $100 million to build a refinery to produce 
a finished nickel product. In addition to building the refinery, the 
new entrant, if not vertically integrated, would also have to secure 
nickel feedstock to refine.
    39. The cost of entering the High-Purity Nickel market is even 
greater than the cost of entering the refined nickel market 
generally. A new entrant into the High-Purity Nickel market would 
have to invest in additional equipment and processes to enable it to 
extract sufficient undesirable trace elements to produce the nickel 
required by makers of super alloys used for safety-critical 
applications. Further, if not vertically integrated, a new entrant 
would have to secure nickel feedstock of sufficient quality to be 
able to refine High-Purity Nickel.
    40. Even companies that currently produce non-High-Purity Nickel 
would require an investment of millions of dollars and several years 
to modify their facilities and processes to be capable of producing 
High-Purity Nickel. These companies would not invest the substantial 
time and money necessary to modify their facilities and processes to 
produce High-Purity Nickel in response to a small but significant 
increase in the price of High-Purity Nickel.
    41. Moreover, it is not sufficient simply to be able to produce 
High-Purity Nickel. A new entrant in the High-Purity Nickel market 
would have to be able to produce High-Purity Nickel in sufficient 
quantities with sufficiently consistent purity levels that customers 
could depend on it to provide the amounts of High-Purity Nickel 
needed at the appropriate time. Achieving such capability could 
require a substantial investment in time and money by a company 
seeking to enter the High-Purity Nickel market.
    42. Therefore, entry or expansion by any other firm into the 
High-Purity Nickel market would not be timely, likely, or sufficient 
to defeat an anticompetitive price increase in the event that Inco 
acquires Falconbridge.

VI. The Proposed Acquisition Violates Section 7 of the Clayton Act

    43. The proposed acquisition of Falconbridge by Inco would 
substantially lessen competition and tend to create a monopoly in 
interstate trade and commerce in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18.
    44. Unless restrained, the transaction will have the following 
anticompetitive effects, among others:
    a. Actual and potential competition in the world market, 
including the United States, between Inco and Falconbridge in the 
development, manufacture, and sale of High-Purity Nickel will be 
eliminated;
    b. Competition generally in the development, manufacture, and 
sale of High-Purity Nickel will be substantially lessened; and
    c. Prices for High-Purity Nickel will likely increase, the 
quality of High-Purity Nickel will likely decline, innovation 
relating to High-Purity Nickel will likely decline, and the delivery 
terms currently offered in the High-Purity Nickel market will likely 
become less favorable to the customer.

VII. Request for Relief

    45. Plaintiff requests that:
    a. Inco's proposed acquisition of Falconbridge be adjudged and 
decreed to be unlawful and in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18;
    b. Defendants and all persons acting on their behalf be 
permanently enjoined and restrained from consummating the proposed 
acquisition or from entering into or carrying out any contract, 
agreement, plan, or understanding, the effect of which would be to 
combine Inco with the operations of Falconbridge;
    c. Plaintiff be awarded its costs for this action; and
    d. Plaintiff receive such other and further relief as the Court 
deems just and proper.

    Dated: June 23, 2006.

Respectfully submitted.

For Plaintiff United States of America:

Thomas O. Barnett,
Assistant Attorney General, D.C. Bar #426840.

David L. Meyer,
Deputy Assistant Attorney General, for Civil Enforcement, D.C. Bar 
#414420.

J. Robert Kramer II,
Director of Operations and Civil Enforcement.

Maribeth Petrizzi,
Chief, Litigation II Section, D.C. Bar #435204.

Karen Y. Phillips-Savoy,
Dando B. Cellini,
Jillian E. Charles (D.C. Bar 459052),
James K. Foster, Jr.,
Christine A. Hill (D.C. Bar 461048/inactive),
Tara M. Shinnick,
Robert W. Wilder,
Attorneys, U.S. Department of Justice, Antitrust Division, 
Litigation II Section, 1401 H Street. NW., Suite 3000, Washington, 
DC 20530, Tel: (202) 307-0924.

[[Page 41240]]

Appendix A--Herfindahl-Hirschman Index Calculations

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly 
accepted measure of market concentration. It is calculated by 
squaring the market share of each firm competing in the market and 
then summing the resulting numbers. For example, for a market 
consisting of four firms with shares of thirty, thirty, twenty, and 
twenty percent, the HHI is 2600 (302 + 302 + 
202 + 202 = 2600). The HHI takes into a ccount 
the relative size and distribution of the firms in a market and 
approaches zero when a market consists of a large number of firms of 
relatively equal size. The HHI increases both as the number of firms 
in the market decreases and as the disparity in size between those 
firms increases.
    Markets in which the HHI is between 1000 and 1800 points are 
considered to be moderately concentrated and those in which the HHI 
is in excess of 1800 points are considered to be highly 
concentrated. Transactions that increase the HHI by more than 100 
points in highly concentrated markets presumptively raise antitrust 
concerns under the Horizontal Merger Guidelines issued by the U.S. 
Department of Justice and the Federal Trade Commission. See 
Horizontal Merger Guidelines Sec.  1.51.

Final Judgment

    Whereas, plaintiff, United States of America, filed its 
Complaint on June 23, 2006, and plaintiff and defendants, Inco 
Limited and Falconbridge Limited, by their respective attorneys, 
have consented to the entry of this Final Judgment without trial or 
adjudication of any issue of fact or law, and without this Final 
Judgment constituting any evidence against or admission by any party 
regarding any issue of fact or law;
    And Whereas, defendants agree to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    And Whereas, the essence of this Final Judgment is the prompt 
and certain divestiture of certain rights or assets by the 
defendants to assure that competition is not substantially lessened;
    And Whereas, plaintiff requires defendants to make certain 
divestitures and enter into the Supply Agreement and provide any 
Alternative Acquirer the Third-Party Feedstock Option for the 
purpose of remedying the loss of competition alleged in the 
Complaint;
    And Whereas, defendants have represented to the United States 
that the divestitures, the Supply Agreement, and the Third-Party 
Feedstock Option required below 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 below;
    Now Therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is Ordered, Adjudged and Decreed:

