[Federal Register Volume 79, Number 11 (Thursday, January 16, 2014)]
[Notices]
[Pages 2885-2897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00709]
[[Page 2885]]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Heraeus Electro-Nite Co., LLC; 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)-(h), that a proposed Final Judgment,
Stipulation and Competitive Impact Statement have been filed with the
United States District Court for the District of Columbia in United
States v. Heraeus Electro-Nite Co., LLC, Civil Action No. 1:14-cv-
00005. On January 2, 2014, the United States filed a Complaint alleging
that the September 7, 2012 acquisition by Heraeus Electro-Nite Co., LLC
(``Heraeus'') of substantially all of the assets of Midwest Instrument
Company, Inc. (``Minco'') violated Section 7 of the Clayton Act, 15
U.S.C. Sec. 18. The proposed Final Judgment, filed at the same time as
the Complaint, requires Heraeus to divest a package of assets,
including the former Minco facilities located in Hartland, Wisconsin
and Johnson City, Tennessee, along with associated tangible and
intangible assets. The proposed Final Judgment also requires Heraeus to
waive any existing noncompete agreement that may bind any former
employee of Heraeus or Minco in the United States.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth
Street NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-2481),
on the U.S. Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court
for the District of Columbia. Copies of these materials may be obtained
from the Antitrust Division upon request and payment of the copying fee
set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the U.S. Department of Justice,
Antitrust Division's Internet Web site, filed with the Court and, under
certain circumstances, published in the Federal Register. Comments
should be directed to Maribeth Petrizzi, Chief, Litigation II Section,
Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW.,
Suite 8700, Washington, DC 20530, (telephone: 202-307-0924).
Patricia A. Brink,
Director of Operations.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA
U.S. Department of Justice
Antitrust Division
450 Fifth Street, N.W., Suite 8700
Washington, D.C. 20530
Plaintiff,
v.
HERAEUS ELECTRO-NITE CO., LLC
One Summit Square, Suite 100
Langhorne, PA 19047
Defendant.
CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014
COMPLAINT
The United States of America, acting under the Attorney General
of the United States, brings this civil antitrust action seeking
equitable relief to remedy the actual and potential anticompetitive
effects of the September 2012 acquisition by Defendant Heraeus
Electro-Nite Co., LLC (``Heraeus'') of substantially all of the
assets of Midwest Instrument Company, Inc. (``Minco''). The United
States alleges as follows:
I. INTRODUCTION
1. In 2012, Defendant Heraeus surveyed the U.S. market for
single-use sensors and instruments used to measure and monitor the
temperature and chemical composition of molten steel (``S&I'') and
found that its once-commanding 85% market share had been reduced to
an estimated 60%, while its closest competitor, Minco, had gained
substantially, reaching about a 35% share. Consequently, Heraeus
decided to restore its ``market leadership'' in the United States by
acquiring Minco and thereby eliminating Minco's production capacity.
The acquisition removed significant head-to-head competition between
Minco and Heraeus on price, innovation and service, and created a
near-monopoly in the supply of S&I in the United States.
Accordingly, Heraeus' acquisition of Minco's assets was unlawful and
violated Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
2. Nearly 100 million tons of steel were produced in the United
States in 2012. Steelmaking is a continuous process during which the
chemistry and temperature of each batch of steel must be measured
and monitored in order to ensure the quality, reliability, and
consistency of the finished steel, as well as the safety and
efficiency of the manufacturing operation. S&I products are integral
to the steel making process; indeed, steel makers cannot produce
steel without using the S&I that is developed, produced and sold by
companies such as Heraeus and, previously, Minco. Steel companies
also rely on S&I suppliers as virtual partners in the steel-making
process.
3. Heraeus became the dominant S&I supplier in the United States
after it acquired its main rival, Leeds & Northrup (``L&N''), in
1995.
4. Until the mid-1990s, Minco was a small company that supplied
low-end equipment to steel mill chemistry labs. Heraeus' acquisition
of L&N left steel mill customers looking for alternatives. As a
result, Minco made a strategic decision to enter the high-tech,
higher-end of the market and offer customers an alternative to
Heraeus. Over a period of years, Minco slowly gained market share by
offering superior customer service and innovation. In 2010, as the
steel industry recovered from the economic downturn, Minco sales
increased significantly when it introduced user-friendly, innovative
products, such as a combination 3-in-1 sensor and a wireless
transmitter. By 2012, Minco's market share had increased to 35%,
while Heraeus' market share had decreased to about 60%.
5. Given the competitive threat presented by Minco, Heraeus'
parent company determined in July 2012 that that the acquisition of
Minco presented the ``[o]pportunity to improve and defend [Heraeus']
position in the North American market.''
6. Accordingly, Heraeus acquired substantially all of Minco's
assets on September 7, 2012. The transaction was not reportable
under the filing thresholds of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and therefore was not subject to antitrust
review prior to being consummated. Instead, the transaction was
brought to the attention of the United States Department of Justice
after the fact by customers concerned that the acquisition of Minco
by Heraeus substantially lessened competition in the S&I market in
the United States.
II. PARTIES TO THE TRANSACTION
7. Defendant Heraeus, a Delaware corporation with its
headquarters in Langhorne, Pennsylvania, is a subsidiary of Heraeus
Electro-Nite International N.V. (``HEN''), a Belgian company, which
itself is a subsidiary of Heraeus Holding GmbH, a privately held
German corporation based in Hanau, Germany. HEN's U.S. subsidiary
Heraeus had approximately $92 million in revenue in fiscal year
2011.
8. Prior to being acquired by Heraeus, Minco was a privately
held company headquartered in Hartland, Wisconsin that sold S&I. In
2011, Minco's U.S. revenues were approximately $29 million. Minco's
manufacturing facilities were located in Hartland, Wisconsin,
Johnson City, Tennessee and Monterrey, Mexico.
9. On September 7, 2012, Heraeus and Minco completed a $42
million asset sale whereby Heraeus acquired all of Minco's business
engaged in the development, production, sale, and service of S&I in
the United States and certain other countries, including Canada,
Brazil and Australia.
III. JURISDICTION AND VENUE
10. The United States brings this action against Defendant
Heraeus under Section 15 of the Clayton Act, 15 U.S.C. Sec. 25, as
amended, to prevent and restrain Heraeus from continuing to violate
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
[[Page 2886]]
11. Heraeus sells S&I in the flow of interstate commerce, and
its development, production, sale, and service of S&I substantially
affects interstate commerce. This Court has subject matter
jurisdiction over this action and over Heraeus pursuant to Section
15 of the Clayton Act, 15 U.S.C. Sec. 25, 28 U.S.C. Sec. Sec. 1331
and 1337(a) and 1345.
12. Heraeus has consented to personal jurisdiction and venue in
this District.
IV. TRADE AND COMMERCE
A. Background: The Critical Role of S&I in U.S. Steel Production
13. The temperature and chemical composition of molten steel
must be measured and monitored throughout the steel-making process.
Each stage of production has specific chemical concentration and
temperature requirements. The accuracy, reproducibility and
reliability of molten steel temperature measurements and chemical
properties directly influence the quality of the end product, as
well as the safety and productivity of the steel mill. As the
finished steel product may be used in demanding applications, such
as steel beams for a building or automotive exterior panels, steel
mills must ensure the molten steel exactly meets the required
specifications. Testing and sampling the molten steel to ensure that
it meets these specifications is a critical aspect of the steel-
making process. S&I systems play a vitally important role in this
essential aspect of the steel-making process.
14. An S&I system consists of four basic parts: (1) The single-
use sensor; (2) the cardboard tube; (3) the pole; and (4) the
instrument, or display. The single-use sensor, typically encased in
heavy paper or cardboard and attached to a cardboard tube, contains
the actual measurement device. The cardboard encasement provides
momentary protection to allow the single-use sensor to transmit a
reading to the instrument before the heat from the molten steel
consumes the sensor. For standard single-use sensors, the cardboard
tube is attached to a long, hollow metal pole that allows a steel
mill worker safely to dip the sensor into the liquid steel to obtain
the desired measurement. The instrument is a specialized electronic
component or computer that interprets the signal from the single-use
sensor and displays the temperature or chemical content measurement
on a display screen or print-out. Unlike the single-use sensor,
which is consumed by the molten steel, the instrument is a long-
lived component that can be used for years.
15. S&I are used to monitor temperature, oxygen content, steel
and slag chemistry, hydrogen concentration and the carbon content of
molten steel and are differentiated primarily by the type of sensor
used. A particular steel mill may utilize one type or multiple types
of S&I during a particular batch, depending upon its proprietary
steel-making process and the specifications of the steel's end use.
The three main categories of S&I used by steel mills are
thermocouples, sensors and samplers, though ``combination'' sensors
are designed to conduct two or more tests at once.
a. Thermocouples. Thermocouples measure the temperature of
molten steel in the furnace and in other stages of steel processing.
b. Sensors. Sensors measure the dissolved oxygen, carbon,
hydrogen, or other elements present in molten steel. Oxygen and
carbon sensors are used in most steel-making processes, while
hydrogen sensors typically are needed to produce high-purity, high-
grade steel. Each type of sensor has a distinct design.
c. Samplers. Samplers are used during the steel-making process
to withdraw a sample of molten steel for analysis outside of the
molten bath. While most samplers do not contain internal
electronics, they can be manufactured as a combination unit that
includes a thermocouple or a type of sensor.
