[Federal Register Volume 74, Number 19 (Friday, January 30, 2009)]
[Notices]
[Pages 5656-5658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-2081]


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FEDERAL TRADE COMMISSION

[File No. 081 0214]


Dow Chemical Company; Analysis of Agreement Containing Consent 
Orders to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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

DATES: Comments must be received on or before February 23, 2009.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Dow Chemical, File No. 081 0214,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, N.W., Washington, D.C. 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper 
form be sent by courier or overnight service, if possible, because U.S. 
postal mail in the Washington area and at the Commission is subject to 
delay due to heightened security precautions. Comments that do not 
contain any nonpublic information may instead be filed in electronic 
form by following the instructions on the web-based form at (http://secure.commentworks.com/ftc-DowChemical). To ensure that the Commission 
considers an electronic comment, you must file it on that web-based 
form.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to

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consider and use in this proceeding as appropriate. All timely and 
responsive public comments, whether filed in paper or electronic form, 
will be considered by the Commission, and will be available to the 
public on the FTC website, to the extent practicable, at www.ftc.gov. 
As a matter of discretion, the FTC makes every effort to remove home 
contact information for individuals from the public comments it 
receives before placing those comments on the FTC website. More 
information, including routine uses permitted by the Privacy Act, may 
be found in the FTC's privacy policy, at (http://www.ftc.gov/ftc/
_____________________________________-
privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Michael A. Franchak, Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-3406.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for January 23, 2009), on the World Wide Web, at (http://www.ftc.gov/os/2009/01/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Dow Chemical Company (``Dow'' or ``Respondent'') to 
remedy the anticompetitive effects stemming from Dow's proposed 
acquisition of Rohm & Haas Company (``Rohm & Haas''). Under the terms 
of the Consent Agreement, Dow is required to divest to a Commission-
approved buyer significant portions of its acrylic monomer, acrylic 
latex polymer, and hollow sphere particle businesses and to license 
certain intellectual property related to the production of the products 
in these businesses. Dow is also required to institute procedures to 
ensure that the other businesses it acquired from Rohm & Haas do not 
have access directly or indirectly to competitively sensitive non-
public information regarding the divested assets.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to receive comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will review the Consent 
Agreement and comments received and decide whether to withdraw from the 
proposed Consent Agreement, modify it, or make final the Consent 
Agreement's proposed Order.
    On July 10, 2008, Dow announced a definitive agreement to purchase 
all of the outstanding shares of Rohm and Haas in a transaction valued 
at $18.8 billion, including $3.5 billion in debt assumption. The 
Commission's complaint alleges that the proposed acquisition, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C. Sec.  18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. Sec.  45, by lessening competition in the North 
American markets for the research, development, manufacture and sale of 
glacial acrylic acid, butyl acrylate, ethyl acrylate, acrylic latex 
polymers for traffic paint, and hollow sphere particles. The Consent 
Agreement will remedy the alleged violation by divesting significant 
acrylic monomer and acrylic polymer research, development, production 
and manufacturing assets and related intellectual property to a third 
party thereby replacing the lost competition that would result from the 
acquisition in these markets.

II. The Proposed Complaint

    According to the Commission's proposed Complaint, the relevant 
lines of commerce in which to analyze the effects of the proposed 
acquisition are the markets for the research, development, manufacture, 
and sale of certain acrylic monomers, including glacial acrylic acid, 
butyl acrylate and ethyl acrylate, as well as acrylic latex polymer for 
traffic paint and hollow sphere particles.
    All of the acrylic monomer relevant products are made from crude 
acrylic acid. Glacial acrylic acid is purified crude acrylic acid and 
is used to make super absorbent polymers for personal care and hygiene 
products. Butyl acrylate and ethyl acrylate are acrylate esters formed 
from reacting crude acrylic acid with butanol and ethanol, 
respectively. These acrylate esters are then used to produce acrylic 
latex polymers used in paints, architectural coatings, and pressure 
sensitive adhesives.
    Acrylic latex polymer for traffic paint and hollow sphere particles 
are unique types of polymers. Acrylic latex polymer for traffic paint 
is a quick drying polymer used to mark traffic lines on highways. 
Hollow sphere particles are a type of specialty polymer that is used in 
the manufacture of coated paper to provide gloss, brightness, and 
opacity.
    The Complaint alleges that the relevant geographic market in which 
to analyze the anticompetitive effects of the proposed acquisition for 
all of the relevant markets is no larger than North America. Most 
monomers are difficult to ship because of their volatility. While there 
are some minor imports of acrylic monomers, they are not a meaningful 
constraint on the prices of these products in North America. Acrylic 
polymers, such as those used for traffic paint and hollow sphere 
particles, are also difficult and expensive to ship long distances. 
Shipping these polymers, which must be immersed in water for transport, 
is cost-prohibitive because of the substantial added water weight 
relative to the value of the polymer itself.
    The Complaint further alleges that all of the relevant markets are 
highly concentrated. For the acrylic monomer relevant markets, the 
proposed transaction would reduce the number of significant players in 
those markets from four to three with the combined company having 
significant market shares in each of the markets. The combined entity 
would have a market share exceeding 40% in glacial acrylic acid, a 
market share approaching 90% in the market for butyl acrylate, and a 
market share approaching 80% in ethyl acrylate. The markets for acrylic 
polymer for traffic paint and hollow sphere particles are even more 
highly concentrated with Dow and Rohm & Haas as the only two suppliers. 
As a result, the proposed acquisition would result in a merger to 
monopoly in those markets.
    Finally, the Complaint alleges that the proposed acquisition would 
reduce competition in the relevant markets by