I. Jurisdiction

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

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means LionOre, the entity to whom defendants 
shall divest the Divested Business.
    B. ``Acquirer Shares'' means the issuance to Falconbridge of no 
more than 19.99 percent or 49,118,057 of the outstanding common 
shares of the Acquirer at the completion of the purchase and sale of 
the Divested Business to the Acquirer.
    C. ``Acquisition of Falconbridge'' means: (a) the condition that 
Inco has taken up and paid for such number of Falconbridge common 
shares, validly deposited and not withdrawn at the expiry time of 
Inco's Offer to Purchase all of the Outstanding Shares of 
Falconbridge, dated October 24,2005, as amended, that, together with 
any Falconbridge common shares directly or indirectly owned by Inco, 
constitutes at least 50.01% of the Falconbridge common shares on a 
fully-diluted basis at the expiry time or (b) Inco's acquisition of 
control of Falconbridge by any other means.
    D. ``Alternative Acquirer'' means an Acquirer other than LionOre 
that is in the metals mining or processing business and is able to 
supply, on a long-term basis, sufficient Feedstock to assure the 
United States, in its sole discretion, that the Nikkelverk Refinery 
will remain an economically viable competitive business.
    E. ``Alternative Divested Business'' means Falconbridge 
Nikkelverk AlS, Falconbridge, U.S., Inc. (``FUS''), Falconbridge 
Europe S.A. (``FESA''), and Falconbridge (Japan) Limited (``FJKK''), 
including:
    1. All tangible assets used in the development, production, 
servicing, and sale of the Nikkelverk Refinery Products, including 
but not limited to the Nikkelverk Refinery; all real property; any 
facilities used for research, development, and engineering support, 
and any real property associated with those facilities; 
manufacturing and sales assets, including capital equipment, 
vehicles, supplies, personal property, inventory, office furniture, 
fixed assets and fixtures, materials, on- or off-site warehouses or 
storage facilities, and other tangible property or improvements; all 
licenses, permits and authorizations issued by any governmental 
organization; all contracts, agreements, leases, commitments, and 
understandings; all customer contracts, lists, accounts, and credit 
records; and other records relating to the Alternative Divested 
Business;
    2. All intangible assets that have been used exclusively or 
primarily in the development, production, servicing, and sale of the 
Nikkelverk Refinery Products, including but not limited to all 
patents, licenses and sublicenses, intellectual property, 
trademarks, trade names, service marks, service names (including the 
product or trade name ``SuperElectro'' or any variation thereof), 
technical information, computer software and related documentation, 
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, and all manuals and technical information 
provided to the employees, customers, suppliers, agents or licensees 
of the Alternative Divested Business, provided that with respect to 
any such intangible assets relating to metal separation or 
purification processes, at the option of the Alternative Acquirer 
defendants may retain a non-exclusive, non-transferable, fully paid-
up license(s) to or copy of such intangible assets;
    3. A non-exclusive, non-transferable, fully paid-up license(s) 
for the use of the name ``Falconbridge,'' the duration and terms of 
which shall be negotiated by the defendants and the Alternative 
Acquirer and limited to the field of use of the Nikkelverk Refinery 
Products, provided that any such license(s) may be transferable to 
any future purchaser of the Nikkelverk Refinery;
    4. A non-exclusive, non-transferable, fully paid-up license(s) 
for use of any intangible asset that has been used by both the 
Alternative Divested Business and any of Falconbridge's non-divested 
businesses, provided that such license(s) may be transferable to any 
future purchaser of Nikkelverk Refinery; and
    5. All research data concerning historic and current research 
and development efforts conducted at or for the Alternative Divested 
Business, including designs of experiments, and the results of 
unsuccessful designs and experiments.
    The term ``Alternative Divested Business'' shall not include 
tangible or intangible assets exclusively used in, or personnel 
exclusively responsible for, the production or sale of products 
other than the Nikkelverk Refinery Products.
    F. ``Alternative Supply Agreement'' means an agreement between 
Inco and the Alternative Acquirer on the terms described in Section 
V(B) by which Inco commits to supply to the Alternative Acquirer, 
other than through a New Third-Party Supply Agreement, Feedstock to 
be used in operating the Nikkelverk Refinery.
    G. ``Divested Business'' means Falconbridge Nikkelverk A/S, 
Falconbridge, U.S., Inc. (``FUS''), Falconbridge Europe S.A. 
(``FESA''), Falconbridge (Japan) Limited (``FJKK''), and 
Falconbridge International Limited (``FIL''), including:
    1. All tangible assets used in the development, production, 
servicing, and sale of the Nikkelverk Refinery Products, including 
but not limited to the Nikkelverk Refinery; all real property; any 
facilities used for research development, and engineering support, 
and any real property associated with those facilities; 
manufacturing and sales assets, including capital equipment, 
vehicles, supplies, personal property, inventory, office furniture, 
fixed assets and fixtures, materials, on- or off-site warehouses or 
storage facilities, and other tangible property or improvements; all 
licenses, permits and authorizations issued by any governmental 
organization; all contracts, agreements, leases, commitments, and 
understandings; all customers contracts, lists, accounts, and credit 
records; and other records relating to the Divested Business;

[[Page 41241]]

    2. All intangible assets that have been used exclusively or 
primarily in the development, production, servicing, and sale of the 
Nikkelverk Refinery Products, including but not limited to all 
patents, licenses and sublicenses, intellectual property, 
trademarks, trade names, service marks, service names (including the 
product or trade name ``SuperElectro'' or any variation thereof), 
technical information, computer software and related documentation, 
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, and all manuals and technical information 
provided to the employees, customers, suppliers, agents or licensees 
of the Divested Business, provided that with respect to any such 
intangible assets relating to metal separation or purification 
processes, at the option of the Acquirer defendants may retain a 
non-exclusive, non-transferable, fully paid-up license(s) to or copy 
of such intangible assets;
    3. A non-exclusive, non-transferable, fully paid-up license(s) 
for the use of the name ``Falconbridge,'' the duration and terms of 
which shall be negotiated by the defendants and the Acquirer and 
limited to the field of use of the Nikkelverk Refinery Products, 
provided that any such license(s) may be transferable to any future 
purchaser of the Nikkelverk Refinery;
    4. A non-exclusive, non-transferable, fully paid-up license(s) 
for use of any intangible asset that has been used by both the 
Divested Business and any of Falconbridge's non-divested businesses, 
provided that such license(s) may be transferable to any future 
purchaser of Nikkelverk Refinery; and
    5. All research data concerning historic and current research 
and development efforts conducted at or for the Divested Business, 
including designs of experiments, and the results of unsuccessful 
designs and experiments.
    The term ``Divested Business'' shall not include tangible or 
intangible assets exclusively used in, or personnel exclusively 
responsible for, the production or sale of products other than the 
Nikkelverk Refinery Products.
    H. ``Existing Third-Party Supply Agreements'' means existing 
agreements between Falconbridge and third parties for the supply of 
Feedstock for the Nikkelverk Refinery that is produced by persons 
other than the defendants.
    I. ``Falconbridge'' means defendant Falconbridge Limited, a 
Canadian corporation with its headquarters in Toronto, Canada, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    J. ``Falconbridge International Limited'' means a corporation 
organized under the laws of Barbados and a subsidiary of 
Falconbridge responsible, in part, for the acquisition of Feedstock 
from third parties.
    K. ``Feedstock'' means nickel-in-matte and other products and 
intermediate compounds constituting refinery feed sources suitable 
for refining at Nikkelverk Refinery.
    L. ``Foreign Competition Clearance'' means an action or inaction 
by the European Commission that results in the termination of any 
relevant waiting period, or grant of approval, clearance or consent, 
that is applicable to the acquisition of Falconbridge by Inco.
    M. ``High-Purity Nickel'' means refined nickel of sufficient 
purity and chemical composition that it can be utilized in super 
alloys used for safety-critical applications.
    N. ``Inco'' means defendant Inco Limited, a Canadian corporation 
with its headquarters in Toronto, Canada, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships, and joint ventures, and their directors, officers, 
managers, agents, and employees.
    O. ``LionOre'' means LionOre Mining International Limited, a 
Canadian corporation with its headquarters in London, England, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    P. ``New Third-Party Supply Agreement'' means one or more 
agreements between the defendants and the Alternative Acquirer on 
the terms described in Section V for the supply to the Nikkelverk 
Refinery of Feedstock that is produced by persons other than the 
defendants.
    Q. ``Nikkelverk Refinery'' means the nickel, copper, cobalt, and 
precious metals refinery owned by Falconbridge's subsidiary 
Falconbridge Nikkelverk A/S and located In Kristiansand, Norway.
    R. ``Nikkelverk Refinery Products'' means the finished nickel, 
copper, cobalt, precious metals, and other products produced at the 
Nikkelverk Refinery.
    S. ``Supply Agreement'' means an agreement between Inco and the 
Acquirer on the terms described in Section IV by which Inco commits 
to supply to the Acquirer, other than through a New Third-Party 
Supply Agreement, Feedstock to be used in operating the Nikkelverk 
Refinery.
    T. ``Third-Party Feedstock Option'' means one or more of the 
options available to the Alternative Acquirer in Section V(A)(3) to 
obtain the quantities and quality of Feedstock supplied pursuant to 
the Existing Third-Party Supply Agreements.

III. Applicability

    A. This Final Judgment applies to Inco and Falconbridge, as 
defined above, and all other persons in active concert or 
participation with any of them who receive 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 their assets or of lesser 
business units that include the Divested Business, that the 
purchaser agrees to be bound by the provisions of this Final 
Judgment.