16. Although single-use sensors appear to be simple, each one
consists of tiny platinum wires and specialized electronic controls.
The lowest-priced single-use sensors may be one to two dollars per
unit, while higher-end single-use sensors may be priced at ten to
twenty dollars per unit.
17. The high temperature and harsh environment of the furnace
necessitates the use of S&I capable of reliable, accurate
measurement in extreme conditions. Temperatures in the furnace can
approach or exceed 3,000 degrees Fahrenheit, and a variation of only
20 to 30 degrees can critically affect the quality and properties of
the final steel product. Failure of a single-use sensor can have
catastrophic results. For example, if the molten steel overheats,
the steel can melt through the vessel or ``break-out,'' which is
extremely dangerous and costly. Similarly, if the molten steel cools
too quickly, or has the wrong chemical composition, it may slow or
stall the production process and/or produce low-quality steel. The
failure of a single-use sensor can thus potentially cost a steel
mill hundreds of thousands of dollars whenever the steel fails to
meet the desired physical characteristics and specifications.
18. Single-use sensors are the consumable component of the S&I
system. Because single-use sensors are used continuously in the
steel-making process, steel mills can use hundreds of units daily
and up to millions of units annually. S&I suppliers must therefore
be capable of producing thousands of these high-precision, high-
reliability products daily at a very low cost.
B. S&I Is a Relevant Product Market
19. Within the broad category of S&I, each type of single-use
sensor performs a distinct function and cannot be substituted for
another type of sensor or a different type of measuring device. For
example, a hydrogen sensor cannot detect temperature and a
thermocouple does not detect hydrogen. Accordingly, single-use
sensors are not interchangeable or substitutable for one another.
There is separate demand for thermocouples, oxygen sensors, carbon
sensors, hydrogen sensors, and other sensors. In the event of a
small but significant price increase for a given type of single-use
sensor, customers would not stop using that sensor in sufficient
numbers so as to defeat the price increase. Thus, each type of S&I
is a separate line of commerce and a relevant product market within
the meaning of Section 7 of the Clayton Act.
20. Each steel-making customer purchases a different mix of S&I
to suit the specific needs of its steel mill, steel-making process,
and application. Prior to the acquisition, Minco and Heraeus
produced a full range of S&I and were, by far, the two producers
with the largest market shares for each individual product. Minco
and Heraeus competed across the full product line of S&I and
typically provided customers with a mix of various single-use
thermocouples, sensors and samplers. Although numerous narrower
product markets also may be defined, the competitive dynamic for
each individual single-use thermocouple, sensor and sampler is
nearly identical. Therefore, these products can all be aggregated
for analytical convenience into a single relevant product market for
the purpose of assigning market shares and evaluating the
competitive impact of the acquisition. Accordingly, the development,
production, sale and service of S&I is a line of commerce and a
relevant product market within the meaning of Section 7 of the
Clayton Act.
C. The United States Is a Relevant Geographic Market
21. The United States is a relevant geographic market because
suppliers of S&I cannot make sales in the United States without
having a U.S. service and sales network and U.S. manufacturing
presence. The consumable portion of S&I consists of a single-use
sensor and a cardboard tube. A single-use sensor is small and light
and can be shipped economically from overseas. However, the
cardboard tubes for S&I can be four to eight feet long and are
mostly air. They have a low value-to-volume ratio, so they cannot be
shipped from overseas economically. For this reason, Heraeus, Minco
and the one other existing U.S. competitor manufacture finished S&I
in the United States.
22. Steel manufacturers can use up to hundreds of single-use
sensors each day. The steel manufacturers are staffed leanly and do
not employ in-house technicians or engineers to service S&I. A
defective single-use sensor or malfunctioning instrument can shut
down an entire steel line, so the steel manufacturers rely on the
S&I suppliers to provide on-site technical service and support that
is on call at all times. Heraeus and Minco have provided experienced
service technicians and product engineers on-site to assist with
inventory management, trouble-shooting, calibration, and other
critical services. These service technicians and product engineers
routinely visit a busy mill multiple times per week and often
increase the number of their visits when the mill is implementing a
new process or is having trouble with a particular S&I. These
service technicians also make service calls in the middle of the
night to fix a problem that has shut down a line. Service and
technical support have been critical to the success of Heraeus and
Minco in selling S&I in the United States.
23. Given that (1) it is uneconomic to ship fully assembled S&I
from overseas to the
[[Page 2887]]
United States and (2) U.S. customers require extensive on-site
service, customers would not switch to producers outside the United
States to defeat a small but significant price increase.
Accordingly, the United States is a relevant geographic market for
the development, production, sale and service of S&I within the
meaning of Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.
18.
V. HERAEUS' ACQUISITION OF MINCO IS ANTICOMPETITIVE
A. The Acquisition Increased Concentration in a Highly Concentrated
Market
24. Heraeus' acquisition of Minco greatly increased the already
high level of concentration in the S&I market in the United States.
Concentration in relevant markets typically is measured by the
Herfindahl-Hirschman Index (``HHI'') (defined and explained in
Appendix A). The more concentrated a market, and the more a
transaction would increase concentration in a market, the greater
the likelihood that the transaction will result in a meaningful
reduction in competition. Markets in which the HHI is in excess of
2500 points are considered highly concentrated, and an increase in
concentration by 150 points or more is considered significant. See
Appendix A.
25. Prior to the acquisition, Heraeus had a 60% market share,
Minco had a 35% market share and a third firm had the remaining 5%
market share. The pre-acquisition HHI was 4850, and the post-
acquisition HHI is 9050, an increase of 4200. The pre- and post-
acquisition market concentration measures demonstrate that Heraeus'
acquisition of Minco is presumptively anticompetitive.
B. The Acquisition Has Eliminated Head-to-Head Competition Between
Heraeus and Minco
26. Prior to the acquisition, U.S. customers could turn to Minco
as a viable alternative source of S&I, which forced Heraeus to
compete with Minco on price, service and innovation. Customers
benefitted from this robust competition between Heraeus and Minco.
27. Heraeus became the dominant supplier in the United States by
acquiring its competitor L&N in 1995. Around 2000, Heraeus owned 85%
of the S&I market in the United States.
28. In or about 1994, Minco decided to build its own research
furnace to facilitate its product development. In 2000, after
several years of development, Minco began introducing high-tech
products in order to compete against Heraeus. Over the next several
years, Minco began selling an oxygen sensor, a hydrogen sensor and a
modern instrument based on the familiar Microsoft Windows software.
Minco's ``Big 3'' product innovations helped it to gain acceptance
with steel mill customers that produce higher grades of steel. Minco
expressly marketed itself to customers as a service-oriented, high-
quality alternative to the dominant Heraeus and dedicated
significant effort and resources toward meeting this standard.
During the 2000s, Minco chipped away at Heraeus' share by competing
on price, service and technology.
29. After slowly gaining market share throughout the 2000s,
Minco broke through in 2010 when it introduced two more innovations
that significantly raised its profile and threatened what Heraeus
called its market ``leadership.'' First, Minco introduced its
combination 3-in-1 sensor head, which both increased plant
efficiency and reduced the risk to steel mill workers by reducing
the number of necessary measurements.
30. Second, Minco introduced its wireless transmitter, which
sends the sensor's signal from the pole to the instrument. Customers
viewed this technology as a ``game-changer'' because it eliminated a
cable dragging along the floor of the steel-making facility. This
innovation enhanced worker safety by eliminating a tripping hazard,
and it also saved customers money because the long cables need to be
replaced frequently.
31. Prior to the acquisition, Minco and Heraeus competed head-
to-head on price. Post-acquisition, Heraeus' steel mill customers
are vulnerable to price increases because of the critical function
of S&I and their small cost relative to the value of the finished
steel product. The lowest-priced single-use sensors may be one to
two dollars per unit, while higher-end single-use sensors can be ten
to twenty dollars per unit. Only a few dollars worth of single-use
sensors are used in each batch of steel, which makes numerous tons
of steel that sell for about $600 per ton at current prices. As a
result, the per-ton cost of single-use sensors is measured in
fractions of a percent of the sales price of finished steel.
Moreover, because the process of making steel costs thousands of
dollars per minute, any interruption of the steel-making process
caused by a defective single-use sensor can be extremely costly.
32. Prior to the acquisition, Minco and Heraeus also competed to
provide a high level of service to steel mills. Each company had
service representatives that would visit the mills multiple times
each week, sometimes daily at the largest mills, to repair
equipment, perform routine maintenance, and train mill employees.
Post-acquisition, Heraeus has the incentive to impose on customers
less favorable terms of service than those that were provided before
the acquisition. Thus, the acquisition likely has led to
deterioration of service, longer delivery times and less certain
delivery, which have imposed significant risks and delays on the
U.S. steel industry. Indeed, Heraeus began cutting its marketing and
service staff immediately after the acquisition.
