[Federal Register Volume 75, Number 179 (Thursday, September 16, 2010)]
[Notices]
[Pages 56538-56540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-23132]
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FEDERAL TRADE COMMISSION
[File No. 101 0093]
Air Products and Chemicals, Inc.; Analysis of Proposed 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 October 12, 2010.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to``Air
Products, Inc., File No. 101 0093'' to facilitate the organization of
comments. Please note that your comment -- including your name and your
state -- will be placed on the public record of this proceeding,
including on the publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. . . .,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with FTC Rule
4.9(c), 16 CFR 4.9(c).\1\
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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 FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: (https://ftcpublic.commentworks.com/ftc/airproducts) and following the
instructions on the web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the web-based form
at the weblink: (https://ftcpublic.commentworks.com/ftc/airproducts).
If this Notice appears at (http://www.regulations.gov/search/index.jsp), you may also file an electronic comment through that
website. The Commission will consider all comments that regulations.gov
forwards to it. You may also visit the FTC website at (http://www.ftc.gov/) to read the Notice and the news release describing it.
A comment filed in paper form should include the ``Air Products,
Inc., File No. 101 0093'' reference both in the text and on the
envelope, and should be mailed or delivered to the following address:
Federal Trade Commission, Office of the Secretary, Room H-135 (Annex
D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. 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.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC website, to the extent practicable,
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of
discretion, the Commission 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: Gregory P. Luib (202-326-3249), Bureau
of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580.
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 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 September 9, 2010), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). 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 from Air
Products and Chemicals, Inc. (``Air Products''), subject to final
approval, an Agreement Containing Consent Orders (``Consent
Agreement''), which is designed to remedy the anticompetitive effects
resulting from Air Products' proposed acquisition of Airgas, Inc.
(``Airgas''). Under the terms of the
[[Page 56539]]
Consent Agreement, Air Products is required, among other things, to
divest 15 air separation units (``ASUs'') and related assets currently
owned and operated by Airgas in the following locations: (1) Bozrah,
Connecticut; (2) Carrollton, Kentucky; (3) Canton, Ohio; (4) Dayton,
Ohio; (5) New Carlisle, Indiana; (6) Madison, Wisconsin; (7) Waukesha,
Wisconsin; (8) Carrollton, Georgia; (9) Jefferson, Georgia; (10)
Gaston, South Carolina (2 ASUs); (11) Rock Hill, South Carolina; (12)
Chester, Virginia; (13) Mulberry, Arkansas; and (14) Lawton, Oklahoma.
With the divestiture of these ASUs and related assets, the competition
that would otherwise be eliminated through the proposed acquisition of
Airgas by Air Products will be fully preserved.
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments by 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
final the accompanying Decision and Order (``Order'').
On February 11, 2010, Air Products announced its intention to
acquire all of the outstanding shares of Airgas pursuant to an all-cash
tender offer for an aggregate purchase price of approximately $7.0
billion. Consummation of this transaction is subject to acceptance of
the offer by a sufficient number of the shareholders of Airgas. Airgas
has repeatedly recommended that its shareholders not tender their
shares, and a sufficient number of shares have not been tendered to
date. It could be several months or more until the proposed acquisition
is consummated, if it is consummated at all.
The Commission's complaint alleges the facts described below and
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 certain regional markets in the United States
for the manufacture and sale of bulk liquid oxygen and bulk liquid
nitrogen.
II. The Parties
Air Products is a global supplier of industrial, medical, and
specialty gases for use in a variety of industries, including health
care, technology, and energy. Air Products is the second-largest
industrial gas supplier in the United States with 32 liquid atmospheric
gas-producing plants throughout the United States.
Airgas is the fifth-largest industrial gas supplier in the United
States. Airgas operates 16 liquid atmospheric gas-producing plants in
the United States, most of which are concentrated in the Eastern United
States. Airgas also is the largest U.S. distributor of packaged
industrial, medical, and specialty gases and hardgoods, such as welding
equipment and supplies.
III. The Products and Structure of the Markets
Both Air Products and Airgas own and operate ASUs in the United
States that produce liquid atmospheric gases, including liquid oxygen
and liquid nitrogen. Each gas has specific properties that make it
uniquely suited for the applications in which it is used. For most of
these applications, there is no viable substitute for the use of oxygen
or nitrogen. Accordingly, customers would not switch to another gas or
product even if the price of liquid oxygen or liquid nitrogen increased
by five to ten percent.
There are three primary and distinct methods of distributing oxygen
and nitrogen: (1) in packaged form (typically delivered in gaseous
cylinders or liquid dewars); (2) in bulk liquid form; and (3) in
gaseous form via on-site ASUs or pipelines connecting customers to
nearby ASUs. Customers choose a distribution method based on the volume
of gas required. Customers who use bulk liquid oxygen or nitrogen
require volumes of these gases that are too large to purchase
economically in cylinders, but too small to justify the expense of an
on-site ASU or pipeline. Thus, even if the price of liquid oxygen or
liquid nitrogen increased by five to ten percent, customers would not
switch to another method of distribution.
