[Federal Register Volume 80, Number 94 (Friday, May 15, 2015)]
[Notices]
[Pages 27961-27970]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-11724]


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FEDERAL TRADE COMMISSION

[File No. 141 0129 ]


Holcim Ltd. and Lafarge S.A.; Analysis of Proposed Consent Orders 
To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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

DATES: Comments must be received on or before June 4, 2015.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/holcimlafargeconsent online or on paper, 
by following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Holcim Ltd. and 
Lafarge

[[Page 27962]]

SA--Consent Agreement; File No. 141-0129'' on your comment and file 
your comment online at https://ftcpublic.commentworks.com/ftc/holcimlafargeconsent by following the instructions on the web-based 
form. If you prefer to file your comment on paper, write ``Holcim Ltd. 
and Lafarge SA--Consent Agreement; File No. 141-0129'' on your comment 
and on the envelope, and mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580, or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, 
Suite 5610 (Annex D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: James Southworth, Bureau of 
Competition, (202-326-2822), 600 Pennsylvania Avenue NW., Washington, 
DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing consent orders to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for May 4, 2015), on the World Wide Web, at 
http://www.ftc.gov/os/actions.shtm.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before June 4, 2015. 
Write ``Holcim Ltd. and Lafarge SA--Consent Agreement; File No. 141-
0129'' on your comment. Your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the public Commission Web 
site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of 
discretion, the Commission tries to remove individuals' home contact 
information from comments before placing them on the Commission Web 
site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/holcimlafargeconsent by following the instructions on the web-based 
form. If this Notice appears at http://www.regulations.gov/#!home, you 
also may file a comment through that Web site.
    If you file your comment on paper, write ``Holcim Ltd. and Lafarge 
SA--Consent Agreement; File No. 141-0129'' on your comment and on the 
envelope, and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite 
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before June 4, 2015. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') designed to remedy the anticompetitive effects resulting 
from the proposed acquisition of Lafarge S.A (``Lafarge'') by Holcim 
Ltd. (``Holcim''). Under the terms of the proposed Consent Agreement, 
Lafarge is required to divest to Continental Cement Company 
(``Continental'') its Davenport cement plant and quarry located in 
Buffalo, Iowa along with cement terminals and associated distribution 
assets in Minneapolis and St. Paul, Minnesota; La Crosse, Wisconsin; 
Memphis, Tennessee; and Convent and New Orleans, Louisiana. The Consent 
Agreement also requires Holcim to divest its Skyway slag cement plant 
located in Chicago, Illinois to Eagle Materials Inc. (``Eagle''), its 
slag cement plant located in Camden, New Jersey and its terminal near 
Boston, Massachusetts to Essroc Cement Corporation (``Essroc''), and 
its cement terminals in Grandville and Elmira, Michigan and Rock 
Island, Illinois to Buzzi Unicem USA (``Buzzi''). Finally, the Consent 
Agreement requires Holcim to divest to a buyer or buyers approved by 
the Commission (1) Holcim's Trident, Montana cement plant and two 
related terminals in Alberta, Canada, and (2) Holcim's Mississauga 
cement plant located in Ontario, Canada and related cement terminals in 
Duluth, Minnesota; Detroit and Dundee, Michigan; Cleveland, Ohio; and 
Buffalo, New York.
    The Consent Agreement has been placed on the public record for 30 
days to solicit comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the Consent

[[Page 27963]]

Agreement and the comments received, and decide whether it should 
withdraw from the Consent Agreement, modify it, or make final the 
Decision and Order (``Order'').

The Transaction

    Pursuant to a Combination Agreement dated July 7, 2014, Holcim 
proposes to acquire 100 percent of the existing shares of Lafarge in a 
transaction valued at $24.95 billion at that time. The Commission's 
Complaint alleges that the proposed acquisition, if consummated, would 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
45, by substantially lessening competition in certain regional markets 
in the United States for the manufacture and sale of portland cement 
and slag cement. The proposed Consent Agreement will remedy the alleged 
violations by preserving the competition that would otherwise be 
eliminated by the proposed acquisition.

The Parties

    Holcim is a Swiss-based, vertically integrated global building 
materials company. The company's products include cement, clinker, 
concrete, lime, and aggregates. In the United States, Holcim currently 
operates nine portland cement and three slag grinding plants, as well 
as a large network of distribution assets.
    Lafarge is a vertically-integrated global building materials 
company incorporated in France and headquartered in Paris. Lafarge 
primarily produces and sells cement, aggregates, and ready-mix 
concrete. In the United States, Lafarge currently operates six portland 
cement and three slag cement grinding plants as well as numerous 
distribution terminals.

The Relevant Products and Structure of the Markets

    In the United States, both parties manufacture and sell portland 
cement. Portland cement is an essential ingredient in making concrete, 
a cheap and versatile building material. Because portland cement has no 
close substitute and the cost of cement usually represents a relatively 
small percentage of a project's overall construction costs, few 
customers are likely to switch to other products in response to a small 
but significant increase in the price of portland cement.
    Both parties also manufacture and sell ground, granulated blast 
furnace slag (``slag cement''), a specialty cement product with unique 
characteristics that can serve as a partial substitute for portland 
cement. Customers add slag cement to portland cement to enhance the 
physical properties of a concrete mixture. It is appropriate to treat 
slag cement as a separate relevant product because an insufficient 
number of purchasers would switch to other products in response to a 
small but significant increase in the price of slag cement to render 
such a price increase unprofitable.
    The primary purchasers of portland and slag cement are ready-mix 
concrete firms and producers of concrete products. These customers 
usually pick up portland and slag cement from a cement company's plant 
or terminal in trucks. Because portland and slag cement are heavy and 
relatively cheap commodities, transportation costs limit the distance 
customers can economically travel to pick up the products. The precise 
scope of the area that can be served by a particular plant or terminal 
depends on a number of factors, including the density of the specific 
region and local transportation costs.
    Due to transportation costs, cement markets are local or regional 
in nature. The relevant geographic markets in which to analyze the 
effects of the proposed acquisition on portland cement competition are 
(1) the Minneapolis-St. Paul, Minnesota area; (2) the Duluth, Minnesota 
area; (3) western Wisconsin; (4) eastern Iowa; (5) the Memphis, 
Tennessee area; (6) the Baton Rouge, Louisiana area; (7) the New 
Orleans, Louisiana area; (8) the Detroit, Michigan area; (9) northern 
Michigan; (10) the Grand Rapids, Michigan area; (11) western Montana; 
and (12) the Boston, Massachusetts/Providence, Rhode Island area. The 
proper geographic markets in which to analyze the effects of the 
proposed transaction on slag cement are (1) the Mid-Atlantic region and 
(2) the western Great Lakes region.
    The relevant markets for portland cement and slag cement are 
already highly concentrated. For each of the relevant markets, the 
parties are either the only suppliers in the market, two of only three 
suppliers, or two of only four suppliers.