33. Prior to the acquisition, Heraeus monitored Minco's
innovative efforts and attempted to match or exceed Minco's
offerings. Post-acquisition, Heraeus has less incentive to continue
its research and development efforts on new and innovative product
offerings.
34. The elimination of Minco as an independent and strong
competitor likely will lead to higher prices, reduced service, and
less innovation. Through its acquisition of the Minco assets,
Heraeus has substantially lessened competition in the U.S. market
for the development, production, sale and service of S&I, in
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
C. The Anticompetitive Effects of the Acquisition Will Not Be
Counteracted by Entry or Expansion.
35. Entry and/or expansion into the development, production,
sale and service of S&I will not be timely, likely or sufficient to
counteract the anticompetitive effects of Heraeus' acquisition of
Minco. The development, production, sale and servicing of S&I
requires highly specialized know-how, specialized equipment, a full-
line of S&I products, a U.S. production facility, and a U.S.-based
sales and service network.
36. The machinery used to manufacture S&I is highly specialized
to meet exacting mass production requirements. For example, it took
one S&I supplier two years of engineering time to develop a
customized machine that could mass produce reliable and accurate
single-use oxygen sensors. Thus, entry by producers of other types
of measurement devices will not be likely, timely or sufficient.
37. S&I suppliers currently outside the United States cannot
sell into the United States because it is uneconomic to transport
fully assembled S&I into the United States and because they do not
have a U.S. sales and service network, which is a prerequisite to
selling to U.S. customers. The development of a U.S. production/
assembly facility and, even more importantly, a dependable sales and
service network often can take a significant period during which the
potential entrant is not making sales. U.S-based customers will not
purchase S&I from a foreign supplier that does not maintain a
dependable sales/support network that can provide on-call service
for its S&I products.
38. Establishing a reputation for successful performance and
gaining customer confidence in a specific firm's S&I are also
significant barriers to expansion and/or entry. Establishing a
reputation for dependable, accurate supply and service is critical
to success in the S&I market. A track record and reputation for
reliability must be earned over years.
VI. VIOLATION ALLEGED
Violation of Clayton Act Section 7, 15 U.S.C. Sec. 18
39. The United States incorporates the allegations of paragraphs
1 through 38 above as if set forth fully herein.
40. Heraeus' acquisition of the assets of Minco is likely to
substantially lessen competition in interstate trade and commerce in
violation of Section 7 of the Clayton Act.
41. The transaction has had or will have the following effects,
among others:
a. Competition between Heraeus and Minco in the development,
production, sale and service of S&I in the United States has been
eliminated;
b. Heraeus has significantly reduced incentives to discount
prices, increase the quality of its services, or invest in
innovation;
c. Prices for S&I will likely increase above levels that would
have prevailed absent the transaction, leading steel mills and other
customers to pay higher prices for S&I for molten steel; and
d. Innovation will likely decrease, delivery times likely will
lengthen, and the
[[Page 2888]]
quality and terms of service likely will become less favorable than
those that would have prevailed absent the transaction.
VII. REQUEST FOR RELIEF
42. The United States requests that this Court:
a. Adjudge and decree the acquisition by defendant Heraeus of
the assets of Minco to violate Section 7 of the Clayton Act, 15
U.S.C. Sec. 18;
b. Compel Heraeus to divest all of Minco's tangible and
intangible assets related to the development, production, sale and
service of S&I and to take any further actions necessary to restore
the market to the competitive position that existed prior to the
acquisition;
c. Award such temporary and preliminary injunctive and
ancillary relief as may be necessary to avert the likelihood of the
dissipation of Minco's tangible and intangible assets during the
pendency of this action and to preserve the possibility of effective
final relief;
d. Award the United States the cost of this action; and
e. Grant the United States such other further relief as the
case requires and the Court deems just and proper.
Respectfully submitted,
DATE: January 2, 2014
FOR PLAINTIFF UNITED STATES
------/s/----------------
Renata B. Hesse (DC BAR 466107)
Acting Assistant Attorney General
------/s/----------------
Maribeth Petrizzi (DC BAR 435204)
Chief, Litigation II Section
------/s/----------------
Leslie C. Overton (DC BAR 454493)
Deputy Assistant Attorney General
------/s/----------------
Dorothy B. Fountain (DC BAR 439469)
Assistant Chief, Litigation II Section
------/s/----------------
Patricia A. Brink
Director of Civil Enforcement
------/s/----------------
Lowell R. Stern (DC BAR 440487)*
Stephen A. Harris
Suzanne A. Morris (DC BAR 450208)
Angela Ting (DC BAR 449576)
Jay D. Owen
Blake W. Rushforth
Counsel for the United States
Antitrust Division, Litigation II Section
United States Department of Justice
450 Fifth Street NW., Suite 8700
Washington D.C. 20530
(202) 514-3676
(202) 514-9033 (fax)
[email protected]
*Attorney of record
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 (30\2\ + 30\2\ + 20\2\ + 20\2\ =
2,600). The HHI takes into account 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 1,500 and 12,500 points are
considered to be moderately concentrated and those in which the HHI
is in excess of 2,500 points are considered to be highly
concentrated. See U.S. Department of Justice & FTC, Horizontal
Merger Guidelines Sec. 5.3 (2010). Transactions that increase the
HHI by more than 200 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 id.
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, Plaintiff,
v.
HERAEUS ELECTRO-NITE CO., LLC,
Defendant.
CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014
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. Sec. 16(b)-(h), files this
Competitive Impact Statement relating to the proposed Final Judgment
submitted for entry in this civil antitrust proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
On September 7, 2012, defendant Heraeus Electro-Nite Co., LLC
(``Heraeus'') acquired substantially all of the assets of Midwest
Instrument Company, Inc. (``Minco''). After investigating the
competitive impact of that acquisition, the United States filed a
civil antitrust Complaint on January 2, 2014, seeking an order
compelling Heraeus to divest certain assets and other relief to
restore competition. The Complaint alleges that the acquisition
substantially lessened competition in the U.S. market for the
development, production, sale and service of single-use sensors and
instruments used to measure and monitor the temperature and chemical
composition of molten steel (``S&I''), in violation of Section 7 of
the Clayton Act, 15 U.S.C. Sec. 18. As a result of the acquisition,
prices for these products did or would have increased, delivery
times would have lengthened, and terms of service would have become
less favorable.
Concurrent with the filing of this Competitive Impact Statement,
the United States and Heraeus have filed an Asset Preservation
Stipulation and Order and a proposed Final Judgment. These filings
are designed to eliminate the anticompetitive effects of Heraeus'
acquisition of Minco. The proposed Final Judgment, which is
explained more fully below, requires Heraeus, among other things, to
divest the assets that it acquired from Minco that are located in
the United States and Mexico.
The United States and Heraeus 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. Heraeus and the Minco Acquisition
Defendant Heraeus, a Delaware corporation with its headquarters
in Langhorne, Pennsylvania, is a subsidiary of Heraeus Electro-Nite
International N.V. (``HEN''), a Belgian company, which itself is a
subsidiary of Heraeus Holding GmbH, a privately held German
corporation based in Hanau, Germany. HEN's U.S. subsidiary, Heraeus,
had approximately $92 million in revenue in fiscal year 2011.
Minco was a privately held company headquartered in Hartland,
Wisconsin that also sold S&I. In 2011, Minco's U.S. revenues were
approximately $29 million. Minco's manufacturing facilities were
located in Hartland, Wisconsin, Johnson City, Tennessee and
Monterrey, Mexico.
On September 7, 2012, Heraeus acquired substantially all of the
assets of Minco. The transaction was not subject to the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (``HSR Act''), which
requires companies to notify and provide information to the
Department of Justice and the Federal Trade Commission before
consummating certain acquisitions. As a result, the Department of
Justice did not learn of the transaction until after it had been
consummated.
B. The Competitive Effects of the Acquisition on the Market for S&I
1. Industry Background
S&I products are integral to the steel-making process. Steel
makers cannot produce steel without using S&I such as those
developed, produced and sold by Heraeus and, formerly, by Minco.
Steel making is a continuous process, in which the chemistry and
temperature of each batch of steel must be measured and monitored in
order to ensure the quality, reliability, and consistency of the
finished steel, as well as the safety and efficiency of the
manufacturing operation. S&I are used to measure and monitor the
temperature and chemical composition of the molten steel. Steel
companies rely on S&I; moreover, they rely on S&I suppliers as
virtual partners in the steel-making process.
The temperature and chemical composition of molten steel must be
measured and monitored throughout the steel-making process, and each
stage of production has specific chemical concentration and
temperature requirements. The accuracy, reproducibility and
reliability of the measurement of molten steel temperature and
chemical properties directly
[[Page 2889]]
influence the quality of the end product, as well as the safety and
productivity of the steel mill. Because the finished steel product
may be used in demanding applications, such as steel beams for a
building or automotive exterior panels, steel mills must ensure the
molten steel exactly meets the required specifications. Testing and
sampling the molten steel to ensure that it meets these
specifications is a critical aspect of the steel-making process.