IV. Divestiture

    A. In the event that Inco acquires any shares pursuant to Inco 
Limited Offer to Purchase All of the Outstanding Shares of 
Falconbridge Limited dated October 24, 2005, as amended, defendants 
are ordered and directed concurrently with Inco's Acquisition of 
Falconbridge, (1) to divest the Divested Business to the Acquirer in 
a manner consistent with this Final Judgment, and (2) to enter into 
the Supply Agreement with the Acquirer. Defendants shall, as soon as 
possible, but within one business day after the Acquisition of 
Falconbridge, notify the United States of (1) the effective date of 
the Acquisition of Falconbridge and (2) the effective date that the 
Divested Business was divested to the Acquirer.
    B. Defendants shall provide the United States and the Acquirer 
information relating to the personnel employed by the Divested 
Business or involved exclusively or primarily in research, 
development, production, operation, and sale of the Nikkelverk 
Refinery Products or procurement of Feedstock from third parties for 
the Divested Business, to enable the Acquirer to make offers of 
employment. Defendants will not interfere with any negotiations by 
the Acquirer to employ any of the defendants' employees whose 
responsibilities exclusively or primarily involve the research, 
development, production, operation, or sale of the products of the 
Divested Business or procurement of Feedstock from third parties for 
the Divested Business.
    C. Defendants shall permit the Acquirer to have reasonable 
access to personnel and to make inspections of the physical 
facilities of the Divested Business; access to any and all 
environmental, zoning, and other permit documents and information; 
access to any and all financial, operational, or other documents and 
information customarily provided as part of a due diligence process; 
and any documents and information the Acquirer shall consider 
relevant to any issues relating to the Supply Agreement.
    D. Defendants shall warrant to the Acquirer that each asset that 
was operational as of the date of filing of the Complaint in this 
matter will be operational on the date of divestiture.
    E. Defendants shall enter into the Supply Agreement with the 
Acquirer to provide Feedstock of the same or substantially the same 
quality and volume provided by Falconbridge to be used in operating 
the Nikkelverk Refinery. At the option of the Acquirer, such Supply 
Agreement may have a term of up to ten (10) years. The terms and 
conditions of the Supply Agreement must be commercially reasonable 
and designed to enable the Acquirer to compete effectively in the 
sale of High-Purity Nickel. The terms and conditions of the Supply 
Agreement must be approved by the United States in its sole 
discretion. Inco shall give the United States 30 calendar days 
notice before exercising any contract right to cancel or terminate 
the Supply Agreement and before implementing any material change to 
any term related to the length of the Supply Agreement, the volume 
and quality of the Feedstock, or the price. In the performance of 
the Supply Agreement, defendants shall take no action the effect of 
which is to interfere with or impede the ability of the Acquirer to 
compete effectively in the sale of High-Purity Nickel.
    F. Defendants shall not take any action that will impede in any 
way the permitting,

[[Page 41242]]

operation. or divestiture of the Divested Business.
    G. Defendants shall warrant to the Acquirer that there are no 
material defects in the . environmental, zoning, or other permits 
pertaining to the operation of the Divested Business, and that 
following the sale of the Divested Business, defendants will not 
undertake, directly or indirectly, any challenges to the 
environmental, zoning, or other permits relating to the operation of 
the Divested Business.
    H. Nothing in this Final Judgment shall be construed to require 
the Acquirer as a condition of any license granted by or to 
defendants pursuant to Sections II (G)(2)-(4) to extend to 
defendants the right to use the Acquirer's improvements to processes 
used in the production of Nikkelverk Refinery Products.
    I. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV of this Final Judgment shall 
include the entire Divested Business and the Supply Agreement, and 
shall be accomplished in such a way as to satisfy the United States, 
in its sole discretion, that the Divested Business can and will be 
used by the Acquirer as part of a viable, ongoing business, engaged 
in producing High-Purity Nickel for sale worldwide, including the 
United States. The divestiture shall be accomplished so as to 
satisfy the United States, in its sole discretion, that:
    1. the Divested Business will remain viable and the divestiture 
of the Divested business will remedy the competitive harm alleged in 
the Complaint; and
    2. none of the terms of any agreement between the Acquirer and 
defendants give defendants the ability unreasonably to raise the 
Acquirer's costs, to lower the Acquirer's efficiency, or to 
otherwise interfere in the ability of the Acquirer to compete 
effectively in the production and sale of High-Purity Nickel.

V. Appointment of Trustee to Effect Divestiture

    A. If defendants have not divested the Divested Business as 
specified in Section IV(A), defendants shall notify the United 
States of that fact in writing. Upon application of the United 
States, the Court shall appoint a trustee selected by the United 
States and approved by the Court (1) to divest the Alternative 
Divested Business in a manner consistent with this Final Judgment to 
an Alternative Acquirer acceptable to the United States in its sole 
discretion, (2) at the option of the Alternative Acquirer, to 
effectuate the Alternative Supply Agreement between the defendants 
and the Alternative Acquirer, and (3) except for those Existing 
Third-Party Supply Agreements under which Feedstocks are 
contractually obligated to be processed at the Nikkelverk Refinery, 
to (a) effectuate, at the option of the Alternative Acquirer, the 
New Third-Party Supply Agreement between the defendants and the 
Alternative Acquirer, (b) oversee the defendants' best efforts to 
procure the assignment of the Existing Third-Party Supply 
Agreements, (c) order the divestiture of Falconbridge International 
Limited, or (d) some combination of these options, to ensure that 
the Alternative Acquirer obtains the quantities and quality of 
Feedstock to be supplied pursuant to the Existing Third-Party Supply 
Agreements consistent with the remaining term of each of the 
Existing Third-Party Supply Agreements. In the event the European 
Commission also requires the divestiture of the same assets, the 
United States shall consult in good faith with the European 
Commission to ensure selection of a trustee acceptable to both the 
United States and the European Commission.
    B. At the option of the Alternative Acquirer, defendants shall 
enter into the Alternative Supply Agreement with the Alternative 
Acquirer to provide Feedstock of the same or substantially the same 
quality and volume provided by Falconbridge to be used in operating 
the Nikkelverk Refinery. At the option of the Alternative Acquirer, 
such Alternative Supply Agreement may have a term of up to ten (10) 
years. The terms and conditions of the Alternative Supply Agreement 
must be commercially reasonable and designed to enable the 
Alternative Acquirer to compete effectively in the sale of High-
Purity Nickel. The terms and conditions of the Alternative Supply 
Agreement must be approved by the United States in its sole 
discretion. Inco shall give the United States 30 calendar days 
notice before exercising any contract right to cancel or terminate 
the Alternative Supply Agreement and before implementing any 
material change to any term related to the length of the Alternative 
Supply Agreement, the volume and quality of the Feedstock, or the 
price. In the performance of the Alternative Supply Agreement, 
defendants shall take no action the effect of which is to interfere 
with or impede the ability of the Alternative Acquirer to compete 
effectively in the sale of High-Purity Nickel.
    C. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section V of this Final Judgment shall 
include the entire Alternative Divested Business, Alternative Supply 
Agreement, and Third-Party Feedstock Option, and shall be 
accomplished in such a way as to satisfy the United States, in its 
sole discretion, that the Alternative Divested Business can and will 
be used by the Alternative Acquirer as part of a viable, ongoing 
business, engaged in producing High-Purity Nickel for sale 
worldwide, including the United States. A divestiture pursuant to 
Section V of this Final Judgment, shall be accomplished so as to 
satisfy the United States, in its sole discretion, that:
    1. The Alternative Acquirer has the intent and capability 
(including the necessary managerial, operational, technical and 
financial capability) to compete effectively in the production and 
sale of High-Purity Nickel; and
    2. That none of the terms of any agreement between the 
Alternative Acquirer and defendants give defendants the ability 
unreasonably to raise the Alternative Acquirer's costs, to lower the 
Alternative Acquirer's efficiency, or otherwise to interfere in the 
ability of the Alternative Acquirer to compete effectively in the 
production and sale of High-Purity Nickel; and
    3. The Alternative Divested Business will remain viable and the 
divestiture of the Alternative Divested Business will remedy the 
competitive harm alleged in the Complaint.
    D. Nothing in this Final Judgment shall be construed to require 
the Alternative Acquirer as a condition of any license granted by or 
to defendants pursuant to Sections II (E)(2)-(4) to extend to 
defendants the right to use the Alternative Acquirer's improvements 
to processes used in the production of Nikkelverk Refinery Products.
    E. With respect to any divestiture to an Alternative Acquirer 
under Section V of this Final Judgment, defendants shall have the 
same obligations to the Alternative Acquirer with respect to the 
Alternative Divested Business as they do to the Acquirer with 
respect to the Divested Business as set forth in Sections IV(B), 
(C), (D), (F), and (G) of the Final Judgment.
    F. After the appointment of a trustee becomes effective, only 
the trustee shall have the right to sell the Alternative Divested 
Business. The trustee shall have the power and authority to 
accomplish the divestiture to an Alternative Acquirer acceptable to 
the United States at such price and on such terms as are then 
obtainable upon reasonable effort by the trustee, subject to the 
provisions of Sections V and VI of this Final Judgment, and shall 
have such other powers as this Court deems appropriate. Subject to 
Section V(H) of this Final Judgment, the trustee may hire at the 
cost and expense of defendants any investment bankers, attorneys, or 
other agents, who shall be solely accountable to the trustee, 
reasonably necessary in the trustee's judgment to assist in the 
divestiture.
    G. Defendants shall not object to a sale by the trustee, or to 
the Alternative Supply Agreement or the Third-Party Feedstock Option 
ordered by the trustee, on any ground other than the trustee's 
malfeasance. Any such objections by defendants must be conveyed in 
writing to the United States and the trustee within ten (10) 
calendar days after the trustee has provided the notice required 
under Section VI.
    H. The trustee shall serve at the cost and expense of 
defendants, on such terms and conditions as plaintiff approves, and 
shall account for all monies derived from the sale of the 
Alternative Divested Business 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 the trustee and any professionals and agents retained by the 
trustee shall be reasonable in light of the value of the Alternative 
Divested Business and based on a fee arrangement providing the 
trustee with an incentive based on the price and terms of the 
divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    I. Defendants shall use their best efforts to assist the trustee 
in accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by 
the trustee shall have full and complete access to the