Entry

    Entry into the relevant portland cement and slag cement markets 
would not be timely, likely, or sufficient in magnitude, character, and 
scope to deter or counteract the anticompetitive effects of the 
proposed transaction. The cost to construct a new portland cement plant 
of sufficient size to be competitive would likely cost over $300 
million and take more than five years to permit, design, and construct 
while the expansion of an existing facility would likely cost hundreds 
of millions of dollars and take four or more years to complete. 
Building competitive cement distribution terminals is also difficult 
and time consuming. It can take more than two years to obtain the 
necessary permits and complete construction of a competitive terminal 
in the relevant markets. New entrants into slag cement markets face the 
additional hurdle of having to obtain a cost-effective source for the 
raw material. There are few domestic sources for granulated blast 
furnace slag because there are a limited number of active blast 
furnaces in the United States. Given the difficulties of entry, it is 
unlikely that any new entry could be accomplished in a timely manner in 
the relevant markets to defeat a likely price increase caused by the 
proposed acquisition.

Effects of the Acquisition

    Unless remedied, the proposed merger would likely result in 
competitive harm in each of the relevant portland and slag cement 
markets. The merger would eliminate substantial head-to-head 
competition between the parties in each of these markets and 
significantly increase market concentration. For many customers in 
these markets, the merger would combine the two closest competitors for 
their business, leaving the merged entity with the power to increase 
prices to these customers unilaterally. Further, because the merger 
would reduce the number of significant competitors to, at most, two or 
three in the relevant markets, it would enhance the likelihood of 
collusion or coordinated action between the remaining competitors by 
reducing impediments to reaching common terms of coordination and 
making it easier to monitor and retaliate against potential deviation 
from a coordinated scheme.

The Consent Agreement

    The proposed Consent Agreement eliminates the competitive concerns 
raised by Holcim's proposed acquisition of Lafarge by requiring the 
parties to divest assets in each relevant market. Lafarge is required 
to divest a cement plant in Buffalo, Iowa and a network of distribution 
terminals along the Mississippi River in Louisiana, Tennessee, 
Wisconsin, and Minnesota to Continental. Continental, in turn, will 
sell its cement terminal located in Bettendorf, Iowa to Lafarge in 
order to eliminate the competitive overlap that would otherwise be 
created by its acquisition of Lafarge's Davenport cement plant. Because 
Lafarge will be

[[Page 27964]]

able to supply the Bettendorf terminal at a comparable or lower cost 
than Continental, the transactions contemplated in the Consent 
Agreement will maintain the competitive status quo in the eastern Iowa 
market. Holcim is required to divest distribution terminals in Illinois 
and Michigan to Buzzi. Holcim is further required to divest a terminal 
in Massachusetts and a slag plant in New Jersey to Essroc and a slag 
plant in Illinois to Eagle. Each of the identified buyers possesses the 
experience and capability to become significant competitors in the 
relevant markets. The parties must accomplish the divestitures to these 
buyers within ten days after the proposed acquisition is accomplished.
    The Commission's goal in evaluating possible purchasers of divested 
assets is to maintain the competitive environment that existed prior to 
the proposed acquisition. If the Commission determines that any of the 
identified buyers is not an acceptable acquirer, the proposed Order 
requires the parties to divest the assets to a Commission-approved 
acquirer within 90 days of the Commission notifying the parties that 
the proposed acquirer is not acceptable. If the Commission determines 
that the manner in which any divestiture was accomplished is not 
acceptable, the Commission may direct the parties, or appoint a 
divestiture trustee, to effect such modifications as may be necessary 
to satisfy the requirements of the Order.
    Finally, the proposed Consent Agreement requires Holcim to divest 
to a buyer or buyers approved by the Commission (1) a cement plant in 
Trident, Montana and two distribution terminals in Alberta, Canada (the 
``Trident Assets''), and (2) a cement plant in Mississauga, Ontario and 
cement terminals in Minnesota, Michigan, Ohio, and New York (the 
``Great Lakes Assets''). The divestiture of the Trident plant would 
eliminate the proposed merger's potential anticompetitive impact on 
purchasers of portland cement located in western Montana. The two 
Alberta terminals distribute cement produced at the Trident plant and 
are included in the Consent Agreement in order to preserve the 
viability and marketability of the Trident Assets. Holcim's Mississauga 
plant supplies portland cement into the United States both directly and 
via terminals located in Duluth; Detroit; Dundee, Michigan; Cleveland, 
Ohio; and Buffalo, New York. The divestiture of the Great Lakes Assets 
would remedy the proposed merger's anticompetitive effects in the 
Duluth and Detroit areas. The Cleveland and Buffalo terminals are 
included in the Consent Agreement in order to preserve the viability 
and marketability of the Great Lakes Assets. The Trident Assets and 
Great Lakes Assets are also part of a larger group of Holcim assets 
located in Canada that the Respondents have agreed to divest in order 
to resolve competitive concerns raised by the Canadian Competition 
Bureau (``CCB''). Commission staff worked cooperatively with staff from 
the CCB to ensure that our respective proposed remedies would be 
consistent and effective.
    The proposed Order provides that Holcim must find a buyer (or 
buyers) for the Trident Assets and the Great Lakes Assets, at no 
minimum price, that is acceptable to the Commission, no later than 120 
days from the date on which the parties consummate the proposed 
acquisition. The Consent Agreement also contains an Order to Hold 
Separate and Maintain Assets, which will serve to ensure that these 
assets are held separate and operated independently from the merged 
company and protect the viability, marketability, and competitiveness 
of the divestiture asset packages until the assets are divested to a 
buyer or buyers approved by the Commission.
    To ensure compliance with the proposed Order, the Commission has 
agreed to appoint an Interim Monitor to ensure that Holcim and Lafarge 
comply with all of their obligations pursuant to the Consent Agreement 
and to keep the Commission informed about the status of the transfer of 
the rights and assets to appropriate purchasers.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and it is not intended to constitute an official 
interpretation of the proposed Decision and Order or to modify its 
terms in any way.

    By direction of the Commission, Commissioner Wright dissenting.
Donald S. Clark,
Secretary.

Statement of the Federal Trade Commission in the Matter of Holcim Ltd. 
and Lafarge S.A.