An S&I system consists of four basic parts: (1) The single-use
sensor; (2) the cardboard tube; (3) the pole; and (4) the
instrument, or display. The single-use sensor, typically encased in
heavy paper or cardboard and attached to a cardboard tube, contains
the actual measurement device. The cardboard encasement provides
momentary protection to allow the single-use sensor to transmit a
reading to the instrument before the heat from the molten steel
consumes the sensor. For standard single-use sensors, the cardboard
tube is attached to a long, hollow metal pole that allows a steel
mill worker safely to dip the sensor into the liquid steel to obtain
the desired measurement. The instrument is a specialized electronic
component or computer that interprets the signal from the single-use
sensor and displays the temperature or chemical content measurement
on a display screen or print-out. Unlike the single-use sensor,
which is consumed in molten steel, the instrument is a long-lived
component that can be used for years. S&I are used to monitor
temperature, oxygen content, steel and slag chemistry, hydrogen
concentration and the carbon content of molten steel and are
differentiated primarily by the type of sensor used. A particular
steel mill may utilize one type or multiple types of S&I during a
particular batch depending upon its proprietary steel-making process
and the specifications of the steel's end use. The three main
categories of S&I used by steel mills are thermocouples, sensors and
samplers, though ``combination'' single-use sensors are designed to
conduct two or more tests at once. Thermocouples measure the
temperature of molten steel in the furnace and in other stages of
steel processing. Sensors measure the dissolved oxygen, carbon,
hydrogen, or other elements present in molten steel. Oxygen and
carbon sensors are used in most steel-making processes, while
hydrogen sensors typically are needed to produce high-purity, high-
grade steel. Each type of sensor has a distinct design. Samplers are
used during the steel-making process to withdraw a sample of molten
steel for analysis outside of the molten bath. While most samplers
do not contain internal electronics, they can be manufactured as a
combination unit that includes a thermocouple or a type of sensor.
Although single-use sensors appear to be simple, each one
consists of tiny platinum wires and specialized electronic controls.
The lowest-priced single-use sensors may be one to two dollars per
unit, while higher-end single-use sensors may be priced at ten to
twenty dollars per unit. Because single-use sensors are used
continuously in the steel-making process, steel mills can use
hundreds of units daily and up to millions of units annually. S&I
suppliers must therefore be capable of producing thousands of these
high-precision, high-reliability products daily at a very low cost.
The high temperature and harsh environment of the furnace
necessitates the use of S&I capable of reliable, accurate
measurement in extreme conditions. Temperatures in the furnace can
approach or exceed 3,000 degrees Fahrenheit, and variation of only
20 to 30 degrees can critically affect the quality and properties of
the final steel product. Failure of a single-use sensor can have
catastrophic results. For example, if the molten steel overheats,
the steel can melt through the vessel or ``break-out,'' which is
extremely dangerous and costly. Similarly, if the molten steel cools
too quickly, or has the wrong chemical composition, it may slow or
stall the production process and/or produce low-quality steel. The
failure of a single-use sensor may cost a steel mill hundreds of
thousands of dollars, if the steel fails to meet the desired
physical characteristics and specifications.
2. Product Market
Within the broad category of S&I, each type of single-use sensor
performs a distinct function and cannot be substituted for another
type of sensor or a different type of measuring device. For example,
a hydrogen sensor cannot detect temperature and a thermocouple does
not detect hydrogen. Accordingly, they are not interchangeable or
substitutable for one another. There is separate demand for
thermocouples, oxygen sensors, carbon sensors, hydrogen sensors, and
other sensors. In the event of a small but significant price
increase for a given type of single-use sensor, customers would not
stop using that sensor in sufficient numbers so as to defeat the
price increase. Thus, each type of S&I is a separate line of
commerce and a relevant product market within the meaning of Section
7 of the Clayton Act.
Each steel-making customer purchases a different mix of S&I to
suit the needs of the customer's steel mill, steel-making process,
and application. Prior to the acquisition, Minco and Heraeus
produced a full range of S&I and were, by far, the two producers
with the largest market shares for each individual product. Minco
and Heraeus competed across the full product line of S&I and
typically provided customers with a mix of various single-use
thermocouples, sensors and samplers. Although numerous narrower
product markets also may be defined, the competitive dynamic for
each individual single-use thermocouple, sensor and sampler is
nearly identical. Therefore, they all may be aggregated for
analytical convenience into a single relevant product market for the
purpose of assigning market shares and evaluating the competitive
impact of the acquisition. Accordingly, the development, production,
sale and service of S&I is a line of commerce and a relevant product
market within the meaning of Section 7 of the Clayton Act.
3. Geographic Market
The United States is a relevant geographic market because
suppliers of S&I cannot make sales in the United States without
having a U.S. service and sales network and U.S. manufacturing
presence. The consumable portion of S&I consists of a single-use
sensor and a cardboard tube. A single-use sensor is small and light
and can be shipped economically from overseas. However, the
cardboard tubes for S&I can be four to eight feet long and are
mostly air. They have a low value-to-volume ratio, so they cannot be
shipped from overseas economically. For this reason, Heraeus and
Minco both manufactured finished S&I in the United States.
Steel manufacturers can use up to hundreds of single-use sensors
each day. The steel manufacturers are staffed leanly and do not
employ in-house technicians or engineers to service S&I. A defective
single-use sensor or malfunctioning instrument can shut down an
entire steel line, so the steel manufacturers rely on the S&I
suppliers to provide on-site technical service and support that is
on call at all times. Heraeus and Minco have provided experienced
service technicians and product engineers on-site to assist with
inventory management, trouble-shooting, calibration, and other
critical services. These service technicians and product engineers
may visit a busy mill once or twice a week or more on a routine
basis, and more frequently if the mill is implementing a new
process, or is having trouble with a particular S&I. They also make
service calls in the middle of the night to fix a problem that has
shut down a line. Service and technical support have been critical
to the success of Heraeus and Minco in selling S&I in the United
States.
Because it is uneconomic to ship fully assembled S&I from
overseas to the United States and U.S. customers require extensive
on-site service, customers would not switch to producers outside the
United States to defeat a small but significant price increase.
Accordingly, the United States is a relevant geographic market for
the development, production, sale and service of S&I within the
meaning of Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.
18.
4. Anticompetitive Effects
Heraeus' acquisition of Minco has increased concentration in a
highly concentrated market. Concentration in relevant markets
typically is measured by the Herfindahl-Hirschman Index (``HHI''),
which is defined and explained in Appendix A to the Complaint. The
more concentrated a market, and the more a transaction would
increase concentration in a market, the more likely it is that a
transaction would result in a meaningful reduction in competition.
Markets in which the HHI is in excess of 2500 points are considered
highly concentrated, and an increase in concentration by 150 points
or more is considered significant.
Prior to the acquisition, Heraeus had a 60% market share, Minco
had a 35% market share and a small third firm had the remaining five
percent. Thus, the pre-acquisition HHI was 4850, and the post-
acquisition HHI is 9050, an increase of 4200. Based on the pre- and
post-acquisition market concentration measures, the acquisition is
presumptively anticompetitive.
Prior to the acquisition, Minco was the best alternative source
to Heraeus for S&I, and
[[Page 2890]]
customers benefited from robust competition between the firms on
price, service and innovation. By 2000, Heraeus owned 85% of the
market. At the same time, after several years of development, Minco
began introducing high-tech products in order to compete against
Heraeus. Minco expressly marketed itself to customers as a service-
oriented, high-quality alternative to the dominant Heraeus and
dedicated significant effort and resources toward meeting this
standard. During the 2000s, Minco chipped away at Heraeus' share and
customers benefited from the head-to-head competition between
Heraeus and Minco on price, service, technology, and innovation.
Through its acquisition of the Minco assets, Heraeus has
substantially lessened competition in the U.S. market for the
development, production, sale and service of S&I for molten steel,
in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
Entry and/or expansion into the development, production, sale
and service of S&I will not be timely, likely or sufficient to
counteract the anticompetitive effects of Heraeus' acquisition of
Minco. The development, production, sale and servicing of S&I
requires highly specialized know-how, specialized equipment, a full-
line of S&I products, a U.S. production facility, and a U.S.-based
sales and service network. S&I suppliers currently outside the
United States cannot sell into the United States because it is
uneconomic to transport fully assembled S&I into the United States
and they do not have a U.S. sales and service network, which is a
prerequisite to selling to U.S. customers. Development of a U.S.
production/assembly facility, and even more importantly, development
of a dependable sales and service network can take a long time,
during which the potential entrant is not making sales. U.S.-based
customers will not purchase S&I from a foreign supplier that does
not maintain a dependable sales and support network that can provide
on-call service for its S&I products.
Establishing a reputation for successful performance and gaining
customer confidence in a specific firm's S&I are also significant
barriers to expansion. Establishing a reputation for dependable,
accurate supply and service is critical to success in the market. A
track record and reputation for reliability must be earned over
years. Entry in the development, production, sale, and service of
S&I in the United States would not be timely, likely, or sufficient
to counteract the anticompetitive effects of Heraeus' acquisition of
Minco.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
A. Divestiture Assets
The United States opened its investigation of the transaction in
December 2012, three months after the transaction was consummated.
