[Federal Register Volume 74, Number 40 (Tuesday, March 3, 2009)]
[Notices]
[Pages 9245-9247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4481]


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FEDERAL TRADE COMMISSION

[File No. 071 0230]


The Lubrizol Corporation and The Lockhart Company; Analysis of 
Agreement Containing Consent Order 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 March 27, 2009.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Lubrizol and Lockhart, File No. 071 0230,'' 
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-LubrizolLockhart). To ensure that 
the Commission consider 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 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: Leonard L. Gordon, Nancy Turnblacer, 
and Alan B. Loughnan, Northeast Regional Office, 600 Pennsylvania 
Avenue, NW, Washington, D.C. 20580, (212) 607-2829.

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 February 26, 2009), on the World Wide Web, at (http://www.ftc.gov/os/2009/02/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 Order (``Consent 
Agreement'') from The Lubrizol Corporation and The Lockhart Company 
(``Respondents''). The Consent Agreement is intended to resolve 
anticompetitive effects stemming from The Lubrizol Corporation's 
(``Lubrizol'') acquisition of certain assets of The Lockhart Company 
(``Lockhart'') in the United States market for rust preventives 
containing oxidates. Under the terms of the proposed Consent Agreement, 
Lubrizol is required to

[[Page 9246]]

divest assets it acquired from Lockhart to Additives International LLC 
(``AI'').
    The proposed Consent Agreement has been placed on the public record 
for thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the proposed 
Consent Agreement and the comments received, and will decide whether it 
should withdraw from the proposed Consent Agreement, modify it, or make 
it final.
    Pursuant to an Asset Purchase Agreement dated February 7, 2007, 
Lubrizol acquired from Lockhart a product line of chemical additives 
used to make rust preventives for approximately $15.6 million 
(``Acquisition''). The Asset Purchase Agreement also included a non-
competition agreement that prohibited Lockhart, for a period of five 
years from the date of the purchase agreement, from directly or 
indirectly engaging in any business competitive with the assets it sold 
to Lubrizol. The Commission's complaint alleges that the Acquisition 
violated 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 market for rust preventives 
containing oxidates sold to metalworking firms, automotive parts 
suppliers, and other entities. The proposed Consent Agreement would 
remedy the alleged violation by replacing the competition that has been 
lost in this market as a result of the Acquisition.

II. The Parties

    Lubrizol is a specialty chemical manufacturer that produces and 
supplies products designed for use in the global transportation, 
industrial, and consumer markets. Lubrizol manufactures products such 
as additives, ingredients, resins, and compounds, which customers use 
as rust preventives and in other ways to improve the quality of their 
end-use products. Prior to the Acquisition, Lubrizol was the leading 
maker of oxidates in North America. Lubrizol, headquartered in 
Wickliffe, Ohio, operates facilities in 29 countries, including 
production facilities in 20 countries and laboratories in 13 countries. 
In FY2007, Lubrizol had approximately $4.5 billion in revenue.
    Lockhart, a private corporation headquartered in Flint, Michigan, 
was the second leading maker of oxidates in North America. Lockhart 
previously manufactured specialty chemicals including corrosion and 
lubricity additive packages, soluble bases, coating intermediates, and 
petroleum sulfonates and oxidates that serve the metalworking and 
coatings industries. Lockhart's metalworking product line included 
oxidates, natural, synthetic and gelled sulfonates, corrosion 
inhibitors and lubricity agents, emulsifier packages, grease additives, 
esters, soaps, semi-finished coatings, and rust preventives.