    The Federal Trade Commission has voted to accept a settlement to 
resolve the likely anticompetitive effects of Holcim Ltd.'s 
(``Holcim'') proposed $25 billion acquisition of Lafarge S.A. 
(``Lafarge''). We have reason to believe that, absent a remedy, the 
proposed acquisition is likely to substantially reduce competition in 
the manufacture and sale of portland cement and slag cement. As we 
explain below, we believe the proposed remedy, tailored to counteract 
the likely anticompetitive effects of the proposed acquisition without 
eliminating any efficiencies that might arise from the combination of 
the two companies, is in the public interest.\1\
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    \1\ Chairwoman Ramirez, Commissioner Brill, Commissioner 
Ohlhausen, and Commissioner McSweeny join in this statement.
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    Holcim is a Switzerland-based, vertically integrated global 
building materials company, with products that include cement, clinker, 
concrete, lime, and aggregates. Lafarge is a France-based, vertically 
integrated global building materials company that primarily produces 
and sells cement, aggregates, and ready-mix concrete.
    The merged company will be the world's largest cement manufacturer, 
with combined 2014 revenues of approximately $35 billion and operations 
in more than 90 countries. Our competitive concerns pertain to specific 
geographic markets in the United States where Holcim and Lafarge each 
make significant cement sales. The proposed merger would likely harm 
competition for the distribution and sale of portland cement, an 
essential ingredient in making concrete, in 12 local or regional 
markets. It would also threaten to lessen competition for the 
distribution and sale of slag cement, a specialty cement product used 
in certain applications, in two other regional markets.
    The merger would create a merger to monopoly in some of the 
challenged relevant markets, while in others at most three competitors 
would remain post-merger. Absent a remedy, the Herfindahl-Hirschman 
Index (``HHI'') in each of these markets would exceed 3,400, making 
every market highly concentrated according to the 2010 Horizontal 
Merger Guidelines.\2\ The increase in HHI in each market would exceed 
900, well above the 200-point change necessary to trigger the 
Guidelines' presumption that the merger is ``likely to enhance market 
power.'' \3\ There is no evidence rebutting this presumption. If 
anything, the evidence suggests that the estimates of market 
concentration understate our concerns.
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    \2\ See 2010 Horizontal Merger Guidelines Sec.  5.3. The 
threshold at which a market is considered ``highly concentrated'' 
under the Guidelines is 2,500.
    \3\ Id.
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    In each of the relevant markets at issue, there is evidence that 
unilateral anticompetitive effects are likely. Substantial evidence 
demonstrates that, for many customers in the relevant areas, the 
merging firms are their preferred suppliers and that customers have 
benefitted from substantial head-to-head competition between the 
parties

[[Page 27965]]

in negotiating prices for portland and slag cement. Customers in every 
single one of the affected markets expressed concern that their 
inability to play the merging parties off each other would diminish 
their ability to obtain better prices or other favorable terms. As the 
Guidelines note, a combination of two competing sellers ``can 
significantly enhance the ability and incentive of the merged entity to 
obtain a result more favorable to it, and less favorable to the buyer, 
than the merging firms would have offered separately absent the 
merger.'' \4\ In addition, the evidence demonstrates that not all of 
the remaining suppliers in the relevant markets provide customers with 
practical alternatives to the merging parties for a variety of reasons, 
including capacity constraints, lack of distribution assets to supply 
new customers, and downstream vertical integration.\5\
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    \4\ Id. Sec.  6.2.
    \5\ For instance, ready-mix concrete producers are often 
unwilling to purchase cement from their rivals.
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    The evidence also suggests that the proposed acquisition would 
increase the ability and incentives of the combined firm and other 
market participants to engage in coordinated behavior that would result 
in harm to consumers. The relevant markets have characteristics that 
make them susceptible to coordination. They are highly concentrated; 
the products are homogeneous; overall market elasticity is low; 
customer switching costs are low; and sales are relatively small, 
frequent, and usually not made pursuant to long-term contracts. There 
is also a high degree of transparency in these markets. Competitors are 
aware of each other's production capacities, costs, sales volumes, 
prices, and customers. Our concern about the potential for coordinated 
effects in these markets is heightened by evidence that cement 
suppliers, including the same global firms that compete in these 
markets, have expressly colluded in other geographic markets with 
similar characteristics.\6\ By reducing the number of significant 
competitors to only two or three, the proposed merger would make it 
easier for the remaining firms to coordinate, monitor compliance with, 
and retaliate against potential deviation from, a coordinated scheme. 
We therefore have reason to believe that the merger may enhance the 
vulnerability to coordinated effects that already exists in the 
relevant markets.\7\
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    \6\ See, e.g., Press Release, European Commission, The Court of 
Justice Upholds in Substance the Judgment Delivered by the Court of 
First Instance in 2000 Concerning the Cement Cartel, Jan. 7, 2004, 
available at http://europa.eu/rapid/press-release_CJE-04-2_en.htm 
(announcing fines of EUR 100 million on cement suppliers for 
collusion); Press Release, German Federal Cartel Office, Highest 
fine in Bundeskartellamt History is Final, April 10, 2013, available 
at http://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2013/10_04_2013_BGH-Zement.html (announcing fines 
of EUR 380 million on Lafarge, Holcim, and others for collusion); 
Philip Blenkinsop, Belgian Competition Regulator Fines Cement 
Groups, Aug. 31, 2013, available at http://www.reuters.com/article/2013/08/31/belgium-cement-idUSL6N0GW05U20130831 (reporting EUR 14.7 
million in fines levied by the Belgian Competition Council on Holcim 
and others for collusion); Press Release, Polish Office of 
Competition and Consumer Protection, UOKiK Breaks Cement Cartel, 
Dec. 12, 2013, available at https://uokik.gov.pl/news.php?news_id=10754&news_page=1 (announcing decision of Poland's 
Court of Competition and Consumer Protection to impose fines of PLN 
339 million (~$93 million) on cement suppliers for collusion 
involving Lafarge and others); see generally Merger Guidelines Sec.  
7.2.
    \7\ See Merger Guidelines Sec.  7.1.
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    In his dissent, Commissioner Wright takes issue with our decision 
to seek a remedy in six markets, going to great lengths to argue that 
we are improperly relying solely on the increase in market 
concentration to justify our action, that we are creating new 
presumptions of harm, that we lack a ``credible basis'' on which to 
conclude that the merger may enhance the vulnerability of the relevant 
markets to coordination, and that our action is otherwise inconsistent 
with the Guidelines. We respectfully disagree with Commissioner 
Wright's various characterizations of the Commission's statement in 
this matter. The Guidelines make clear that a substantial increase in 
concentration caused by a merger continues to be a significant factor 
in merger analysis because highly concentrated markets with only two or 
three large firms are more likely to lead to anticompetitive 
outcomes.\8\ Economic theory and empirical research bear this out.\9\ 
As a result, we view the evidence in a merger that reduces the number 
of firms in a relevant market to two or three differently from a merger 
that only reduces the number of firms to six or seven. Where, as here, 
a proposed merger significantly increases concentration in an already 
highly concentrated market, a presumption of competitive harm is 
justified under both the Guidelines and well-established case law.\10\
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    \8\ Id. Sec.  2.1.3 (``Mergers that cause a significant increase 
in concentration and result in highly concentrated markets are 
presumed to be likely to enhance market power, but this presumption 
can be rebutted by persuasive evidence showing that the merger is 
unlikely to enhance market power.''). See also Carl Shapiro, The 
2010 Horizontal Merger Guidelines: From Hedgehog to Fox in Forty 
Years, 77 Antitrust L.J. 701, 708 (2010) (explaining that the 
Guidelines' flexible approach ``certainly does not mean that they 
reject the use of market concentration to predict competitive 
effects, as can be seen in Sections 2.1.3 and 5,'' that the 
Guidelines ``recognize that levels and changes in market 
concentration are more probative in some cases than others,'' and 
that ``the Agencies place considerable weight on HHI measures in 
cases involving coordinated effects'') (emphasis in original).
    \9\ See, e.g., Steven C. Salop, The Evolution and Vitality of 
Merger Presumptions: A Decision-Theoretic Approach 11 (Georgetown 
Law Faculty Publications and Other Works, Working Paper No. 1304, 
2014), available at http://scholarship.law.georgetown.edu/facpub/1304 (``[V]arious theories of oligopoly conduct--both static and 
dynamic models of firm interaction--are consistent with the view 
that competition with fewer significant firms on average is 
associated with higher prices. . . . Accordingly, a horizontal 
merger reducing the number of rivals from four to three, or three to 
two, would be more likely to raise competitive concerns than one 
reducing the number from ten to nine, ceteris paribus.''); Steffen 
Huck, et al., Two Are Few and Four Are Many: Number Effects from 
Experimental Oligopolies, 53 J. Econ. Behavior & Org. 435, 443 
(2004) (testing the frequency of collusive outcomes in Cournot 
oligopolies and finding ``clear evidence that there is a qualitative 
difference between two and four or more firms''); Timothy F. 
Bresnahan & Peter C. Reiss, Entry and Competition in Concentrated 
Markets, 99 J. Pol. Econ. 977, 1006 (1991) (finding, in a study of 
tire prices, that ``[m]arkets with three or more dealers have lower 
prices than monopolists or duopolists,'' and noting that, ``while 
prices level off between three and five dealers, they are higher 
than unconcentrated market prices'').
    \10\ See Merger Guidelines Sec.  2.1.3; Chicago Bridge & Iron 
Co. v. FTC, 534 F.3d 410, 423 (5th Cir. 2008) (``Typically, the 
Government establishes a prima facie case by showing that the 
transaction in question will significantly increase market 
concentration, thereby creating a presumption that the transaction 
is likely to substantially lessen competition.''); FTC v. H.J. Heinz 
Co., 246 F.3d 708, 716 (D.C. Cir. 2001) (merger to duopoly creates a 
rebuttable presumption of anticompetitive harm through direct or 
tacit coordination).
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    Moreover, despite Commissioner Wright's assertion to the contrary, 
our investigation went beyond consideration of market concentration and 
application of the Guidelines presumption of competitive harm and, as 
noted above, produced additional evidence supporting our belief that 
the effect of the proposed acquisition would be to substantially lessen 
competition and harm cement customers in the relevant markets. On 
coordinated effects, we found numerous characteristics of the market 
making it vulnerable to collusion. It is particularly troubling that 
existing cement suppliers have expressly colluded in other geographic 
markets with similar characteristics. We also examined whether other 
market factors, such as the possibility of entry or expansion, might 
alleviate our competitive concerns. The evidence demonstrates the 
presence of high barriers to entry for both portland cement and slag 
cement, including significant capital costs and regulatory 
requirements. Entry sufficient to deter or counteract the likely harm 
from the proposed transaction would thus be neither timely nor likely.