Due to high transportation costs, bulk liquid oxygen and nitrogen
may only be purchased economically from a supplier with an ASU located
within 150 to 250 miles of the customer. Therefore, it is appropriate
to analyze the competitive effects of the proposed acquisition in
regional geographic markets for bulk liquid oxygen and nitrogen. The
relevant geographic markets in which to analyze the effects of the
proposed acquisition are (1) the Northeast (including Connecticut,
Maine, Massachusetts, New Hampshire, Eastern New York, Rhode Island,
and Vermont), (2) the Eastern Midwest (including Eastern Indiana,
Northern Kentucky, Southeastern Michigan, Ohio, Western Pennsylvania,
and Northern West Virginia), (3) the Chicago-Milwaukee metropolitan
area (including the area 150 miles around Chicago), (4) the Southeast
(including part of Alabama, all of Georgia, North Carolina, and South
Carolina, part of Tennessee, and Southern Virginia), and (5) Oklahoma
and surrounding areas (including Western Arkansas, Southeastern Kansas,
Southwestern Missouri, Oklahoma, and Northeastern Texas). Because the
boundaries of the relevant geographic markets at issue are largely
determined by the proximity of overlapping ASUs, those geographic
markets with a greater number of proximate, overlapping ASUs - for
example, the Southeast market - tend to be larger in size than those
markets with fewer such ASUs - for example, the Chicago-Milwaukee
market.
The markets for bulk liquid oxygen and nitrogen are highly
concentrated. In all but the Oklahoma market, Air Products and Airgas
are two of only five companies supplying bulk liquid oxygen and
nitrogen to customers. In the Oklahoma market, Air Products is the
largest supplier, and the parties are two of only six suppliers of bulk
liquid oxygen and nitrogen.
IV. Effects of the Acquisition
In each of the relevant markets, as a result of the proposed
acquisition, a significant competitor would be eliminated, and a small
number of viable competitors would remain. Certain market conditions,
including the relative homogeneity of the firms and products involved
and availability of detailed market information, are conducive to the
firms reaching terms of coordination and detecting and punishing
deviations from those terms. Therefore, the proposed acquisition would
enhance the likelihood of collusion or coordinated action between or
among the remaining firms in each market.
The proposed acquisition also would eliminate direct and
substantial competition between Air Products and Airgas in these areas,
provide Air Products with a larger base of sales on which to enjoy the
benefit of a unilateral price increase, and eliminate a competitor to
which customers otherwise could have diverted their sales in markets
where alternative sources of supply are already limited. The proposed
acquisition, therefore, likely would allow Air Products to exercise
market power unilaterally, increasing the likelihood that purchasers of
bulk liquid oxygen or bulk liquid nitrogen would be forced to pay
higher prices in these areas.
[[Page 56540]]
V. Entry
Significant impediments to new entry exist in the markets for bulk
liquid oxygen and nitrogen. In order to be competitively viable in the
relevant markets, an ASU must produce at least 250 to 300 tons per day
of liquid product. The cost to construct a plant sufficiently large to
be cost-effective can be 30 to 50 million dollars, most of which are
sunk costs and cannot be recovered. Although an ASU can be constructed
within two years, it is not economically justifiable to build an ASU
before contracting to sell a substantial portion of the plant's
capacity, either to an on-site customer or to liquid customers. On-site
customers normally sign long-term contracts. Because such opportunities
to contract with these customers are rare, it is uncertain whether such
an opportunity would arise in the near future in any of the areas
affected by the proposed acquisition. It is even more difficult and
time-consuming for a potential new entrant to contract with enough
liquid gas customers to justify building a new ASU. These customers are
generally locked into contracts with existing suppliers that typically
last between five and seven years. Even if the new entrant were able to
secure enough customers to justify constructing a new ASU in any of the
affected markets, the new entrant may still need to rely on incumbent
suppliers to obtain liquid gases to service the new entrant's customers
while the ASU was constructed. Given the difficulties of entry, it is
unlikely that new entry could be accomplished in a timely manner in the
bulk liquid oxygen and nitrogen markets to defeat a likely price
increase caused by the proposed acquisition.
VI. The Consent Agreement
The proposed Consent Agreement remedies the acquisition's likely
anticompetitive effects in the markets for bulk liquid oxygen and bulk
liquid nitrogen. Pursuant to the Consent Agreement, Air Products will
divest all of the Airgas business and assets relating to the
manufacture or sale of bulk liquid oxygen and nitrogen in the
identified geographic markets. The Consent Agreement provides that Air
Products must find a buyer for the ASUs, at no minimum price, that is
acceptable to the Commission, no later than four months from the date
on which Air Products consummates its acquisition of Airgas. If Air
Products is unable to consummate the acquisition by February 15, 2011,
however, the Commission, in its discretion, may require Air Products to
seek prior approval of a buyer before Air Products can close any
transaction with Airgas. This provision provides the Commission an
opportunity to evaluate the continued availability of acceptable
purchasers - if, for example, economic conditions were to deteriorate
significantly - if the closing of the Air Products-Airgas transaction
takes place after February 15, 2011.
Any acquirer of the divested assets must receive the prior approval
of the Commission. The Commission's goal in evaluating possible
purchasers of divested assets is to maintain the competitive
environment that existed prior to the acquisition. A proposed acquirer
of divested assets must not itself present competitive problems. There
are a number of parties interested in purchasing the ASUs and related
assets to be divested that have the expertise, experience, and
financial viability to successfully purchase and manage these assets
and retain the current level of competition in the relevant markets.
The Commission is therefore satisfied that sufficient potential buyers
for the divested bulk liquid oxygen and nitrogen assets currently
exist.
If the Commission determines that Air Products has not provided an
acceptable buyer for the ASUs within the required time period, or that
the manner of the divestiture is not acceptable, the Commission may
appoint a trustee to divest the assets. The trustee would have the
exclusive power and authority to accomplish the divestiture.
The Consent Agreement also contains an Order to Hold Separate and
Maintain Assets, which will serve to protect the viability,
marketability, and competitiveness of the divestiture asset package
until the assets are divested to a buyer approved by the Commission.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.
By direction of the Commission.
Donald S. Clark
Secretary.
[FR Doc. 2010-23132 Filed 9-15-10; 7:50 am]
BILLING CODE 6750-01-S