III. Oxidates

    Oxidates are waxy petroleum-based substances that are normally 
solid at room temperature and are used in chemical formations designed 
to be applied to metal for rust prevention purposes. Oxidates may be 
further processed into soaps of oxidates and esters, which have the 
same rust preventive abilities as oxidates and are also used in 
chemical blends. In addition to their excellent rust preventive 
properties, oxidates are inexpensive and long-lasting compared to other 
rust preventive additives in the market. Due to oxidates' low costs and 
superior rust-preventing properties, they have become the ``gold-
standard'' in long-term rust and corrosion protection. Oxidates are 
purchased by chemical formulators who use them to formulate rust 
protection and corrosion-inhibiting additives.
    The relevant geographic market in which to assess the impact of the 
Acquisition is the United States. Foreign importers of oxidates face 
tariffs and other obstacles that increase their prices and make United 
States customers less likely to rely on foreign sources.
    The market for oxidates is highly concentrated, with Lubrizol, and 
previously, Lockhart, being the top two providers of oxidates in the 
United States. While a few fringe firms exist, oxidates customers do 
not regard them as suitable alternatives to Lubrizol and Lockhart.
    The acquisition of Lockhart's oxidate line by Lubrizol 
substantially lessened competition in the oxidate market. Through the 
Acquisition, Lubrizol removed its last substantial competitor in the 
market. Before the Acquisition, customers benefitted from the rivalry 
between Lubrizol and Lockhart in the form of lower prices, innovative 
products, and better service and support. In addition, the Acquisition 
thwarted entry by restricting the use of Lockhart's Flint, Michigan, 
plant and equipment through the non-competition agreement.
    New entry or fringe expansion into the market for the manufacture 
of oxidates sufficient to counteract the competitive effects of the 
Acquisition is unlikely to occur within two years. To enter the market, 
a firm needs to invest in assets such as equipment, production know-
how, supplier relationships, and infrastructure. The market for 
oxidates is not expanding and it is likely a new entrant would not be 
able to establish enough sales to achieve the minimum viable scale to 
make entry economically feasible. In addition, the formulations for 
oxidates and other rust preventatives go through extensive testing and 
certification processes. Due to the time and expense of testing, 
customers are reticent to change suppliers absent exigent 
circumstances.

IV. Consent Agreement

    Under the terms of the Consent Agreement, Lubrizol is required to 
transfer certain assets to AI. The transferred assets consist of a non-
exclusive license to manufacture twenty-eight former Lockhart rust 
preventive formulas that contain oxidates, including testing data 
relating to the formulas and the right to use the Lockhart trademarks 
and trade name for a period of two years after the date upon which the 
Decision and Order becomes final. Under the terms of the Consent 
Agreement, Lockhart must also lease a portion of its Flint plant to AI 
and maintain the plant in good working order for the duration of the 
lease. Lubrizol must also release its right of first refusal to 
purchase Lockhart's oxidizer. AI also acquired from Lockhart a right of 
first refusal to purchase the plant.
    The Consent Agreement also requires Lubrizol to execute a waiver of 
the non-compete provision of the Acquisition Agreement. Specifically, 
Section II.A. of the Decision and Order requires Lubrizol to ``[r]emove 
and rescind any prohibition or restraint including, but not limited to, 
any non-compete agreements, on the sale or use of all or any part of 
Respondent Lockhart's Flint Plant for the manufacture and sale of any 
products produced at the Flint Plant by [AI] or any other Person.'' 
Finally, the Consent Agreement prohibits Lubrizol from acquiring any or 
all of AI without prior Commission approval.
    The Commission believes that this Consent Agreement establishes AI 
as a viable competitor in the oxidate market and substantially restores 
the competition lost as a result of the transaction. The acquisition of 
the former Lockhart formulas and the lease of the Lockhart plant by AI 
decreases the normal barriers a new entrant would face and remedies the 
anticompetitive effects of the previously executed Acquisition.

[[Page 9247]]

    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, and does not modify their terms in any 
way. Further, the proposed Consent Agreement has been entered into for 
settlement purposes only, and does not constitute an admission by 
Respondents that they violated the law or that the facts alleged in the 
complaint (other than jurisdictional facts) are true.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E9-4481 Filed 3-2-09: 8:45 am]
[BILLING CODE 6750-01-S]