[[Page 27966]]

    In the face of our competitive concerns, based on what we had 
learned about the nature and conditions of the relevant markets, the 
parties proposed divestitures to remedy our concerns in each of those 
markets. The parties did not comply with our Second Requests. While 
continued investigation may have produced more evidentiary support for 
our complaint, including those markets for which Commissioner Wright 
dissents, we do not think such a course would have been justified. We 
have ample evidence to support our allegations of anticompetitive harm 
and had no reason to burden the parties with the expense and delay of 
further inquiry for the sole purpose of obtaining additional, 
cumulative evidence. Nor would further inquiry have been a good use of 
Commission resources.
    Merger analysis is necessarily predictive. The evidence in this 
case provides us with sufficient reason to believe that the proposed 
acquisition is likely to substantially reduce competition, and there is 
no evidence of countervailing efficiencies that weigh against the 
remedy. We believe that the public interest is best served by remedying 
the competitive concerns as set forth in our proposed consent order.

Statement of Commissioner Joshua D. Wright, Dissenting in Part and 
Concurring in Part In the Matter of Holcim Ltd. and Lafarge S.A.

    The Commission has voted to issue a Complaint and a Decision & 
Order against Holcim Ltd. (``Holcim'') and Lafarge S.A. (``Lafarge'') 
to remedy the allegedly anticompetitive effects of the proposed merger 
of the two companies. I dissent in part from and concur in part with 
the Commission's decision because the evidence is insufficient to 
provide a reason to believe the proposed transaction is likely to 
substantially lessen competition, in violation of Section 7 of the 
Clayton Act, in several of the portland cement markets identified in 
the Complaint.\1\
---------------------------------------------------------------------------

    \1\ As I explain below, I concur with the Commission as to the 
Twin Cities, Duluth, western Wisconsin, New Orleans, western 
Montana, Boston/Providence, the Mid-Atlantic region, and the western 
Great Lakes region; I dissent with the Commission as to eastern 
Iowa, Memphis, Baton Rouge, Detroit, northern Michigan, and Grand 
Rapids.
---------------------------------------------------------------------------

    The Commission articulates coordinated effects and unilateral 
effects theories of harm arising from the proposed transaction in all 
of the fourteen relevant geographic markets defined in the Complaint 
(the ``Relevant Markets'').\2\ Additionally, and untethered to these 
two theories of harm articulated in the 2010 Horizontal Merger 
Guidelines (``Merger Guidelines''), the Commission asserts that 
mergers, such as the proposed transaction, that reduce the number of 
competitors to three or fewer are likely to harm competition. The 
Commission's structural presumption is economically unfounded and 
inappropriate in the vast majority of Relevant Markets. Furthermore, 
there is insufficient evidence to support a coordinated effects theory 
in any Relevant Market and insufficient evidence to support a 
unilateral effects theory in several of the Relevant Markets.
---------------------------------------------------------------------------

    \2\ See Analysis of Agreement Containing Consent Orders to Aid 
Public Comment 3, Holcim Ltd., FTC File No. 141-0129 (May 4, 2015) 
(``For many customers in these markets, the merger would . . . 
leav[e] the merged entity with the power to increase prices . . . 
unilaterally. Further, . . . it would enhance the likelihood of 
collusion or coordinated action between the remaining 
competitors.'').
---------------------------------------------------------------------------

    In those markets in which I conclude the record evidence supports 
neither a coordinated nor a unilateral effects theory, the Commission 
relies upon little more than the change in market structure to support 
each of its allegations. Without particularized evidence substantiating 
a unilateral effects or coordinated effects theory of harm arising from 
the proposed transaction, a structural theory alone cannot provide a 
sufficient basis to establish reason to believe a transaction violates 
the Clayton Act. It follows, in my view, that the Commission should 
refrain from imposing a remedy in the markets for which the evidence is 
insufficient to support either a coordinated effects theory or a 
unilateral effects theory.