[[Page 41243]]

personnel, books, records, and facilities of the business to be 
divested, and defendants shall develop financial and other 
information relevant to such business as the trustee may reasonably 
request, subject to customary confidentiality protection for trade 
secret or other confidential research, development, or commercial 
information. Defendants shall take no action to interfere with or to 
impede the trustee's accomplishment of the divestiture.
    J. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestiture ordered under this Final 
Judgment. 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 Alternative 
Divested Business and shall describe in detail each contact with any 
such person. The trustee shall maintain full records of all efforts 
made to divest the Alternative Divested Business.
    K. If the trustee has not accomplished such divestiture within 
six months after its appointment, the trustee shall promptly file 
with the Court a report setting forth (1) The trustee's efforts to 
accomplish the required divestiture; (2) the reasons, in the 
trustee's judgment, why the required divestiture has not been 
accomplished; and (3) the trustee's recommendations. 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. The trustee shall at the same time furnish such report 
to the plaintiff who shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shaIl deem appropriate 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. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a 
definitive divestiture agreement, the trustee shall notify the 
United States and the defendants of any proposed divestiture 
required by Section V of this Final Judgment. The notice shall set 
forth the details of the proposed divestiture and list the name, 
address, and telephone number of each person not previously 
identified who offered or expressed an interest in or desire to 
acquire any ownership interest in the Alternative Divested Business, 
together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from 
defendants, the proposed Alternative Acquirer, any other third 
party, or the trustee if applicable, additional information 
concerning the proposed divestiture, the proposed Alternative 
Acquirer, and any other potential Alternative Acquirer. Defendants 
and the trustee shall furnish any additional information requested 
within fifteen (15) calendar days of the receipt of the request, 
unless the parties shall otherwise agree.
    C. Within (a) thirty (30) calendar days after receipt of the 
notice or (b) twenty (20) calendar days after the United States has 
been provided the additional information requested from defendants, 
the proposed Alternative Acquirer, any third party, or the trustee, 
whichever is later, the United States shall provide written notice 
to defendants and the trustee, if there is one, stating whether or 
not it objects to the proposed divestiture. If the United States 
provides written. notice that it does not object, the divestiture 
may be consummated, subject only to defendants' limited right to 
object to the sale under Section V(G) of this Final Judgment. Absent 
written notice that the United States does not object to the 
proposed Alternative Acquirer or upon objection by the United 
States, a divestiture proposed under Section V shall not be 
consummated. Upon objection by defendants under Section V(G), a 
divestiture proposed under Section V shall not be consummated unless 
approved by the Court.

VII. Financing

    To the extent that defendants are issued Acquirer Shares 
pursuant to the Agreement to Acquire the Divested Business Through 
Purchase of FNA Group Shares dated June 6, 2006 between Falconbridge 
and LionOre, or otherwise, in exchange for financing part of the 
Acquirer's acquisition of the Divested Business, defendants:
    1. Shall, within 150 days after the earlier of (a) the 
Acquisition of Falconbridge, or (b) the issuance of the Acquirer 
Shares, divest in a manner consistent with this Final Judgment all 
of the Acquirer Shares;
    2. Shall divest the Acquirer Shares by open market sale, public 
offering, private sale, repurchase by LionOre, or a combination 
thereof. The divestiture of the Acquirer Shares shall not be made: 
(i) To any person other than LionOre who provides High-Purity Nickel 
unless the United States shall otherwise agree in writing; or (ii) 
in a manner that, in the sole judgment of the United States, could 
significantly impair LionOre as an effective competitor in the 
production and sale of High-Purity Nickel;
    3. Shall not be issued more than the Acquirer Shares;
    4. Shall not exercise any rights relating to the Acquirer 
Shares, including but not limited to (i) exercising or permitting 
the exercise of any voting rights, (ii) electing, nominating, 
appointing, or otherwise designating or participating as officer or 
directors; (iii) participating. as a member of the Board of 
Directors or otherwise, in any meeting of the Board of Directors, 
(iv) participating in any committees or other governing body of 
LionOre; (v) exercising any veto rights with respect to the business 
of LionOre, including veto power over changes in control of LionOre, 
over significant asset purchases or sales, over change in majority 
of board membership, or over changes in majority ownership of 
LionOre; (vi) obtaining any financial or business information with 
respect to LionOre that is not otherwise publicly available. In no 
event shall defendant influence or attempt to influence the 
decision-making, management, or policies of LionOre; and
    5. Shall not acquire, directly or indirectly, any shares of, or 
other ownership interest in, LionOre, within two years of divesting 
the Acquirer Shares.

VIII. Hold Separate

    Until the divestiture required by this Final Judgment has been 
accomplished, defendants shall take all steps necessary to comply 
with the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the 
divestiture ordered by this Court.

IX. 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 divestiture has been completed under Section IV 
or Section V, defendants shall deliver to the United States an 
affidavit as to the fact and manner of its compliance with Section 
IV or Section V of this Final Judgment. Every twelve (12) months 
following completion of the divestiture required by Section IV or 
Section V, defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section IV(E) or Section V(B) of this Final 
Judgment, including compliance with the Supply Agreement. Defendants 
shall, in addition, deliver to the United States an affidavit 
describing any changes to the Supply Agreement outlined in 
defendants' earlier affidavits filed pursuant to this section within 
fifteen (15) calendar days after the change is implemented.
    B. Defendants shall keep all records of all efforts made to 
preserve the Divested Business and to divest the Divested Business 
until one year after such divestiture has been completed.
    C. Within twenty (20) calendar days of the filing of the 
Complaint in this matter, and every thirty (30) calendar days 
thereafter until the divestiture of the Acquirer Shares has been 
completed under Section VII of the Final Judgment, defendants shall 
deliver to the United States an affidavit that describes in 
reasonable detail all actions defendants have taken and all steps 
defendants have implemented on an ongoing basis to comply with 
Section VII of this Final Judgment.

X. Compliance Inspection

    A. For 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 duly authorized representatives of the 
United States Department of Justice, including consultants and other 
persons retained by the United States, shall, 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, be permitted:

[[Page 41244]]

    1. Access during defendants' office hours to inspect and copy, 
or at plaintiffs option, to require defendants to provide copies of, 
all books, ledgers, accounts, records and documents in the 
possession, custody, or control of defendants, relating to any 
matters contained in this Final Judgment; and
    2. To interview, either informally or on the record, defendants' 
officers, employees, or agents, who may have their individual 
counsel present, regarding such matters. The interviews shall be 
subject to the reasonable convenience of the interviewee and without 
restraint or interference by defendants.
    B. Upon the written request of a duly authorized representative 
of the Assistant Attorney General in charge of the Antitrust 
Division, defendants shall submit written reports, under oath if 
requested, relating to any of the matters contained in this Final 
Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person 
other than an 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 the United States, defendants represent and identify 
in writing the material in any such information or documents to 
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 
the United States shall give defendants ten (10) calendar days 
notice prior to divulging such material in any legal proceeding 
(other than a grand jury proceeding).

XI. No Reacquisition

    Defendants may not reacquire any part of the Divested Business 
during the term of this Final Judgment.

XII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this 
Final Judgment to apply to this Court at any time for further orders 
and directions as may be necessary or appropriate to carry out or 
construe this Final Judgment, to modify any of its provisions, to 
enforce compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten years from the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The 
parties have complied with the requirements of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16, including making copies 
available to the public of this Final Judgment, the Competitive 
Impact Statement, and any comments thereon and the United States' 
responses to comments. Based upon the record before the Court, which 
includes the Competitive Impact Statement and any comments and 
response to comments filed with the Court, entry of this Final 
Judgment is in the public interest.

Date:------------------------------------------------------------------

Court approval subject to procedures of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

-----------------------------------------------------------------------
United States District Judge

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant 
to Section 2(b) of the Antitrust Procedures and Penalties Act 
(``APPA'' or ``Tunney Act''), 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.