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eliminating direct and substantial competition between Dow and Rohm & 
Haas, by increasing Dow's ability to exercise market power unilaterally 
in the relevant markets, and/or by increasing the likelihood of 
coordinated interaction in the markets for glacial acrylic acid, butyl 
acrylate, and ethyl acrylate. The Complaint further alleges that 
potential new entry or fringe expansion would not prevent the 
anticompetitive effects described in the Complaint.

III. Terms of the Proposed Order

    Under the proposed Consent Agreement, Dow will divest to a single 
Commission-approved Acquirer a significant part of its acrylic monomer 
and polymer research and development and production assets including: 
its acrylic monomer production facility in Clear Lake, Texas; its 
acrylic polymer production assets located in St. Charles, Louisiana; 
its acrylic polymer production facility located in Alsip, Illinois; its 
acrylic polymer production facility located in Torrance, California; 
its acrylic monomer research and development group located in South 
Charleston, West Virginia; its acrylic latex polymer research and 
development group located in Cary, North Carolina, and other assets 
related to such businesses. The divestiture would also include the 
technology that is primarily related to these businesses, and further 
provides that Dow license to the Acquirer any intellectual property not 
primarily related to the divested business that Dow nonetheless uses in 
those businesses, and requires Dow to divest the business contracts of 
the divested businesses, and obtain the consents that are necessary to 
assign those contracts to the Acquirer. The divestiture to a single 
acquirer of both acrylic monomer and acrylic polymer research, 
development, manufacture and production assets best replicates the pre-
acquisition market structure in which each of the significant acrylic 
monomer firms was forward-integrated into the supply of acrylic 
polymers.
    In order to ensure the transition of the divested assets and the 
viability of the Acquirer, the Consent Agreement requires Dow to 
provide certain services. First, Dow is required to continue to provide 
certain input products to the Acquirer that Dow provided previously to 
the divested assets. Second, the Consent Agreement requires Dow to 
provide transition services for a short period of time to accomplish 
the transition of the divested assets to the Acquirer. Finally, the 
Consent Agreement requires that Dow continue to provide site services 
to the Acquirer in connection with the acrylic polymer production 
assets located in St. Charles, Louisiana, where the Acquirer will 
operate a business unit that, although largely separate, is located on 
the grounds of a larger Dow facility.
    The Consent Agreement remedies the competitive concerns in the 
markets for hollow sphere particles and acrylic latex polymer for 
traffic paint by requiring Dow to divest the intellectual property that 
is primarily related to these products and to license certain other 
intellectual property used for these products. In addition, Dow is 
required to supply hollow sphere particles and acrylic latex polymer 
for traffic paint to the Acquirer at its manufacturing cost, until such 
time as the Acquirer is able to develop its own manufacturing.
    The Consent Agreement also requires Dow to institute procedures to 
ensure that it does not have access directly, or indirectly, to 
competitively sensitive non-public information obtained from the 
Divested Businesses and Facilities or to use any such competitively 
sensitive non-public information it already has in an anticompetitive 
manner.
    The proposed Order gives the Commission the power to appoint an 
interim monitor to assure that Dow expeditiously complies with all of 
its obligations and performs all of its responsibilities as required by 
the Order. If Dow fails to sell the divested assets within the later of 
(1) 240 days after the Consent Agreement is accepted by the Commission 
for Public Comment and (2) 240 days after the Acquisition closes, the 
Order allows for the appointment of a Divestiture Trustee to divest the 
assets that are the subject of the proposed Order. In order to ensure 
that the Commission remains informed about the status of the proposed 
divestitures and the transfers of assets, the proposed Consent 
Agreement requires Dow to file reports with the Commission periodically 
until the divestitures and transfers are accomplished.
    The purpose of this analysis is to facilitate public comment on the 
proposed Decision and Order. This analysis is not intended to 
constitute an official interpretation of the Consent Agreement and the 
proposed Decision and Order.
    By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. E9-2081 Filed 1-29-09: 8:45 am]
[BILLING CODE 6750-01-S]