I. The Commission's Structural Theory and Presumption Are Unsupported 
by Economic Evidence

    The Commission argues mergers that reduce the number of competitors 
in a relevant market to three or two are unique in the sense that they 
warrant a presumption of competitive harm and illegality,\3\ but it 
cannot defend its structural presumption upon the basis of economic 
evidence or accumulated empirical knowledge.
---------------------------------------------------------------------------

    \3\ Id. at 3.
---------------------------------------------------------------------------

    The Commission cites in support of its structural theory and 
presumption three academic articles written by economists.\4\ Only two 
offer economic evidence, and the proffered substantiation fails to 
support the claim. The first is an important early entrant into the 
static entry literature examining the relationship between market size 
and the number of entrants in a market, focusing upon isolated rural 
markets.\5\ It strains credulity to argue that Bresnahan and Reiss's 
important analysis of the impact of entry in markets involving doctors, 
dentists, druggists, plumbers, and tire dealers in local and isolated 
areas, where they find the competitive benefits of a second competitor 
are especially important, apply with generality sufficient to support a 
widely applicable presumption of harm based upon the number of firms. 
Indeed, the authors warn against precisely this interpretation of their 
work.\6\
---------------------------------------------------------------------------

    \4\ Id. at 3 n.9.
    \5\ Timothy F. Bresnahan & Peter C. Reiss, Entry and Competition 
in Concentrated Markets, 99 J. Pol. Econ. 977 (1991). While 
Bresnahan and Reiss is an important early contribution to the static 
entry literature, it cannot possibly bear the burden the Commission 
wishes to place upon it. Abstracting from the complexities of market 
definition was necessary for the researchers to isolate entry 
decisions. This is possible when studying the effects of entry by a 
second dentist in a town with a population of less than 1,000, but 
not in most real-world antitrust applications. The authors of the 
study make this point themselves, noting that ``whether this pattern 
appears in other industries remains an open question.'' Id. at 1007.
    \6\ In earlier research using similar empirical techniques and 
data--namely, small rural markets--Bresnahan and Reiss plainly 
reject the notion that the findings should inform views of market 
structure and competition generally: ``We do not believe that these 
markets `stand in' for highly concentrated industries in the sectors 
of the economy where competition is national or global.'' Timothy F. 
Bresnahan & Peter C. Reiss, Do Entry Conditions Vary Across Markets, 
3 Brookings Papers Econ. Activity 833, 868 (1987).
---------------------------------------------------------------------------

    The second article is a laboratory experiment and does not involve 
the behavior of actual firms and certainly cannot provide sufficient 
economic evidence to support a presumption that four-to-three and 
three-to-two mergers in real-world markets will result in 
anticompetitive coordination.\7\ Once again, the authors warn against 
such an interpretation.\8\
---------------------------------------------------------------------------

    \7\ Steffen Huck et al., Two Are Few and Four Are Many: Number 
Effects from Experimental Oligopolies, 53 J. Econ. Behavior & Org. 
435 (2004).
    \8\ Id. at 436 (``The number of firms is not the only factor 
affecting competition in experimental markets. This implies that 
there exists no unique number of firms that determines a definite 
borderline between non-cooperative and collusive markets 
irrespective of all institutional and structural details of the 
experimental markets.'').
---------------------------------------------------------------------------

    Finally, the Commission cites a draft article, authored by Steve 
Salop, in support of its view that economic evidence supports a 
presumption that four-to-three and three-to-two mergers are 
competitively suspect.\9\ The article does not purport to study or 
provide new economic evidence on the relationship between market 
structure and competition. Thus, it cannot

[[Page 27967]]

support the Commission's proposition.\10\
---------------------------------------------------------------------------

    \9\ Steven C. Salop, The Evolution and Vitality of Merger 
Presumptions: A Decision-Theoretic Approach (Georgetown Law Faculty 
Publications and Other Works, Working Paper No. 1304, 2014), 
available at http://scholarship.law.georgetown.edu/facpub/1304/.
    \10\ Nevertheless, to the extent Salop argues in favor of legal 
presumptions in merger analysis, he clarifies that they ``obviously 
should be based on valid economic analysis, that is, proper economic 
presumptions,'' which should be updated ``based on new or additional 
economic factors besides market shares and concentration.'' Id. at 
37, 48. I agree. Additionally, Salop explains that ``[c]ontemporary 
economic learning suggests that concentration be considered when 
undertaking competitive effects analysis--in conjunction with other 
factors suggested by the competitive effects theory--but not treated 
as the sole determinant of post-merger pricing.'' Id. at 13-14. 
Notably, Salop does not endorse a distinction between four-to-three 
mergers or three-to-two mergers and mergers in less concentrated 
markets that justifies a presumption that the former are 
anticompetitive; rather, he merely observes that empirical evidence 
and economic theory do not warrant ``ignoring market shares and 
concentration in merger analysis.'' Id. at 12 (emphasis in 
original).
---------------------------------------------------------------------------

    There is simply no empirical economic evidence sufficient to 
warrant a presumption that anticompetitive coordination is likely to 
result from four-to-three or three-to-two mergers. Indeed, such a 
presumption would be inconsistent with modern economic theory and the 
analysis endorsed by the Merger Guidelines, which deemphasize 
inferences of competitive harm arising from market structure in favor 
of greater reliance upon particularized evidence of changes in post-
merger incentives to compete.\11\
---------------------------------------------------------------------------

    \11\ See Carl Shapiro, The 2010 Horizontal Merger Guidelines: 
From Hedgehog to Fox in Forty Years, 77 Antitrust L.J. 701, 707-08 
(2010) (acknowledging the role of market concentration in the 
analysis endorsed in the Merger Guidelines and observing that they 
place less weight upon market concentration and market shares, 
instead emphasizing the importance of direct evidence of changes in 
post-merger incentives to compete and competitive effects). To the 
extent the Commission relies upon Shapiro's caveat that ``changes in 
market concentration are more probative in some cases than others,'' 
Statement of the Federal Trade Commission 3 n.8, Holcim Ltd., FTC 
File No. 141-0129 (May 8, 2015), they fail to explain why, nor have 
I been provided any evidence attempting to establish that, markets 
for portland or slag concrete fit within the subset of cases for 
which it has been established that there is a reliable a 
relationship between market structure and competition. I do not 
quarrel with the notion that such markets exist. We identify them 
over time using economic analysis, empirical evidence, and 
accumulated learning. For example, substantial research has 
identified empirical regularities in the relationship between 
structure and price in generic pharmaceutical markets. See David 
Reiffen & Michael R. Ward, Generic Drug Industry Dynamics, 87 Rev. 
Econ. & Stat. 37 (2005).
---------------------------------------------------------------------------