Nature and Purpose of the Proceeding

    The United States filed a civil antitrust Complaint on June 23, 
2006, seeking to enjoin the proposed acquisition by defendant Inco 
Limited (``Inco'') of defendant Falconbridge Limited 
(''Falconbridge''). The Complaint alleges that the likely effect of 
this acquisition would be to lessen competition substantially in the 
development, production and sale of high-purity nickel (''High-
Purity Nickel''), i.e., a purer form of nickel used for certain 
alloys such as those used in safety-critical parts for jet engines, 
in violation of Section 7 of the Clayton Act. This loss of 
competition would likely result in higher prices, lower quality, 
less innovation, and less favorable delivery terms to customers in 
the High-Purity Nickel market.
    At the same time the Complaint was filed, the United States 
filed a Hold Separate Stipulation and Order and a proposed Final 
Judgment. These are designed to eliminate the anticompetitive 
effects of the acquisition while permitting Inco to complete its 
acquisition of Falconbridge. Under the proposed Final Judgment, 
which is explained more fully below, Inco is required to divest 
assets that include Falconbridge's Nikkelverk refinery in 
Kristiansand, Norway (''Nikkelverk Refinery''), and Falconbridge's 
nickel marketing businesses. The proposed Final Judgment requires 
that the divestiture of these assets be made to LionOre Mining 
International Ltd. (``LionOre''), a company headquartered in London, 
United Kingdom. LionOre is not currently involved in the refining of 
nickel, but owns nickel mining and processing resources in Africa 
and Australia, and has had plans to enter the business of refining 
nickel and thus become a fully-integrated nickel producer. Its 
acquisition of the Nikkelverk refinery and the other assets included 
in the proposed divestiture will accelerate LionOre's becoming a 
fully integrated nickel producer, and make it a viable and active 
competitor in the High-Purity Nickel market.
    The proposed Final Judgment requires that the divestiture to 
LionOre take place concurrently with the acquisition of Falconbridge 
by Inco. Under the terms of the Hold Separate Stipulation and Order, 
Falconbridge must maintain and preserve, until the acquisition is 
consummated, the Nikkelverk Refinery and other divestiture assets 
(hereafter ``Divested Business'') as an ongoing, economically viable 
competitive business. The Hold Separate Stipulation and Order 
further requires that, upon Inco's acquisition of the first share of 
Falconbridge common stock, the defendants will ensure that the 
Divested Business operates as an independent, economically viable 
ongoing competitive business, held separate and apart from Inco, and 
that it will remain independent and uninfluenced by Inco.
    The proposed Final Judgment also provides that, if for any 
reason the divestiture to LionOre does not occur as required by the 
proposed Final Judgment, a trustee will be appointed to divest the 
assets to an Alternative Acquirer, which is defined as a company 
that is in the metals mining or processing business and is able to 
supply, on a long-term basis, sufficient Feedstock to assure the 
United States, in its sole discretion, that the Nikkelverk Refinery 
will remain an economically viable competitive business.
    The United States 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 this 
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.

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

A. The Defendants and the Proposed Transaction

    Inco, a Canadian corporation, has its corporate headquarters and 
principal place of business in Toronto, Ontario, Canada. As one of 
the largest mining companies in the world, Inco is primarily engaged 
in mining, processing, and refining nickel, and also produces other 
elements, such as cobalt and platinum group metals (``PGMs''), as 
by-products of its nickel production. In 2005, Inco reported total 
sales of approximately $4.7 billion. The company's main nickel 
mining, processing, and refining operations are located in Canada, 
although it also owns mines and processing facilities in many other 
parts of the world. Inco's High-Purity Nickel refining operations 
are located in Ontario, Canada, and Wales, United Kingdom. Inco 
operates in the United States through its wholly-owned subsidiary 
International Nickel, Inc., located at Saddlebrook, New Jersey, 
which markets and sells in the United States nickel and other 
products manufactured by Inco. Inco's High-Purity Nickel is shipped 
to customers all over the world, including the United States.
    Falconbridge, a Canadian corporation, also has its corporate 
headquarters and principal place of business in Toronto, Ontario, 
Canada. Like Inco, Falconbridge is one of the world's largest mining 
companies and engages in all phases of the production of nickel and 
other refined elements. The main products that Falconbridge produces 
are nickel and copper, but the company also produces cobalt, PGMs, 
and other elemental metals as by-products of both its nickel and

[[Page 41245]]

copper refining operations. In 2005, Falconbridge reported total 
sales of approximately $7.7 billion. Falconbridge's primary nickel 
mining and processing facilities are located in Ontario, Canada, 
although it also has such facilities worldwide. Falconbridge's only 
High-Purity Nickel refining operation is the Nikkelverk Refinery 
located in Kristiansand, Norway. The company operates in the United 
States through its wholly-owned subsidiary, Falconbridge U.S., Inc., 
located at Pittsburgh, Pennsylvania, which markets and sells in the 
United States nickel and other products manufactured by 
Falconbridge. The High-Purity Nickel produced by the Nikkelverk 
Refinery is shipped to customers all over the world, including the 
United States.
    Inco and Falconbridge entered into an agreement dated October 
10, 2005, in which Inco stated that it intended to offer to purchase 
all of the common shares of Falconbridge that it did not already 
own. Also pursuant to that agreement, Falconbridge's Board of 
Directors stated that it had determined that it is in the best 
interests of Falconbridge to support the offer, recommend acceptance 
of Inco's offer to holders of the common shares of Falconbridge, and 
use its reasonable best efforts to permit Inco's offer to be 
successful, on the terms and conditions contained in the agreement. 
On October 24, 2005, Inco made a formal offer to purchase all of the 
outstanding common shares of Falconbridge in a transaction valued at 
over $15 billion. Inco's offer originally was open for acceptance 
until December 23,2005, but this date has been extended several 
times, most recently to June 30, 2006. The acquisition, among other 
things, would combine the operations of the two leading providers of 
High-Purity Nickel worldwide. The United States alleges in its 
Complaint that this proposed transaction, as initially agreed to by 
the defendants, would lessen competition substantially in the market 
for High-Purity Nickel in violation of section 7 of the Clayton Act.