Heraeus had by then integrated the former Minco assets into Heraeus'
S&I business, including terminating certain supply contracts and
closing foreign production facilities. The United States therefore
designed the partial divestiture required by the proposed Final
Judgment to facilitate entry of a new firm or expansion of an
existing competitor in the S&I industry by providing that firm with
market-specific assets needed for successful competition.
The proposed Final Judgment directs Heraeus to sell a package of
assets in the United States and Mexico, including the former Minco
facilities located in Hartland, Wisconsin and Johnson City,
Tennessee, along with tangible and intangible assets associated with
those facilities (the ``Divestiture Assets''). Heraeus is required
to sell the Divestiture Assets to a qualified Acquirer that has the
intention and ability to compete in the development, production,
sale, and service of S&I in the United States. Thus, the divestiture
provisions of the proposed Final Judgment are designed to make
available to an Acquirer all of the remaining Minco assets acquired
by Heraeus for the purpose of remedying the competitive harm from
the acquisition. Under the proposed Final Judgment, however, the
Acquirer, at its option, and with the consent of the United States,
may elect to acquire less than the entire package of assets.
B. Identification of an Upfront Buyer
The goal of the proposed Final Judgment is to restore the
competition in the development, production, sale, and service of S&I
that was lost as a result of the transaction. The United States
favors the divestiture of an existing business unit that has the
necessary experience to compete in the relevant market. In this
case, however, the divestiture of an existing, intact business is
impossible because of the integration of assets undertaken by
Heraeus. Under these circumstances, the United States may consider
the divestiture of less than an existing business and may identify
and approve an Acquirer at the outset to ensure that the sale of the
assets will create a viable entity that will restore effective
competition.\1\
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\1\ U.S. Department of Justice Antitrust Division Policy Guide
to Merger Remedies (June 2011), available at http://www.justice.gov/atr/public/guidelines/27350.pdf (Identifying an upfront buyer
provides greater assurance that the divestiture package contains the
assets needed to create a viable entity that will preserve
competition.)
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In the proposed Final Judgment, the designated Acquirer of the
Divestiture Assets is a new entrant, Keystone Sensors LLC,
(``Keystone''), which was formed in May 2013 for the purpose of
entering the U.S. market for S&I to provide an alternative to
Heraeus. The founders have significant experience in the S&I
industry and bring together experience in the U.S. market, as well
as an innovative technology concept. Initially, Keystone had
intended to enter the market with a limited portfolio of high-
technology products and build sales incrementally. Through the
purchase of the Divestiture Assets, Keystone will be able to enter
the market more rapidly and compete more effectively with Heraeus
and the other U.S. supplier. After its investigation, the United
States has concluded that Keystone has the intention and ability to
compete in the development, production, sale and service of S&I in
the United States.
C. Procedure
The proposed Final Judgment requires Heraeus to divest the
Divestiture Assets to Keystone within sixty (60) calendar days after
the Court signs the Asset Preservation Stipulation and Order in this
matter. The Divestiture Assets must be divested in such a way as to
satisfy the United States, in its sole discretion, that the
Divestiture Assets can and will be used by the Acquirer to compete
effectively in the relevant market. Heraeus must take all reasonable
steps necessary to accomplish the divestiture quickly and must
cooperate with the Acquirer.
In the unlikely event that the sale to Keystone does not occur
as anticipated, the proposed Final Judgment provides that a trustee
would be appointed to effect the sale of the Divestiture Assets. In
that event, the alternative Acquirer similarly would be able to
determine which portion of the Divestiture Assets it would need to
compete in the development, production, sale, and service of S&I in
the United States.
D. Waiver of Noncompete Provisions
To be an effective S&I supplier, a firm must employ a network of
dedicated sales and service representatives that can provide on-call
service to steel mill customers. A robust sales and service
organization is critical to establishing the firm's reputation to
provide accurate and reliable service. Following the transaction,
Heraeus terminated several experienced sales and service employees
of Minco and/or Heraeus, and imposed, as a condition of the
employees' severance agreements, a two-year ban on employment in the
S&I industry. The United States has concluded that, under the facts
and circumstances of this case, these noncompete provisions are
overbroad and have impeded the expansion and/or entry of other S&I
firms. Accordingly, the proposed Final Judgment requires Heraeus to
waive any existing noncompete agreement or other restrictive
covenant that may bind any former employee of either Heraeus or
Minco in the United States, without imposing any financial penalty
on any such former employee. Heraeus also shall not enter into any
noncompete or other restrictive covenant with any former, current,
or future employee of Heraeus or Minco during the two years
following the filing of the Complaint. The United States has
determined that the availability of experienced personnel may help
facilitate the entry and/or expansion of other S&I firms in the
United States.
E. Notice of Future Acquisitions
Because the transaction was not reportable under the HSR Act,
the Division did not learn of the transaction until after it was
consummated and Heraeus had undertaken significant integration of
the former Minco assets. The proposed Final Judgment requires
Heraeus to provide the United States with notice (similar to HSR Act
notice) of any future acquisition by Heraeus of any firm that
provides S&I in the United States. This provision will ensure that
the United States has the opportunity to review any future
transaction before the assets are integrated.
F. Other Provisions
The proposed Final Judgment provides that, at the Acquirer's
option, Heraeus shall enter into an agreement to provide training
[[Page 2891]]
and technical support regarding the operation of any purchased
Divestiture Asset to the personnel of the Acquirer. The proposed
Final Judgment also requires Heraeus to provide the Acquirer with
information relating to Heraeus and former Minco personnel in the
United States to enable the Acquirer to make offers of employment,
and prevents Heraeus from interfering with any negotiations to
employ any current or former Heraeus or Minco employee.
Moreover, because the customer qualification process can be a
high barrier to entry, the proposed Final Judgment provides that
Heraeus shall allow customers to use Heraeus products and equipment
in the testing and/or qualification of any S&I, and that Heraeus
must waive any contractual restrictions that otherwise would
preclude such usage.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. Sec. 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. Sec. 16(a), the proposed Final Judgment has no prima
facie effect in any subsequent private lawsuit that may be brought
against Heraeus.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
The United States and Heraeus 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 (60) 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 (60) days of the date of publication of this
Competitive Impact Statement in the Federal Register, or the last
date of publication in a newspaper of the summary of this
Competitive Impact Statement, whichever is later. All comments
received during this period will be considered by the United States
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. In addition, comments will be posted on the
U.S. Department of Justice, Antitrust Division's internet Web site
and, under certain circumstances, published in the Federal Register.
Written comments should be submitted to:
Maribeth Petrizzi
Chief, Litigation II Section
Antitrust Division
United States Department of Justice
450 Fifth Street NW., Suite 8700
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 Final Judgment.
VI. 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 Heraeus. The
United States could have continued the litigation and sought
divestiture of the Minco assets. The United States is satisfied,
however, that the divestiture of assets described in the proposed
Final Judgment will preserve competition for the provision of S&I in
the relevant market identified by the United States. Thus, the
proposed Final Judgment would achieve all or substantially all of
the relief the United States would have obtained through litigation,
and avoids the time, expense, and uncertainty of a full trial on the
merits of the Complaint.
VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by 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. Sec. 16(e)(1). In making that
determination, the court, in accordance with the statute as amended
in 2004, is required to consider:
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of 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. Sec. 16(e)(1)(A) & (B). In considering these statutory
factors, the court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States
v. Microsoft Corp., 56 F.3d 1448, 1461 (DC Cir. 1995); see generally
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public interest standard under the Tunney Act); United
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009
U.S. Dist. LEXIS 84787, No. 08-1965 (JR), at *3, (D.D.C. Aug. 11,
2009) (noting that the court's review of a consent judgment is
limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanism to enforce the final judgment are clear and
manageable.'').\2\
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\2\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
Sec. 16(e) (2004), with 15 U.S.C. Sec. 16(e)(1) (2006); see also
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004
amendments ``effected minimal changes'' to Tunney Act review).
As the United States Court of Appeals for the District of
Columbia Circuit has held, under the APPA a court considers, 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 Microsoft, 56 F.3d at 1458-62. 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;
United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001);
---------------------------------------------------------------------------
InBev, 2009 U.S. Dist. LEXIS 84787, at *3. 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
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).\3\ In
determining whether a proposed settlement is in the public interest,
a district court ``must accord deference to the government's
predictions about the efficacy of its remedies, and may not require
that the remedies perfectly match
[[Page 2892]]
the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17; see
also Microsoft, 56 F.3d at 1461 (noting the need for courts to be
``deferential to the government's predictions as to the effect of
the proposed remedies''); United States v. Archer-Daniels-Midland
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court
should grant due respect to the United States' prediction as to the
effect of proposed remedies, its perception of the market structure,
and its views of the nature of the case).
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\3\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (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' '').
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[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. Am.
Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations
omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713,
716 (D. Mass. 1975)), 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). To meet this
standard, the United States ``need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
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;
see also InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public
interest' is not to be measured by comparing the violations alleged
in the complaint against those the court believes could have, or
even should have, been alleged''). 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. Microsoft, 56 F.3d at 1459-60. As this Court recently
confirmed in SBC Communications, courts ``cannot look beyond the
complaint in making the public interest determination unless the
complaint is drafted so narrowly as to make a mockery of judicial
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to
preserve the practical benefits of utilizing consent decrees in
antitrust enforcement, adding the unambiguous instruction that
``[n]othing 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. Sec. 16(e)(2). The language wrote
into the statute what Congress intended when it enacted the Tunney
Act in 1974, as Senator Tunney explained: ``[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). Rather, the
procedure for the public interest determination is left to the
discretion of the court, with the recognition that the court's
``scope of review remains sharply proscribed by precedent and the
nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at
11.\4\
---------------------------------------------------------------------------
\4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent 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.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6
(1973) (``Where the public interest can be meaningfully evaluated
simply on the basis of briefs and oral arguments, that is the
approach that should be utilized.'').
---------------------------------------------------------------------------
VIII. 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: January 2, 2014
Respectfully submitted,
----/--s/----------------
Lowell R. Stern* (DC BAR 440487)
U.S. Department of Justice
Antitrust Division, Litigation II Section
Liberty Square Building
450 5th Street NW., Suite 8700
Washington, DC 20530
Tel.: (202) 514-3676
Email: [email protected]
*Attorney of Record
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
HERAEUS ELECTRO-NITE CO., LLC,
Defendant.
CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014
ASSET PRESERVATION STIPULATION AND ORDER
It is hereby stipulated and agreed by and between the
undersigned parties, subject to approval and entry by the Court,
that:
I. DEFINITIONS
As used in this Asset Preservation Stipulation and Order:
A. ``Heraeus'' means defendant Heraeus Electro-Nite Co., LLC, a
Delaware corporation with its headquarters in Langhorne,
Pennsylvania, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships and joint ventures, and
their directors, officers, managers, agents, and employees.
B. ``Minco'' means Midwest Instrument Company, Inc., a Wisconsin
corporation with its headquarters in Hartland, Wisconsin, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
C. ``S&I'' means single-use sensors and instruments used to
measure and monitor the temperature and chemical composition of
molten steel.
D. ``Acquirer'' means Keystone Sensors, LLC or another entity to
which Heraeus divests the Divestiture Assets.
E. ``Keystone'' means Keystone Sensors, LLC, a Delaware
corporation headquartered in Cranberry Township, Pennsylvania, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees.
F. ``Divestiture Assets'' means all assets of Heraeus that (1)
were acquired from Minco pursuant to the Asset Purchase Agreement
between the companies dated August 29, 2012 (and subject to the
conditions and limitations specified in that agreement), and (2) are
located in the United States or Mexico, including, but not limited
to:
1. The former Minco facilities located at 541 Industrial Drive,
Hartland, Wisconsin and at 2735 E. Oakland Avenue, Johnson City,
Tennessee;
2. All remaining assets from the former Minco facility, located
at Avenida Letra D No. 1005, Monterrey, Mexico;
3. All remaining tangible assets, including, but not limited to,
all manufacturing equipment, tooling and fixed assets, personal
property, remaining finished or partially finished inventory, office
furniture, materials, supplies, other tangible property, and all
other assets, used in connection with the Divestiture Assets; all
licenses, permits and authorizations issued by any governmental
organization relating to the Divestiture Assets; all teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, relating to the Divestiture Assets, including supply
agreements; all customer lists, accounts, and credit records; all
repair and performance records and all other records relating to the
Divestiture Assets; and
4. All intangible assets, including, but not limited to, all
intellectual property, including, but not limited to, patents,
licenses and sublicenses, copyrights, trademarks, trade names,
service marks, service names, 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, all
manuals and technical information Heraeus provides to its own
employees, customers, suppliers, agents or licensees, and all
research data concerning historic and current research and
[[Page 2893]]
development efforts relating to S&I, including, but not limited to,
designs of experiments and the results of successful and
unsuccessful designs and experiments.
II. OBJECTIVES
The proposed Final Judgment filed in this case is meant to
ensure Heraeus' prompt divestiture of the Divestiture Assets for the
purpose of remedying the loss of competition alleged in the
Complaint. This Asset Preservation Stipulation and Order ensures
that, until such divestiture required by the Proposed Final Judgment
has been accomplished, the Divestiture Assets will remain as
economically viable, competitive, and saleable assets.
III. JURISDICTION AND VENUE
The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action
is proper in the United States District Court for the District of
Columbia.
IV. COMPLIANCE WITH AND ENTRY OF PROPOSED FINAL JUDGMENT
A. The parties stipulate that a Final Judgment in the form
attached hereto as Exhibit A may be filed with and entered by the
Court, upon the motion of any party or upon the Court's own motion,
at any time after compliance with the requirements of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16, and
without further notice to any party or other proceedings, provided
that the United States has not withdrawn its consent, which it may
do at any time before the entry of the proposed Final Judgment by
serving notice thereof on Heraeus and by filing that notice with the
Court. Heraeus agrees to arrange, at its expense, publication as
quickly as possible of the newspaper notice required by the APPA,
which shall be drafted by the United States, in its sole discretion.
The publication shall be arranged no later than three business days
after Heraeus' receipt from the United States of the text of the
notice and the identity of the newspaper within which the
publication shall be made. Heraeus shall promptly send to the United
States (1) confirmation that publication of the newspaper notice has
been arranged, and (2) the certification of the publication prepared
by the newspaper within which the notice was published.
B. Heraeus shall abide by and comply with the provisions of the
proposed Final Judgment, pending the proposed Final Judgment's entry
by the Court, or until expiration of time for all appeals of any
Court ruling declining entry of the proposed Final Judgment, and
shall, from the date of the signing of this Asset Preservation
Stipulation and Order by the parties, comply with all the terms and
provisions of the proposed Final Judgment. The United States shall
have the full rights and enforcement powers in the proposed Final
Judgment as though the same were in full force and effect as an
order of the Court.
C. This Asset Preservation Stipulation and Order shall apply
with equal force and effect to any amended proposed Final Judgment
agreed upon in writing by the parties and submitted to the Court.
D. In the event (1) the United States has withdrawn its consent,
as provided in Section IV(A) above, or (2) the proposed Final
Judgment is not entered pursuant to this Asset Preservation
Stipulation and Order, the time has expired for all appeals of any
court ruling declining entry of the proposed Final Judgment, and the
Court has not otherwise ordered continued compliance with the terms
and provisions of the proposed Final Judgment, then Heraeus is
released from all further obligations under this Asset Preservation
Stipulation and Order, and the making of this Asset Preservation
Stipulation and Order shall be without prejudice to any party in
this or any other proceeding.
E. Heraeus represents that the divestiture ordered in the
proposed Final Judgment can and will be made, and that Heraeus will
later raise no claim of mistake, hardship or difficulty of
compliance as grounds for asking the Court to modify any of the
provisions contained therein.
V. ASSET PRESERVATION PROVISIONS
Until the divestiture required by the proposed Final Judgment
have been accomplished:
A. Heraeus will not destroy, sell, lease, assign, transfer,
pledge, or otherwise dispose of any of the Divestiture Assets, even
if those assets are no longer used by Heraeus, except that Heraeus
may continue to use, sell or dispose of inventory formerly owned by
Minco in the normal course of business. Within twenty (20) days
after the entry of the Asset Preservation Stipulation and Order,
Heraeus will inform the United States of the steps it has taken to
comply with this Asset Preservation Stipulation and Order.
B. Heraeus will preserve all corporate and commercial books and
records formerly belonging to Minco that are currently in Heraeus'
possession.
C. Heraeus will not terminate (except for cause) any United
States-based full-time employee formerly employed by Minco. Heraeus'
employees with primary responsibility for the productive use of the
Divestiture Assets shall not be transferred or reassigned to other
areas within the company except for transfer bids initiated by
employees pursuant to defendant's regular, established job posting
policy. Heraeus shall provide the United States with ten (10)
calendar days' notice of such transfer.
D. Heraeus will preserve the tooling, equipment, product and
process drawing and specifications, and other items necessary to
manufacture products formerly manufactured by Minco.
E. Heraeus shall take no action that would jeopardize, delay, or
impede the sale of the Divestiture Assets.
F. Heraeus shall take no action that would interfere with the
ability of any trustee appointed pursuant to the Final Judgment to
complete the divestitures pursuant to the Final Judgment to an
Acquirer acceptable to the United States.
G. Subject to the approval of the United States, Heraeus shall
appoint a person or persons to oversee the Divestiture Assets, and
who will be responsible for Heraeus' compliance with this section.
This person shall have complete managerial responsibility for the
Divestiture Assets, subject to the provisions of this Final
Judgment. In the event such person is unable to perform his duties,
Heraeus shall appoint, subject to the approval of the United States,
a replacement within ten (10) working days. Should Heraeus fail to
appoint a replacement acceptable to the United States within this
time period, the United States shall appoint a replacement.
VI. DURATION OF ASSET PRESERVATION OBLIGATIONS
Heraeus' obligations under Section V of this Asset Preservation
Stipulation and Order shall remain in effect until (1) consummation
of the divestitures required by the proposed Final Judgment or (2)
until further order of the Court. If the United States voluntarily
dismisses the Complaint in this matter, Heraeus is released from all
further obligations under this Asset Preservation Stipulation and
Order.