    To the contrary, this approach is inconsistent with Agency practice 
and the letter and spirit of the more economically sophisticated 
approach adopted in the Merger Guidelines.\12\ Section 2.1.3 of the 
Merger Guidelines does, as the Commission observes, state that 
``mergers that cause a significant increase in concentration and result 
in highly concentrated markets are presumed to be likely to enhance 
market power.'' \13\ The Merger Guidelines insure against reverting to 
naked structural analysis by making clear that the role of market 
shares and market concentration is ``not an end in itself,'' but rather 
``one useful indicator of likely anticompetitive effects,'' and that 
market concentration is not to be used to ``provide a rigid screen to 
separate competitively benign mergers from anticompetitive ones,'' but 
rather to provide one way to distinguish competitively benign mergers 
from those that warrant closer scrutiny.\14\ To the extent these 
passages evince an ambiguity in the Merger Guidelines with respect to 
the minimum evidentiary burden that must be satisfied to support a 
merger challenge, the Commission should embrace the interpretation more 
consistent with a modern economic approach rather than with the 
obsolete and discredited structural analysis of a prior era.
---------------------------------------------------------------------------

    \12\ Comments of the ABA Section of Antitrust Law on the 
Horizontal Merger Guidelines Revision Project (June 4, 2010), 
available at https://www.ftc.gov/sites/default/files/documents/public_comments/horizontal-merger-guidelines-review-project-proposed-new-horizontal-merger-guidelines-548050-00026/548050-00026.pdf (urging the agencies to ``remove the presumption of 
illegality keyed to the level and increase in the HHI'' because 
``[t]he presumption does not reflect how the Agencies conduct 
investigations [and] is not theoretically warranted'').
    \13\ U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal 
Merger Guidelines Sec.  7.1 (2010) [hereinafter Merger Guidelines].
    \14\ Id. Sec. Sec.  4, 5.3.
---------------------------------------------------------------------------

    Rather than relying upon economic evidence to defend the 
Commission's structural presumption, the Commission highlights case law 
supporting a presumption of illegality for mergers to duopoly or that 
substantially increase concentration.\15\ As a preliminary matter, case 
law that endorses a wholly structural approach to merger analysis--an 
approach clearly rejected by the Merger Guidelines--does not constitute 
relevant economic evidence. Judicial opinions adopting this approach 
are orthogonal to the proposition in need of economic substantiation: 
that mergers resulting in three- or two-firm markets are likely to 
result in coordination. Indeed, one can find a variety of economically 
dubious propositions adopted in antitrust case law blessed by no less a 
legal authority than the Supreme Court.\16\ But courts' observations 
about the relationship between market structure and competition are not 
relevant to the Commission's adoption of a structural presumption in 
this case.
---------------------------------------------------------------------------

    \15\ Statement of the Federal Trade Commission, supra note 11, 
at 3 (citing Chicago Bridge & Iron Co. v. FTC, 534 F.3d 410, 423 
(5th Cir. 2008) and FTC v. H.J. Heinz Co., 246 F.3d 708, 716 (D.C. 
Cir. 2001)).
    \16\ For example, well-established case law endorses the 
economic proposition that mergers that result in post-merger shares 
of greater than 30% are likely to harm competition, United States v. 
Philadelphia Nat'l Bank, 374 U.S. 321, 364-65 (1963), and that 
mergers resulting in post-merger shares of less than 10% harm 
competition when coupled with a trend toward concentration, United 
States v. Von's Grocery Co., 384 U.S. 270 (1966); United States v. 
Pabst Brewing Co., 384 U.S. 546 (1966).
---------------------------------------------------------------------------

    I therefore find any reliance upon structural changes alone to be 
economically untenable and insufficient to give me reason to believe 
the proposed transaction will violate Section 7 in the vast majority of 
Relevant Markets.

II. Coordinated Effects Are Unlikely in Any Relevant Market

    The Merger Guidelines describe the conditions under which the 
antitrust agencies will challenge a proposed merger on the basis that 
it is likely to result in anticompetitive coordination. Specifically, 
the Merger Guidelines articulate three necessary conditions that must 
each be satisfied to support a coordinated effects theory: (1) A 
significant increase in concentration, leading to a moderately or 
highly concentrated market, (2) a market vulnerable to coordinated 
conduct, and (3) a credible basis for concluding the transaction will 
enhance that vulnerability.\17\ Thus, the Merger Guidelines establish 
clearly that a highly concentrated market that is already vulnerable to 
coordinated conduct is necessary but not sufficient to support a 
coordinated effects theory. Critically, the Commission must also have 
evidence sufficient to provide a credible basis to conclude the 
transaction will enhance the market's vulnerability to coordinated 
conduct. Such evidence must evince a change in the post-merger 
competitive market dynamics and, in particular, post-merger incentives 
to engage in coordinated pricing. The Merger Guidelines provide the 
elimination of a maverick firm as an illustrative example of the type 
of evidence that would satisfy the third condition and warrant a 
presumption of adverse coordinated effects.\18\ Importantly, the Merger 
Guidelines explain evidence that a merger will eliminate a maverick is 
given weight precisely because it

[[Page 27968]]

changes post-merger incentives to coordinate.\19\
---------------------------------------------------------------------------

    \17\ Merger Guidelines, supra note 13, Sec.  7.1; see also 
Dissenting Statement of Commissioner Joshua D. Wright 3, Fidelity 
National Financial, Inc., FTC File No. 131-0159 (Dec. 23, 2013) 
[hereinafter Wright, Fidelity Dissent].
    \18\ Merger Guidelines, supra note 13, Sec.  7.1.
    \19\ Id. Sec.  2.1.5.
---------------------------------------------------------------------------

    The first and second elements of the Merger Guidelines' coordinated 
effects analysis are not at issue in this case. The Commission's 
investigation revealed evidence supporting a conclusion that the 
Relevant Markets are already highly concentrated and the proposed 
transaction will increase concentration.\20\ Furthermore, the evidence 
supports a conclusion that the markets are vulnerable to coordinated 
conduct.\21\ Nevertheless, the investigation failed to uncover any 
evidence to suggest the proposed transaction will increase post-merger 
incentives to coordinate--that is, there is no record evidence to 
provide a credible basis to conclude the merger alters the competitive 
dynamic in any Relevant Market in a manner that enhances its 
vulnerability to coordinated conduct.
---------------------------------------------------------------------------

    \20\ See Analysis of Agreement Containing Consent Orders to Aid 
Public Comment, supra note 2, at 2.
    \21\ See Statement of the Federal Trade Commission, supra note 
11, at 2 (describing the characteristics of the Relevant Markets 
that render them vulnerable to coordination).
---------------------------------------------------------------------------

    The Commission asserts that the facts that the market is highly 
concentrated, that it is vulnerable to coordination, and that the 
merger reduces ``the number of significant competitors to only two or 
three'' \22\ jointly satisfy the third necessary element that ``the 
Agencies have a credible basis on which to conclude that the merger may 
enhance that vulnerability.''\23\ The Commission's analysis can be read 
in one of two ways. Each is tantamount to the application of a 
structural presumption for coordinated effects claims involving markets 
with three or two firms, each is problematic because it adopts an 
outdated and obsolete structural approach to coordinated effects, and 
each is in significant tension with the economic approach to 
coordinated effects embodied in the Merger Guidelines.
---------------------------------------------------------------------------