B. The Competitive Effects of the Transaction on the High-Purity 
Nickel Market

    Nickel is a metallic element that is particularly resistant to 
high temperatures, high stresses, and corrosion. Nickel is often 
combined with other materials to form alloys with particular 
performance characteristics. These performance characteristics 
depend on the amount of nickel and other elements contained in the 
particular alloy. As a general proposition, as the amount of nickel 
in the alloy increases, the more resistant the alloy is to heat and 
stress. One sub-set of nickel-based alloys is called super alloys, 
which generally contain between 50 and 70 percent nickel, as well as 
specific amounts of other elements, including iron, cobalt, and 
chromium, that combine to give the alloy very specific performance 
characteristics. Super alloys are used primarily in chemical 
processing plants, medical applications, industrial power 
generation, and various aerospace applications. Many products made 
from super alloys, such as the rotating parts of jet engines, are 
considered safety-critical parts. For these parts, it is vital that, 
in addition to containing the proper amount of nickel, the super 
alloy be as free as possible from certain trace elements that could 
compromise the performance of the product and result in serious 
problems, including engine failure. The nickel that meets these 
demanding requirements is High-Purity Nickel. High-Purity Nickel is 
refined nickel of sufficient purity and chemical composition that it 
can be utilized for safety-critical applications. Only a small 
portion of the refined nickel produced in the world meets the 
specifications for High-Purity Nickel.
    High-Purity Nickel constitutes an essential ingredient in the 
production of super alloys used for safety-critical applications. 
The Complaint alleges that a small but significant post-acquisition 
increase in the price of High-Purity Nickel would not cause 
purchasers of super alloys used for safety-critical applications to 
substitute non-High-Purity Nickel or elements other than nickel so 
as to make such a price increase unprofitable.
    The Complaint also alleges that the relevant geographic market 
is the world, because all of the High-Purity Nickel sold in the 
world is mined, processed, and refined outside of the United States, 
and both Inco and Falconbridge sell High-Purity Nickel throughout 
the world. Both companies import High-Purity Nickel into the United 
States and sell that nickel to customers located throughout the 
United States.
    The market for High-Purity Nickel is already highly 
concentrated. Inco and Falconbridge are by far the two largest 
producers of High-Purity Nickel sold in the United States and 
throughout the world. Inco and Falconbridge each account for at 
least 40 percent of the worldwide sales of High-Purity Nickel. 
Combined, Inco and Falconbridge would account for over 80 percent of 
worldwide High-Purity Nickel sales.
    Only three other companies have demonstrated any ability to 
produce High-Purity Nickel. While one other finn consistently 
produces High-Purity Nickel, its available capacity is substantially 
less than that of either Inco or Falconbridge, and it cannot 
economically increase its capacity. Two other companies have 
produced small amounts of High-Purity Nickel, but are not 
substantial competitors in the High-Purity Nickel market. While both 
have substantial capacity to make non-High-Purity Nickel, their 
current ability to make High-Purity Nickel, and to make it on a 
consistent basis, is very limited. The other current producers of 
High-Purity Nickel do not have the ability, individually or 
collectively, to constrain effectively a unilateral exercise of 
market power in High-Purity nickel by a combined Inco and 
Falconbridge.
    As alleged in the Complaint, High-Purity Nickel customers 
generally view Inco's and Falconbridge's High-Purity Nickel as their 
only available options and do not view the products of other 
producers as viable alternatives due to concerns relating to the 
other producers' quality, capacity, and reliability. The vigorous 
and aggressive competition between Inco and Falconbridge in the 
production and sale of High-Purity Nickel has benefitted these 
customers, as Inco and Falconbridge have competed directly in terms 
of price, quality, innovation and delivery terms. The acquisition as 
originally proposed would eliminate all competition between Inco and 
Falconbridge, reduce the number of significant worldwide suppliers 
of High-Purity Nickel from three to two, and substantially increase 
the likelihood that Inco would unilaterally raise the price of High-
Purity Nickel to a significant number of customers.
    The Complaint also alleges that the merged firm would have the 
ability to increase prices to certain customers of High-Purity 
Nickel that must purchase High-Purity Nickel because they use it in 
super alloys used for safety-critical. applications, even though 
other customers purchase High-Purity Nickel for different uses and 
can often substitute non-High-Purity Nickel. The combined Inco and 
Falconbridge would be able to determine their High-Purity Nickel 
customers' end-uses and identify which customers are purchasing 
High-Purity Nickel specifically for super alloys used for safety-
critical applications. They could, therefore, charge customers that 
are purchasing High-Purity Nickel for super alloys used for safety-
critical applications a higher price than customers that are 
purchasing High-Purity Nickel for other uses.
    Successful entry or expansion by another firm into the 
development, manufacture, and sale of High-Purity Nickel would be 
difficult, time-consuming, and costly. As alleged in the Complaint, 
companies not currently producing nickel of any kind would require 
roughly three to five years and the expenditure of at least $100 
million to build a refinery to produce finished nickel product, and 
it would require even greater expenditures to enter the High-Purity 
Nickel market. A new entrant in the High-Purity Nickel market must 
invest in additional equipment and processes to extract sufficient 
undesirable trace elements to produce the High-Purity Nickel 
required by makers of super alloys used for safety-critical 
applications. Further, if not vertically integrated, the new entrant 
also must secure nickel feed sources of sufficient quality needed to 
make High-Purity Nickel. The United States investigated whether 
nickel producers not currently capable of producing High-Purity 
Nickel could easily enter the High-Purity Nickel market. The 
investigation concluded, however, that such producers would require 
an incremental investment of millions of dollars over several years 
to modify facilities and processes to become capable of producing 
High-Purity Nickel. A small but significant price increase in High-
Purity Nickel would not be sufficient to induce these companies to 
invest the substantial time and money necessary to enter the High-
Purity Nickel market. A new entrant in the High-Purity Nickel market 
also must be able to produce High-Purity Nickel in sufficient 
quantities, and with sufficiently consistent purity levels that 
customers could depend on it reliably to provide the High-Purity 
Nickel. Therefore, entry or expansion by any other firm into the 
High-Purity Nickel market will not be timely, likely, or sufficient 
to defeat an anticompetitive price increase that would result from 
Inco's acquisition of Falconbridge as originally proposed.

[[Page 41246]]

III. Explanation of the Proposed Final Judgment

    The divestiture required by the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisition in the 
market for High-Purity Nickel by establishing a new, independent, 
and economically viable competitor, which will include essentially 
all of the current nickel refining and marketing business of 
Falconbridge. This divestiture is designed to remedy the 
anticompetitive effects of the proposed transaction while preserving 
beneficial efficiencies that the parties anticipate achieving 
through the combination of the other businesses of Inco and 
Falconbridge. As discussed below, the proposed Final Judgment 
provides that LionOre shall be the Acquirer of the Divested 
Business. It also provides that the divestiture to LionOre must be 
accomplished in such a way as to demonstrate to the sole 
satisfaction of the United States that the Divested Business will 
remain viable and will remedy the competitive harm alleged in the 
Complaint. The divestiture must also be accomplished in a manner 
that satisfies the United States, in its sole discretion, that none 
of the terms of any agreement between LionOre and the defendants 
gives the defendants the ability unreasonably to raise LionOre's 
costs, lower LionOre's efficiency, or otherwise interfere in the 
ability of LionOre to compete effectively in the production and sale 
of High-Purity Nickel. The proposed Final Judgment also provides for 
continued, contractually guaranteed suitable refinery feeds 
(``Feedstock'') to Nikkelverk through the establishment and 
continuation of a Feedstock supply agreement between LionOre and the 
defendants, to supplement LionOre's own feedstock supplies.

A. Identification of LionOre as the Purchaser of the Divested 
Business

    A number of considerations led the United States to specifically 
approve and designate LionOre as the entity to whom the Divested 
Business should be sold. In the course of its investigation, the 
United States determined that competition in the High-Purity Nickel 
market would be most effectively preserved if the divestiture of the 
Nikkelverk assets were made to a purchaser that possessed its own 
nickel feedstock sources, thus helping to ensure that Nikkelverk 
would have a secure and long-term source of supply. LionOre 
satisfies that criterion. The defendants identified LionOre as a 
potential purchaser of the Divested Business that satisfies this 
criterion, and the United States undertook an evaluation of LionOre 
and determined that its ownership of Nikkelverk would preserve 
vigorous competition in the High-Purity Nickel market. Additionally, 
the defendants and LionOre had agreed on the terms of the 
divestiture, and entered into a number of subordinate agreements 
that will help ensure that LionOre will be able to operate 
Nikkelverk successfully.
    Given the parties' agreement with LionOre and the United States' 
determination that the divestiture to LionOre would resolve the 
competitive concerns, the United States drafted the proposed Final 
Judgment to order the sale. Under such circumstances, the United 
States' competitive concerns are often resolved by a ``fix-it-
first'' remedy.\1\ A fix-it-first remedy is a structural remedy that 
the parties implement and the United States accepts before a merger 
is consummated. In such a case, there is no need for the United 
States to file a Complaint to preserve competition. In this case, 
however, two aspects of the remedy led the United States to seek 
entry of a Final Judgment to ensure Court oversight of the 
defendants' fulfillment of their commitments. (Antitrust Division 
Policy Guide to Merger Remedies, Section IV.A; p. 28.) First, 
preservation of competition required not only that the Nikkelverk 
assets be divested, but that the defendants continue to supply 
feedstock to Nikkelverk for a number of years. (This part of the 
remedy is described in more detail in Section III.C. below.) Second, 
in order to expedite its purchase, LionOre will be issuing stock to 
Falconbridge, subject to the requirement that defendants sell within 
150 days any shares of LionOre that it receives as partial payment 
for the sale of the Divested Business. To ensure compliance with 
these ongoing commitments, the United States determined that a 
traditional ``fix-it-first'' remedy would not be appropriate, and 
that it would be necessary to seek entry of the proposed Final 
Judgment.
---------------------------------------------------------------------------

    \1\ A fix-it-first remedy has several benefits, including quick 
and certain divestiture, removing the need for litigation, allowing 
the Antitrust Division to use its resources more efficiently, and 
saving society from incurring real costs. (Antitrust Division Policy 
Guide to Merger Remedies, Section IV.A, p. 27)
---------------------------------------------------------------------------

    Because this is not a traditional fix-it-first remedy, the 
United States also determined that the proposed Final Judgment 
should anticipate the possibility, however remote, that for some 
reason the sale to LionOre does not take place. Section V of the 
proposed Final Judgment therefore requires that, if the divestiture 
to LionOre does not occur in the manner called for in Section IV, a 
trustee will be appointed to sell the assets to an Alternative 
Acquirer. For the most part, the assets to be divested, and the 
Defendants' obligations regarding the divestiture, are the same 
whether the sale is made to LionOre under Section IV or an 
Alternative Acquirer under Section V. However, since, unlike 
LionOre, an Alternative Acquirer has not already entered into 
agreements with the defendants, the proposed Final Judgment gives 
the Alternative Acquirer the option to enter into such agreements, 
including the ability to choose among several options, as discussed 
below, regarding the manner in which third-party feedstocks will be 
secured.