Dated: January 2, 2014
Respectfully submitted,
FOR PLAINTIFF
UNITED STATES OF AMERICA
------/s/----------------
Lowell R. Stern * (D.C. BAR 440487)
United States Department of Justice
Antitrust Division
Litigation II Section
450 Fifth Street NW, Suite 8700
Washington, DC 20530
Tel: (202) 514-3676
*Attorney of Record
FOR DEFENDANT
HERAEUS ELECTRO-NITE CO., LLC
------/s/----------------
Paul M. Honigberg, Esq. (D.C. Bar 342576)
Blank Rome LLP
Watergate
600 New Hampshire Avenue NW.
Washington, D.C. 20037
(202) 772-5800
------/s/----------------
Jeremy A. Rist, Esq.
Blank Rome LLP
One Logan Square
130 North 18th Street
Philadelphia, PA 19103-6998
Phone: (215) 569-5361
ORDER
IT IS SO ORDERED by the Court, this ---- day of ----------, 2014.
-----------------------------------------------------------------------
United States District Judge
CERTIFICATE OF SERVICE
I, Lowell R. Stern, hereby certify that on January 2, 2014, I caused
a copy of the foregoing Competitive Impact Statement, as well as the
Complaint, Asset Preservation Stipulation and Order, proposed Final
Judgment, and Explanation of Consent Decree Procedures, to be served
upon defendant Heraeus Electro-Nite Co., LLC, by mailing the
documents electronically to its duly authorized legal representative
as follows:
Counsel for Defendant Heraeus Electro-Nite Co., LLC:
Paul M. Honigberg, Esq. (D.C. Bar 342576)
[[Page 2894]]
Blank Rome LLP
Watergate
600 New Hampshire Avenue, NW.
Washington, DC 20037
(202) 772-5800
Jeremy A. Rist, Esquire
Blank Rome LLP
One Logan Square
130 North 18th Street
Philadelphia, PA 19103-6998
Phone: (215) 569-5361
------/s/----------
Lowell R. Stern, Esquire
D.C. BAR 440487
United States Department of Justice Antitrust Division, Litigation
II Section
450 Fifth Street, NW., Suite 8700
Washington, DC 20530
Tel.: (202) 514-3676
Fax: (202) 514-9033
Email: [email protected]
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
HERAEUS ELECTRO-NITE CO., LLC,
Defendant.
CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014
PROPOSED FINAL JUDGMENT
WHEREAS, Plaintiff, United States of America, filed its
Complaint on January 2, 2014, the United States and Defendant
Heraeus Electro-Nite Co., LLC (``Heraeus''), 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, Heraeus agrees 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 Heraeus to
assure that competition is substantially restored;
AND WHEREAS, the United States requires Heraeus to divest
certain assets and take certain other actions for the purpose of
remedying the loss of competition alleged in the Complaint;
AND WHEREAS, Heraeus has represented to the United States that
the divestiture required below can and will be made and that Heraeus
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the 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 Heraeus under Section 7 of the
Clayton Act, as amended (15 U.S.C. Sec. 18).
II. Definitions
As used in this Final Judgment:
A. ``Heraeus'' means defendant Heraeus Electro-Nite Co., LLC, a
Delaware corporation with its headquarters in Langhorne,
Pennsylvania, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships and joint ventures, and
their directors, officers, managers, agents, and employees.
B. ``Minco'' means Midwest Instrument Company, Inc., a Wisconsin
corporation with its headquarters in Hartland, Wisconsin, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
C. ``S&I'' means single-use sensors and instruments used to
measure and monitor the temperature and chemical composition of
molten steel.
D. ``Acquirer'' means Keystone Sensors, LLC or another entity to
which Heraeus divests the Divestiture Assets.
E. ``Keystone'' means Keystone Sensors, LLC, a Delaware
corporation headquartered in Cranberry Township, Pennsylvania, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees.
F. ``Divestiture Assets'' means all assets of Heraeus that (1)
were acquired from Minco pursuant to the Asset Purchase Agreement
between the companies dated August 29, 2012 (and subject to the
conditions and limitations specified in that agreement), and (2) are
located in the United States or Mexico, including, but not limited
to:
1. The former Minco facilities located at 541 Industrial Drive,
Hartland, Wisconsin and at 2735 E. Oakland Avenue, Johnson City,
Tennessee;
2. All remaining assets from the former Minco facility, located
at Avenida Letra D No. 1005, Monterrey, Mexico;
3. All remaining tangible assets, including, but not limited
to, all manufacturing equipment, tooling and fixed assets, personal
property, remaining finished or partially finished inventory, office
furniture, materials, supplies, other tangible property, and all
other assets, used in connection with the Divestiture Assets; all
licenses, permits and authorizations issued by any governmental
organization relating to the Divestiture Assets; all teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, relating to the Divestiture Assets, including supply
agreements; all customer lists, accounts, and credit records; all
repair and performance records and all other records relating to the
Divestiture Assets; and
4. All intangible assets, including, but not limited to, all
intellectual property, including, but not limited to, patents,
licenses and sublicenses, copyrights, trademarks, trade names,
service marks, service names, 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, all
manuals and technical information Heraeus provides to its own
employees, customers, suppliers, agents or licensees, and all
research data concerning historic and current research and
development efforts relating to S&I, including, but not limited to,
designs of experiments and the results of successful and
unsuccessful designs and experiments.
III. Applicability
This Final Judgment applies to Heraeus, as defined above, and
all other persons in active concert or participation with Heraeus
who receive actual notice of this Final Judgment by personal service
or otherwise.
IV. Divestiture
A. Heraeus is ordered and directed, within sixty (60) calendar
days after the signing of the Asset Preservation Stipulation and
Order in this matter, to divest the Divestiture Assets in a manner
consistent with this Final Judgment to an Acquirer acceptable to the
United States, in its sole discretion. The United States, in its
sole discretion, may agree to an extension of this time period not
to exceed thirty (30) calendar days, and shall notify the Court in
such circumstances. Heraeus agrees to use its best efforts to divest
the Divestiture Assets as expeditiously as possible.
B. Notwithstanding the provisions of Paragraph IV.A, upon
written request from Heraeus, the United States, in its sole
discretion, may agree to exclude from the Divestiture Assets any
portion thereof that the Acquirer, at its option, elects not to
acquire.
C. Heraeus shall offer to furnish to the Acquirer, subject to
customary confidentiality assurances, all information and documents
relating to the Divestiture Assets customarily provided in a due
diligence process except such information or documents subject to
the attorney-client privilege or work-product doctrine. Heraeus
shall make available such information to the United States at the
same time that such information is made available to any other
person.
D. Heraeus shall provide the Acquirer and the United States with
the name, job title and other contact information relating to all
Heraeus personnel in the United States who were formerly employed by
Minco, excluding shareholders and former shareholders of Minco, to
enable the Acquirer to make offers of employment. Heraeus shall also
provide the Acquirer and the United States with the name, last job
title, and last known address and other contact information for
former employees of Minco or Heraeus in the United States whose
employment ended on or after January 1, 2012, to enable the Acquirer
to make offers of employment to such persons. Heraeus shall not
interfere with any negotiations by the Acquirer to employ any such
current or former Heraeus or Minco employee described in this
section.
[[Page 2895]]
E. Heraeus shall permit the Acquirer to have reasonable access
to personnel and to make inspections of the physical facilities
included in the Divestiture Assets; access to any and all
environmental, zoning, and other permit documents and information;
and access to any and all financial, operational, or other documents
and information customarily provided as part of a due diligence
process.
F. Should the Acquirer elect to acquire the Johnson City,
Tennessee and/or Hartland, Wisconsin facilities that Heraeus
acquired from Minco, Heraeus shall assign the lease(s) to these
facilities to the Acquirer, subject to the landlord(s) permission,
and shall not interfere with any negotiations between the Acquirer
and the landlord(s) concerning assignment of the lease(s).
G. At the option of the Acquirer, Heraeus shall enter into an
agreement to provide training and technical support regarding the
operation of any purchased Divestiture Asset to the personnel of the
Acquirer.
H. Heraeus shall warrant to the Acquirer that each asset that is
currently operational will be operational on the date of sale.
I. Heraeus shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
J. Heraeus shall warrant to the Acquirer that there are no
material defects in the environmental, zoning or other permits
pertaining to the operation of each asset, and that following the
sale of the Divestiture Assets, Heraeus will not undertake, directly
or indirectly, any challenge to the environmental, zoning, or other
permits relating to the operation of the Divestiture Assets.
K. At the option of Heraeus, the Acquirer shall provide Heraeus
with a non-exclusive, non-transferable license for the intangible
assets described in II(F)(4), above, that prior to the filing of the
Complaint in this matter were used in connection with the design,
development, production, marketing, servicing, distribution, and/or
sale of S&I.
L. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by trustee appointed pursuant
to Section V, of this Final Judgment, shall include the entire
Divestiture Assets, and shall be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the
Divestiture Assets can and will be used by the Acquirer as part of a
viable, ongoing business of the development, production, sale and
service of S&I in the United States. The divestiture shall be
accomplished in such a way so as to satisfy the United States, in
its sole discretion, that the Divestiture Assets will remain viable
and the divestiture of such assets will remedy the competitive harm
alleged in the Complaint. The divestiture, whether pursuant to
Section IV or Section V of this Final Judgment,
(1) shall be made to an Acquirer that, in the United States'
sole judgment, has the intent and capability (including the
necessary managerial, operational, technical and financial
capability) of competing effectively in the business of the
development, production, sale and service of S&I; and
(2) shall be accomplished so as to satisfy the United States,
in its sole discretion, that none of the terms of any agreement
between the Acquirer and Heraeus gives Heraeus the ability
unreasonably to raise the Acquirer's costs, to lower the Acquirer's
efficiency, or otherwise to interfere in the ability of the Acquirer
to compete effectively.
V. Appointment of Trustee
A. If Heraeus has not divested the Divestiture Assets within the
time period specified in Section IV(A), Heraeus 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 to effect the divestiture of
the Divestiture Assets.
B. After the appointment of a trustee becomes effective, only
the trustee shall have the right to sell the Divestiture Assets. The
trustee shall have the power and authority to accomplish the
divestiture to an 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 IV, V,
and VI of this Final Judgment, and shall have such other powers as
this Court deems appropriate. Subject to Section V(D) of this Final
Judgment, the trustee may hire at the cost and expense of Heraeus
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.
C. Heraeus shall not object to a sale by the trustee on any
ground other than the trustee's malfeasance. Any such objections by
Heraeus 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.
D. The trustee shall serve at the cost and expense of Heraeus,
on such terms and conditions as the United States approves, and
shall account for all monies derived from the sale of the assets
sold by the trustee 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 Heraeus 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 Divestiture Assets 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.
E. Heraeus shall use its 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 personnel,
books, records, and facilities of the business to be divested, and
Heraeus shall develop financial and other information relevant to
such business as the trustee may reasonably request, subject to
reasonable protection for trade secret or other confidential
research, development, or commercial information. Heraeus shall take
no action to interfere with or to impede the trustee's
accomplishment of the divestiture.
F. 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 Divestiture
Assets, and shall describe in detail each contact with any such
person. The trustee shall maintain full records of all efforts made
to divest the Divestiture Assets.
G. If the trustee has not accomplished the divestiture ordered
under this Final Judgment 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 United States which shall
have the right to make additional recommendations consistent with
the purpose of the trust. The Court thereafter shall enter such
orders as it shall 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. Unless the Acquirer is Keystone, within two (2) business days
following execution of a definitive divestiture agreement, Heraeus
or the trustee, whichever is then responsible for effecting the
divestiture required herein, shall notify the United States of any
proposed divestiture required by Section IV or V of this Final
Judgment. If the trustee is responsible, it shall similarly notify
Heraeus. 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
Divestiture Assets, 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 Heraeus,
the proposed Acquirer, any other third party, or the trustee, if
applicable, additional information concerning the proposed
divestiture, the proposed Acquirer, and any other potential Acquirer
of the Divestiture Assets. Heraeus and the trustee shall furnish any
additional information requested within fifteen (15) calendar days
of the receipt of the
[[Page 2896]]
request, unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice
or within twenty (20) calendar days after the United States has been
provided the additional information requested from Heraeus, the
Acquirer, any third party, and the trustee, whichever is later, the
United States shall provide written notice to Heraeus 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 Heraeus' limited right to object to the sale under Section
V(C) of this Final Judgment. Absent written notice that the United
States does not object to the Acquirer or upon objection by the
United States, a divestiture proposed under Section IV or Section V
shall not be consummated. Upon objection by Heraeus under Section
V(C), a divestiture proposed under Section V shall not be
consummated unless approved by the Court.
VII. Financing
Heraeus shall not finance all or any part of any purchase made
pursuant to Section IV or V of this Final Judgment.
VIII. Preserving and Maintaining Divestiture Assets
Until the divestiture required by this Final Judgment has been
accomplished, Heraeus shall take all steps necessary to comply with
the Asset Preservation Order entered by this Court. Heraeus shall
take no action that would jeopardize the divestiture ordered by this
Court.
IX. Waiver of Noncompete Agreements
A. Heraeus shall waive any existing noncompete agreement or
other restrictive covenant that may bind any former employee of
either Heraeus or Minco in the United States, without imposing any
financial penalty on any such employee. Heraeus shall, no later than
twenty-one (21) calendar days after the filing of the Complaint in
this matter, provide each such former employee with written notice
of the waiver and provide copies of each such waiver to the United
States.
B. For a period of two years following Heraeus' agreement to the
terms of this Final Judgment, Heraeus shall not require any employee
in the United States to agree to a noncompete restriction or other
restrictive covenant as a condition of severance or any other
agreement relating to an employee's termination of employment.
C. This provision shall not apply to any current or former
shareholder of Minco.
X. Use of Equipment
Heraeus shall allow customers, and shall so notify them, to use
without consequence Heraeus products and equipment in the testing
and/or qualification of any S&I, including waiving any contractual
restrictions or the imposition of any warranty- or usage-related
defenses to claims that may arise.
XI. 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 V, Heraeus shall deliver to the United States an affidavit as to
the fact and manner of its compliance with Section IV or V of this
Final Judgment. Each such affidavit shall include the name, address,
and telephone number of each person who, during the preceding thirty
(30) calendar days, 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 Divestiture
Assets, and shall describe in detail each contact with any such
person during that period. Each such affidavit shall also include a
description of the efforts Heraeus has taken to solicit buyers for
the Divestiture Assets, and to provide required information to the
prospective Acquirers, including the limitations, if any, on such
information. Assuming the information set forth in the affidavit is
true and complete, any objection by the United States to information
provided by Heraeus, including limitation on information, shall be
made within fourteen (14) calendar days of receipt of such
affidavit.
B. Within twenty (20) calendar days of the filing of the
Complaint in this matter, Heraeus shall deliver to the United States
an affidavit that describes in reasonable detail all actions Heraeus
has taken and all steps Heraeus has implemented on an ongoing basis
to comply with Section VIII of this Final Judgment. Heraeus shall
deliver to the United States an affidavit describing any changes to
the efforts and actions outlined in Heraeus' earlier affidavits
filed pursuant to this section within fifteen (15) calendar days
after the change is implemented.
C. Heraeus shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
XII. Compliance Inspection
A. For the purposes of determining or securing compliance with
this Final Judgment, the Asset Preservation Order, or any related
orders, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized
privilege, from time to time authorized representatives of the
United States Department of Justice, including consultants and other
persons retained by the United States, shall, upon written request
of an authorized representative of the Assistant Attorney General in
charge of the Antitrust Division, and on reasonable notice to
Heraeus, be permitted:
(1) access during Heraeus' office hours to inspect and copy, or
at the option of the United States, to require Heraeus to provide
hard copy or electronic copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control
of Heraeus, relating to any matters contained in this Final
Judgment; and
(2) to interview, either informally or on the record, Heraeus'
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 Heraeus.
B. Upon the written request of an authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
Heraeus shall submit written reports or response to written
interrogatories, 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
Heraeus to the United States, Heraeus represents and identifies 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 Heraeus marks 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 Heraeus ten (10) calendar days notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XIII. Notification
Unless such transaction is otherwise subject to the reporting
and waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. Sec. 18a (the ``HSR
Act''), Heraeus, without providing advance notification to the
Antitrust Division, shall not directly or indirectly acquire any
assets of or any interest, including any financial, security, loan,
equity or management interest, in any entity engaged in the
development, production, sale or service of S&I in the United States
during the term of this Final Judgment.
Such notification shall be provided to the Antitrust Division in
the same format as, and per the instructions relating to the
Notification and Report Form set forth in the Appendix to Part 803
of Title 16 of the Code of Federal Regulations as amended, except
that the information requested in Items 5 through 9 of the
instructions must be provided only about the development,
production, sale and service of S&I. Notification shall be provided
at least thirty (30) calendar days prior to acquiring any such
interest, and shall include, beyond what may be required by the
applicable instructions, the names of the principal representatives
of the parties to the agreement who negotiated the agreement, and
any management or strategic plans discussing the proposed
transaction. If within the 30-day period after notification,
representatives of the Antitrust Division make a written request for
additional
[[Page 2897]]
information, Heraeus shall not consummate the proposed transaction
or agreement until thirty (30) calendar days after submitting all
such additional information. Early termination of the waiting
periods in this paragraph may be requested and, where appropriate,
granted in the same manner as is applicable under the requirements
and provisions of the HSR Act and rules promulgated thereunder. This
Section shall be broadly construed and any ambiguity or uncertainty
regarding the filing of notice under this Section shall be resolved
in favor of filing notice.
XIV. No Reacquisition
During the term of this Final Judgment, Heraeus may not
reacquire any part of the Divestiture Assets purchased by the
Acquirer.
XV. 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.
XVI. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XVII. 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. Sec. 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 Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16
-----------------------------------------------------------------------
United States District Judge
[FR Doc. 2014-00709 Filed 1-15-14; 8:45 am]
BILLING CODE 4410-11-P