    \22\ Id. at 2.
    \23\ Merger Guidelines, supra note 13, Sec.  7.1.
---------------------------------------------------------------------------

    The first interpretation is that the satisfaction of the first and 
second elements of the Merger Guidelines analysis--and particularly the 
demonstration that the merger significantly increases concentration in 
an already concentrated market--is sufficient to simultaneously satisfy 
the third element that the merger enhance post-merger incentives to 
coordinate. This interpretation renders the third element of Section 
7.1 entirely superfluous. The more logical explanation of the third 
element is that a crucial, additional type of information is required 
to illuminate how the merger changes the merged firm's incentives to 
coordinate. The Commission's application completely overlooks the 
economic relevance of the third element.
    The second plausible interpretation of the Commission's analysis is 
that the reduction in the number of competitors in a market is itself 
sufficient evidence to provide a credible basis that a merger will 
enhance a market's vulnerability to coordination and thus satisfy the 
third element of the Merger Guidelines' coordinated effects analysis. 
Under this reading, the Commission relies upon the fact that the 
proposed transaction reduces the number of competitors in each Relevant 
Market by one firm, either from four to three or from three to two.\24\ 
For example, the Majority Statement asserts that the proposed 
transaction might enhance the likelihood of coordination by ``mak[ing] 
it easier for the remaining firms to coordinate, monitor compliance 
with, and retaliate against potential deviation from, a coordinated 
scheme.'' \25\ These are generic observations that are true of any 
merger that reduces the number of firms in a market; they are not 
particularized to the proposed transaction or to any Relevant Market 
nor do they establish a credible basis to conclude that post-merger 
incentives to coordinate will increase. The observation that a market 
with N firms will, after the merger, have N-1 firms is simply 
insufficient without more to establish the required credible basis. 
This is true even when a merger reduces the number of firms from four 
to three or from three to two. The Commission offers no explanation as 
to why the Merger Guidelines would go through the trouble of requiring 
a credible basis to believe a merger will change the market's 
competitive dynamics that enhances the market's vulnerability to 
coordinated conduct, in addition to an increase in market 
concentration, in order to substantiate a coordinated effects merger 
challenge if the latter were considered sufficient to satisfy both 
elements.
---------------------------------------------------------------------------

    \24\ See Statement of the Federal Trade Commission, supra note 
11, at 2 (taking the view that a reduction of competitors to three 
or two firms in the relevant market justify a presumption of 
competitive harm).
    \25\ Id. at 2.
---------------------------------------------------------------------------

    As I have stated previously, ``there is no basis in modern 
economics to conclude with any modicum of reliability that increased 
concentration--without more--will increase post-merger incentives to 
coordinate.'' \26\ Janusz Ordover, in a leading treatment of the 
economics of coordinated effects, similarly explains that ``[i]t is now 
well understood that it is not sufficient when gauging the likelihood 
of coordinated effects from a merger to simply observe that because the 
merger reduces the number of firms, it automatically lessens the 
coordination problem facing the firms and enhances their incentives to 
engage in tacit collusion; far from it.''\27\ Without particularized 
evidence that the proposed transaction will enhance incentives to 
coordinate post-merger, I am unable to conclude there is reason to 
believe it is likely to substantially lessen competition in violation 
of Section 7.
---------------------------------------------------------------------------

    \26\ Wright, Fidelity Dissent, supra note 17, at 3.
    \27\ Janusz A. Ordover, Coordinated Effects, in 2 Issues in 
Competition Law and Policy 1359, 1367 (ABA Section of Antitrust Law 
2008) (``It is quite clear . . . that a reduction in the number of 
firms and concomitant increases in concentration do not necessarily 
make collusion inevitable or even more likely, stable, or 
complete.'').
---------------------------------------------------------------------------

III. Unilateral Effects Are Unlikely in Some of the Relevant Markets

    The Commission alleges the proposed transaction is likely to result 
in unilateral price effects in the Relevant Markets. Unilateral effects 
arise when the reduction in direct competition between merging firms is 
sufficient to create post-merger market power. The Merger Guidelines 
articulate a variety of potential unilateral effects theories, 
including merger to monopoly, merger of firms producing very close 
substitutes in a differentiated products market, merger of sellers 
competing in bargaining and auction markets, and mergers in homogeneous 
goods markets making post-merger output suppression strategies more 
profitable.\28\ The unifying theme of the unilateral effects analysis 
contemplated by the Merger Guidelines is that a particularized showing 
that post-merger competitive constraints are weakened or eliminated by 
the merger is superior to relying solely upon inferences of competitive 
effects drawn from changes in market structure.\29\
---------------------------------------------------------------------------

    \28\ Merger Guidelines, supra note 13, Sec.  6.
    \29\ See Shapiro, supra note 11, Part III (explaining the Merger 
Guidelines' unilateral effects analysis, the types of evidence that 
support such analysis, and the relative analytical weakness of 
inferences of competitive harm drawn from changes in market 
structure).
---------------------------------------------------------------------------

    The potential unilateral effects theories in this case fall broadly 
within one of three categories. The first category involves 
straightforward merger-to-monopoly markets. In these markets, the 
theory of harm is that Holcim and Lafarge are the only two meaningful 
suppliers for all customers in the Relevant Market. The second

[[Page 27969]]

category involves markets in which Holcim and Lafarge face some 
competition, but the proposed transaction will result in a merger to 
monopoly for a substantial subset of customers and will allow the 
merged entity to unilaterally increase market prices. The third 
category includes markets where the proposed transaction will reduce 
the number of competitors in the Relevant Market to three or two, and 
the remaining competitors will be unable or unwilling to compete for 
market share--for example, because of capacity constraints, leaving the 
merged entity with the ability to unilaterally raise prices. Each of 
these theories requires particularized evidence sufficient to establish 
reason to believe the proposed transaction violates Section 7 of the 
Clayton Act. I conclude the available evidence is sufficient to do so 
in some Relevant Markets and insufficient in others.
    Unilateral price effects are ``most apparent in a merger to 
monopoly in a relevant market.'' \30\ Basic economic theory provides a 
robust and reliable inference that a merger to monopoly or near 
monopoly is likely to result in anticompetitive effects. A rational 
firm with little or no competitive constraints will set prices or 
choose output to maximize its profits; it can be expected that a 
rational firm acquiring such monopoly power will adjust prices and 
output accordingly. No further economic evidence is required to 
substantiate an enforcement action based upon likely unilateral price 
effects and to establish reason to believe a merger to monopoly or near 
monopoly is likely to violate Section 7 of the Clayton Act. This 
analysis applies to at least one of the Relevant Markets.
---------------------------------------------------------------------------

    \30\ Merger Guidelines, supra note 13, Sec.  6.
---------------------------------------------------------------------------