B. Assets

    The Divested Business as defined in the proposed Final Judgment 
means Falconbridge Nikkelverk A/S (the Nikkelverk Refinery in 
Norway), Falconbridge's three current-nickel marketing arms 
(Falconbridge, U.S., Inc.; Falconbridge Europe S.A.; and 
Falconbridge (Japan) Limited), Falconbridge International Limited 
(``FIL''), the Falconbridge subsidiary responsible for the current 
acquisition of feedstock from third parties, and related assets. The 
proposed Final Judgment includes a complete descriptive list of 
related divestiture assets designed to enable the Divested Business 
to compete vigorously.\2\ In summary, the list of divested assets 
includes all tangible assets used in the development, production, 
servicing, and sale of the products currently made at the Nikkelverk 
Refinery (``Nikkelverk Refinery Products''); and all intangible 
assets that have been used exclusively or primarily in the 
development, production, servicing, and sale of products, including 
but not limited to all intellectual property, and trade names 
(including the product or trade name ``SuperElectro''). With respect 
to any other intangible assets that are used by the Divested 
Business and also have been used by Falconbridge's other businesses 
(i.e., the non-Divested Business), LionOre may obtain a non-
exclusive, non-transferable, fully paid-up license for such 
intangible assets (including the use of the name ``Falconbridge''). 
In addition, the proposed Final Judgment requires Inco to provide 
information to LionOre about current employees to enable LionOre to 
make offers of employment. The defendants will not interfere with 
any negotiations by LionOre to employ any of Falconbridge's 
employees whose responsibilities include the research, development, 
production, operation, or sale of the products of the Divested 
Business, or procurement of Feedstock from third parties. As noted 
above, the defendants bear these obligations whether the sale is 
made to LionOre under Section IV, or to an Alternative Acquirer 
under Section V.
---------------------------------------------------------------------------

    \2\ The assets to be divested to an Alternative Acquirer, 
defined as the Alternative Divested Business, are the same as those 
to be divested to LionOre, except that FIL is not included. The 
proposed Final Judgment gives the Alternative Acquirer the option of 
acquiring FlL, but does not require the acquisition; LionOre has 
already chosen to acquire FIL.
---------------------------------------------------------------------------

    The United States is satisfied that LionOre possesses the 
incentive and capability to use the Divested Business to compete 
successfully in the High-Purity Nickel market. The proposed Final 
Judgment provides that the United States must also be satisfied that 
the manner in which the divestiture to LionOre is accomplished, and 
any agreements between the defendants and LionOre, do not interfere 
with the ability of LionOre to compete successfully in that market.

C. Feedstock Supply

    As part of the divestiture. the proposed Final Judgment also 
addresses the potential need for LionOre to have reliable and 
sufficient Feedstock supply for the Divested Business. This is 
accomplished in three ways. First, Inco has entered into a supply 
agreement (``Supply Agreement'') with LionOre by which Inco commits 
to supply Feedstock, produced by Inco, to be used in operating the 
Nikkelverk Refinery. Second, Inco has agreed to divest to LionOre 
the Falconbridge group that is responsible, in part, for procuring 
feedstock for Nikkelverk from third parties along with existing 
third-party supply agreements. Third, as a miner and processor of 
nickel, including feedstock currently refined at Nikkelverk, LionOre 
has

[[Page 41247]]

current and long-term access to feedstock of its own.
    Under the Supply Agreement provision, it is the option of 
LionOre to procure from Inco the same or substantially the same 
quality and volume of Feedstock provided by Falconbridge to the 
Nikkelverk Refinery. Currently, Falconbridge provides about 70% of 
the Feedstock for the Nikkelverk Refinery from its own operations. 
At the option of LionOre, such Supply Agreement may have a term of 
up to ten years. The terms and conditions of the Supply Agreement 
must be commercially reasonable and designed to enable LionOre to 
compete effectively in the sale of High-Purity Nickel, and must be 
approved by the United States in its sole discretion. The proposed 
Final Judgment also provides that Inco give the United States thirty 
days notice before implementing any material change to the Supply 
Agreement related to the length of the Supply Agreement, to the 
volume and quality of the Feedstock, or price, and further provides 
that Inco in the performance of the Supply Agreement will take no 
action to interfere with LionOre's ability to compete.
    Although the Antitrust Division generally disfavors long-term 
supply agreements, the Division has agreed to a long-term supply 
agreement here for three reasons. First, long-term supply agreements 
are common in this industry and may be necessary to ensure LionOre's 
ability to compete effectively. Second, the agreement is structured 
in a way that minimizes the potential risks normally associated with 
supply agreements. Third, the use of a supply agreement preserves 
substantial efficiencies the parties anticipate from the Inco/
Falconbridge acquisition.
    Providing LionOre the option of obtaining nickel feedstock from 
Inco through the Supply Agreement may be critical to its ability to 
compete effectively. Supply agreements of up to fifteen or twenty 
years are not uncommon in this industry because refineries are 
configured to process feedstock from specific sources, and a long-
term relationship encourages and ensures long-term profitability as 
capital expenditures are made to the refinery to suit the feedstock. 
In this instance, moreover, a long-term supply agreement provides 
LionOre time to develop and adapt the Nikkelverk Refinery to new 
feedstock sources. LionOre will have incentives to make this 
transition, but the ten-year Supply Agreement ensures that 
sufficient time is available for LionOre to compete effectively 
while developing its own sources and establishing relationships with 
new third-party sources of feedstock. It is contemplated that 
LionOre will over time supply increasing portions of the Nikkelverk 
feedstock from its own mines and processing facilities, and will 
eventually be able to operate Nikkelverk without the need for any 
Inco feedstock. Until that occurs, however, it is important to 
ensure that Nikkelverk will have the same quality and quantity of 
feedstock that it currently obtains from Falconbridge.
    The Supply Agreement between Inco and LionOre ensures that Inco 
will not be able to disadvantage the Nikkelverk Refinery through 
Feedstock pricing or quality, or by supply disruptions, and should 
not facilitate anticompetitive collusion between Inco and the 
Nikkelverk refinery. Moreover, key provisions of the agreement are 
expected to check the ability of Inco to abuse the supply 
relationship with LionOre. The price LionOre will pay Inco for 
Feedstock has been set through negotiations between Inco and 
LionOre, and any price changes will be linked directly to changes in 
the price for finished nickel as published independently by the 
London Metal Exchange. This wi1l further ensure that Inco, as 
required under the proposed Final Judgment, can take no pricing 
action under the Supply Agreement to interfere with or impede the 
ability of LionOre to compete effectively in the sale of High-Purity 
Nickel. Regarding the quality of Feedstock or other performance 
under the Supply Agreement, contract specifications for Feedstock 
are well-defined and chemically measurable, and inferior quality or 
performance will be easily detected and remedied.
    The fact that High-Purity Nickel is a relatively small part of 
total Nikkelverk Refinery sales would make it difficult for Inco to 
harm competition in the High-Purity Nickel market by disrupting 
supply to Nikkelverk. If Inco cut a portion of feedstock supply, the 
Nikkelverk Refinery easily could maintain its output of High-Purity 
Nickel using its feedstock used for other nickel.
    Nor will the Supply Agreement facilitate anticompetitive 
collusion between Inco and LionOre. There appear to be no structural 
reasons to anticipate that, in an industry where feedstock is 
generally destined for many end-uses of nickel, Inco could use the 
supply contract to coordinate with LionOre to unlawfully restrain 
trade in the High-Purity Nickel market. Although Inco will supply up 
to 70% of the Nikkelverk Refinery's feedstock, it will have 
incomplete information about the Nikkelverk Refinery's other sources 
of feedstock, and no information about its total production, product 
mix, and prices.\3\
---------------------------------------------------------------------------

    \3\ It is also important to note that in this industry supply 
agreements are common and appear to work well. Indeed, Nikkelverk 
currently relies on such contracts for much of the feedstock that it 
uses.
---------------------------------------------------------------------------

    The other sources of suitable feedstock for the new firm will be 
LionOre itself and third parties. Currently, third parties, 
including a company partly owned by LionOre, provide about 30% of 
the Nikkelverk Refinery's Feedstock pursuant to long term contracts 
with Falconbridge. Under the proposed Final Judgment, LionOre will 
acquire Falconbridge International Limited (``FIL''). FIL is a 
Barbados corporation and is the subsidiary of Falconbridge 
responsible, in part, for the current acquisition of Feedstock from 
third parties. By acquiring FIL, LionOre will also be acquiring the 
Third-Party Supply Agreements that have been made with FIL, which 
currently represent thirty percent of Nikkelverk' s total feedstock 
supply.
    The Supply Agreement with Inco, the acquisition of FIL and its 
existing third-party feedstock, and LionOre's own substantial 
feedstock resources will ensure that LionOre has sufficient 
Feedstock at commercial terms to operate the Divested Business as a 
viable, ongoing business that can stand in the position of today's 
Falconbridge, and thereby compete effectively in the High-Purity 
Nickel market.
    An Alternative Acquirer who purchases the Alternative Divested 
Business from the trustee will also have the option of entering into 
a Supply Agreement of up to ten years. The Alternative Acquirer will 
be a company that is in the metals mining or processing business and 
able to supply on a long-term basis, sufficient Feedstock to assure 
the United States, in its sole discretion, that the Nikkelverk 
Refinery will be a viable competitive business. An Alternative 
Acquirer will also have the option to obtain the right to third-
party feedstock comparable to that provided by Falconbridge's 
interest in existing third-party supply agreements, although it 
would not be required to do so by acquiring FIL as part of the 
divested assets. It may instead choose to provide for third-party 
feedstock supply through the defendants' assigning existing third-
party agreements to the Alternative Acquirer, or by the defendants 
entering into new agreements with the Alternative Acquirer to 
procure third-party feedstock.
    Securing access to feedstock in the manner provided by the 
proposed Final Judgment is more advantageous than the divestiture of 
one or more mines that are currently used to supply Nikkelverk. The 
combination of the Inco and Falconbridge mines in Ontario is the 
source of a substantial portion of the efficiencies that the parties 
anticipate they will realize via the proposed acquisition. 
Therefore, it is appropriate to craft a remedy that preserves 
competition without unnecessarily disrupting potential efficiencies.

D. Timing of the Divestiture

    In antitrust cases involving mergers in which the United States 
seeks a divestiture remedy, it requires completion of the 
divestiture within the shortest time period reasonable under the 
circumstances. In this case, because Inco and Falconbridge have 
significant sales and operations in Europe as well as the United 
States, the European Commission must also review Inco's proposed 
acquisition of Falconbridge. The proposed Final Judgment requires 
that, if Inco assumes control of Falconbridge, it must concurrently 
divest the Divested Business to LionOre as required by the proposed 
Final Judgment. During the period before Inco consummates the 
transaction with Falconbridge, a Hold Separate Stipulation and Order 
will preserve the assets to be divested, and require that Inco and 
Falconbridge continue to operate them as an independent competitor 
in the High-Purity Nickel market. During this time, Inco and 
Falconbridge are required to take the necessary steps to ensure that 
the assets remain an economically viable and ongoing business 
concern that is not influenced by the consummation of the 
acquisition, and otherwise maintain all competition during the 
pendency of the ordered divestiture.
    The United States and the defendants fully expect that the 
divestiture to LionOre will take place. In the event that it does 
not, however, the proposed Final Judgment provides that a trustee 
will be appointed to

[[Page 41248]]

sell the Alternative Divested Business. If the trustee has not 
effected a divestiture within six months of the trustee's 
appointment, the trustee shall file a report with the Court, and the 
Court shall thereafter enter whatever orders may be necessary to 
carry out the purposes of the proposed Final Judgment.

E. Financing

    The Division has never favored seller financing of divestitures, 
because such arrangements create an avenue for the seller to 
influence the business decisions of the company to whom the assets 
have been sold. In some cases, it may also signal that the proposed 
purchaser has insufficient resources to be a viable competition.
    In this case, although LionOre will finance the majority of its 
acquisition of the divested business on its own, the purchase 
agreement between Falconbridge and LionOre contemplates a partial 
payment to Falconbridge in the form of LionOre stock. The proposed 
Final Judgment provides, however, that any issuance of LionOre stock 
to Falconbridge must be strictly limited to no more than 19.99% or 
49,118,057 shares, defendants are not permitted to exercise any 
voting or control rights associated with those shares, and, perhaps 
most importantly, defendants must divest themselves completely of 
those shares within 150 days of the divestiture of Nikkelverk to 
LionOre. Under these circumstances, the Division determined that 
there was no possibility that the dangers associated with seller 
financing could materialize, and that the short-term issuance of 
these shares to Falconbridge created no risk to competition. In 
addition, the Division determined that the short-term issuance of 
LionOre stock was necessitated by the proposed speed of the 
divestiture, to take place immediately upon the success of Inco's 
tender offer. The Division determined that with a longer divestiture 
period, LionOre was fully able to finance the transaction without 
resorting to the issuance of stock to Falconbridge.

V. 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 the defendants.

VI. 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 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 days of the date of publication of this 
Competitive Impact Statement in the Federal Register. All comments 
received during this period will be considered by the Department of 
Justice, which remains free to withdraw its consent to the proposed 
Final Judgment at any time prior to the Court's entry of judgment. 
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: Maribeth Petrizzi, 
Chief, Litigation II Section, 1401 H St., NW., Suite 3000, Antitrust 
Division, United States Department of Justice, Washington, DC 20530.
    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 proposed Final Judgment.

VII. 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 defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions against Inco's acquisition of 
Falconbridge. The United States is satisfied, however, that the 
divestiture of assets described in the proposed Final Judgment will 
preserve competition for the provision of High-Purity Nickel as it 
existed prior to the proposed acquisition, and that such a remedy 
would achieve all or substantially all the relief the government 
would have obtained through litigation, but avoids the time and 
expense of a trial.

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

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day comment 
period, after which the Court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
16(e)(1). In making that determination, the Court shall consider:
    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, 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)(1)(A) & (B). As the United States Court of Appeals for 
the District of Columbia Circuit has 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 Corp., 
56 F.3d 1448, 1458-62 (D.C. Cir. 1995).
    ``Nothing in this section shall be construed to require the 
court to conduct an evidentiary hearing or to require the court to 
permit anyone to intervene.'' 15 U.S.C. 16(e)(2). Thus, in 
conducting this inquiry, ``[t]he court is 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.'' 119 Cong. Rec. 
24,598 (1973) (statement of Senator Tunney).\4\ Rather:

    \4\ See United States v. Gillette Co., 406 F. Supp. 713, 716 (D. 
Mass. 1975) (recognizing it was not the court's duty to settle; 
rather, the court must only answer ``whether the settlement achieved 
[was] within the reaches of the public interest''). A ``public 
interest'' determination can be made properly on the basis of the 
Competitive Impact Statement and Response to Comments filed by the 
Department of Justice pursuant to the APPA. Although the APPA 
authorizes the use of additional procedures, 15 U.S.C. 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. Rep. No. 93-1463, 93rd Cong., 2d Sess. 8-9 (1974), 
reprinted in 1974 U.S.C.C.A.N. 6535, 6538.

[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-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
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) (citing 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); 
see also Microsoft, 56 F.3d at 1460-62. Courts have held 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 41249]]

whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\5\
---------------------------------------------------------------------------

    \5\ Cf. BNS, 858 F.2d at 463 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); Gillette, 406 F. Supp. at 716 
(noting that, in this way, the court is constrained to ``look at the 
overall picture not hypercritically, nor with a microscope, but with 
an artist's reducing glass''). See generally Microsoft, 56 F.3d at 
1461 (discussing 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'').

    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.''' United States v. AT&T, 552 F. Supp. 131, 151 (D.D.C. 
1982) (citations omitted) (quoting Gillette, 406 F. Supp. at 716), 
aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see 
also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 
(W.D. Ky. 1985) (approving the consent decree even though the court 
would have imposed a greater remedy).
    Moreover, the Court's role under the APPA is limited to 
reviewing the remedy in relationship to the violations that the 
United States has alleged in its Complaint, and does not authorize 
the Court to ``construct [its] own hypothetical case and then 
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459. 
Because the ``court's authority to review the decree depends 
entirely on the government's exercising its prosecutorial discretion 
by bringing a case in the first place,'' it follows that ``the court 
is only authorized to review the decree itself,'' and not to 
``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Id. at 1459-60.

IX. 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.
Dated: June 23, 2006.

 Respectfully submitted,
Karen Phillips-Savoy,
Dando Cellini,
Jillian Charles,
James Foster,
Christine Hill,
Tara Shinnick,
Robert Wilder,
U.S. Department of Justice, Antitrust Division, Litigation II 
Section, Washington, DC 20530.

[FR Doc. 06-6361 Filed 7-19-06; 8:45 am]
BILLING CODE 4410-11-M