    The analysis is necessarily more nuanced for theories falling 
within the second category of theories of unilateral price effects. 
These theories involve Relevant Markets where the proposed transaction 
would reduce the number of competitors from four to three or three to 
two, and the market share for the merged entity would not be large 
enough to infer it would have the power to raise market prices 
unilaterally. In these markets, particularized evidence is required to 
establish reason to believe the merged firm will gain unilateral 
pricing power. In many Relevant Markets, staff was successful in 
uncovering the required evidence. For example, in some Relevant 
Markets, there was evidence of a significant subset of customers for 
whom a sole market participant would be the only remaining acceptable 
supplier, due either to physical proximity or to some other preference 
rendering alternatives an unacceptable source of portland or slag 
cement. The Commission's example of ready-mix concrete producers,\31\ a 
relevant subset of customers, is an illustrative example here. In some 
Relevant Markets, the evidence supports a finding that such customers 
would continue to find their vertically integrated rivals to be an 
unacceptable source of portland cement, even if the sole remaining 
vertically unintegrated portland cement producer raised its prices 
after the merger. In the Relevant Markets for which credible evidence 
of this type is available, I find it sufficient to create reason to 
believe the merger is likely to result in competitive harm. Several 
other Relevant Markets fall into this category.
---------------------------------------------------------------------------

    \31\ See Statement of the Federal Trade Commission, supra note 
11, at 2 n.5.
---------------------------------------------------------------------------

    In other Relevant Markets, the allegation that there will remain 
only one acceptable supplier for a significant subset of customers 
after the proposed transaction lacks evidentiary support. Specifically, 
in these markets, the record evidence does not indicate that a material 
number of customers view Holcim and Lafarge as closest supply 
alternatives or that they view other potential suppliers as 
unacceptable supply sources and would continue to do so in the face of 
a post-merger unilateral price increase.\32\
---------------------------------------------------------------------------

    \32\ The role of ready-mix customers in the competitive analysis 
is again illustrative. In some Relevant Markets the available 
evidence indicates there are some ready-mix customers that purchase 
from rivals and others that do not, but the totality of the evidence 
fails to establish the existence of a significant set of customers 
that view vertically integrated suppliers as unacceptable or would 
continue to do so in the face of a post-merger unilateral price 
increase.
---------------------------------------------------------------------------

    The final category of potential unilateral effects theories, like 
the second category, also involves Relevant Markets where the proposed 
transaction would reduce the number of competitors from four to three 
or three to two, but the post-merger market share would not be large 
enough to infer it would have the power to raise market prices 
unilaterally. However, unlike the second category, in these Relevant 
Markets, it is not customer preference that limits the number of 
available competitors to one. Rather, in these Relevant Markets, the 
proposed transaction is effectively a merger to monopoly or near 
monopoly because alternative suppliers would be unwilling or unable to 
compete with the merged entity in the face of a price increase. In some 
Relevant Markets, the investigation uncovered particularized evidence 
sufficient to establish a reason to believe such unilateral effects are 
likely, including evidence that other competitors are experiencing, or 
soon will experience, capacity constraints, rendering them unable or 
unwilling to compete for market share, or that other suppliers will not 
constrain the merged entity's prices. Several Relevant Markets fall 
into this third category.
    Relevant Markets where the ``reason to believe'' standard is not 
satisfied lacked record evidence necessary to corroborate any of these 
three theories.\33\ Indeed, with respect to the Relevant Markets for 
which I dissent from the Commission's decision, it is my view that the 
investigation failed to adduce particularized evidence to elevate the 
anticipated likelihood of competitive effects from ``possible'' to 
``likely'' under any of these theories. Without this necessary 
evidence, the only remaining factual basis upon which the Commission 
rests its decision is the fact that the merger will reduce the number 
of competitors from four to three or three to two. This is simply not 
enough evidence to support a reason to believe the proposed transaction 
will violate the Clayton Act in these Relevant Markets.
---------------------------------------------------------------------------

    \33\ One other potentially plausible theory is that customers 
refuse to sole source their product, and therefore that two or more 
competitors are necessary to prevent post-merger unilateral effects. 
There is insufficient record evidence to indicate customers would be 
unwilling to switch from dual- to single-sourced supply in the event 
of a post-merger price increase.
---------------------------------------------------------------------------

IV. Conclusion

    Prior to entering into a consent agreement with the merging 
parties, the Commission must first find reason to believe that a merger 
likely will substantially lessen competition under Section 7 of the 
Clayton Act. A presumption that such reason to believe exists when a 
merger decreases in the number of competitors in a market to three or 
two is misguided. Additionally, when the Commission alleges coordinated 
or unilateral effects arising from a proposed transaction, this 
standard requires more than a mere counting of pre- and post-merger 
firms. In particular, reason to believe a proposed transaction is 
likely to result in coordinated effects requires evidence--absent from 
the record here--that the merger will enhance a market's vulnerability 
to coordinated pricing, and not just that it takes place in a market 
that is already concentrated. In the absence of such a particularized 
showing, the Commission's approach to coordinated effects here reduces 
to a strict structural presumption

[[Page 27970]]

unsupported by modern economics and at odds with the Merger Guidelines.
    Similarly, substantiating a unilateral effects theory requires 
particularized evidence--also absent from the record here in some 
Relevant Markets--that a merger will reduce or eliminate competitive 
constraints, permitting the merged entity to increase prices. Without 
such evidence, a unilateral effects theory reduces to little more than 
a complaint about market structure coupled with speculation about the 
circumstances under which unilateral effects might occur in a post-
merger world. The Merger Guidelines contemplate a more rigorous 
analysis.
    This is not to suggest the ``reason to believe'' standard requires 
access to every piece of relevant information and a full and complete 
economic analysis of a proposed transaction, regardless of whether the 
parties wish to propose divestitures before complying with a Second 
Request. Rather, the standard requires only evidence sufficient to 
establish that competitive harm is likely. Such evidence, although 
quite minimal--indeed, a handful of facts in most instances--is indeed 
available in some Relevant Markets in this matter, and it is in those 
markets that I concur with the Commission's decision. While I 
appreciate the practical complications of requesting additional 
information during the course of a merger investigation, as well as the 
desire to conduct efficient investigations, these important pragmatic 
considerations do not trump the Commission's primary obligation to 
collect evidence sufficient to establish reason to believe the merger 
will harm competition before issuing a complaint and accepting a 
consent.
    For the reasons I explain above, I find reason to believe the 
proposed transaction is likely to result in unilateral price effects, 
and thus violate the Clayton Act, in the Twin Cities, Duluth, western 
Wisconsin, New Orleans, western Montana, Boston/Providence, the Mid-
Atlantic region, and the western Great Lakes region. I conclude there 
is no reason to believe the proposed transaction will violate Section 7 
in eastern Iowa, Memphis, Baton Rouge, Detroit, northern Michigan, and 
Grand Rapids; it follows that I believe the Commission should refrain 
from imposing a remedy in these markets.

[FR Doc. 2015-11724 Filed 5-14-15; 8:45 am]
 BILLING CODE 6750-01-P