[Federal Register Volume 81, Number 129 (Wednesday, July 6, 2016)]
[Notices]
[Pages 44021-44023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15859]


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FEDERAL TRADE COMMISSION

[File No. 151 0200]


HeidelbergCement AG and Italcementi S.p.A.; Analysis 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 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 July 20, 2016.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/heidelbergitalcementiconsent/ online or 
on paper, by following the instructions in the Request for Comment part 
of the SUPPLEMENTARY INFORMATION section below. Write 
``HeidelbergCement AG and Italcementi S.p.A.--Consent Agreement; File 
No. 151 0200'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/heidelbergitalcementiconsent/ by 
following the instructions on the web-based form. If you prefer to file 
your comment on paper, write ``HeidelbergCement AG and Italcementi 
S.p.A.--Consent Agreement; File No. 151 0200'' 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 (202-326-2822), 
Bureau of Competition, 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 June 17, 2016), 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 July 20, 2016. 
Write ``HeidelbergCement AG and Italcementi S.p.A.--Consent Agreement; 
File No. 151 0200'' 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/heidelbergitalcementiconsent/ 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 ``HeidelbergCement AG and 
Italcementi S.p.A.--Consent Agreement; File No. 151 0200'' on your 
comment

[[Page 44022]]

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 July 20, 2016. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission's privacy policy, at 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 Italcementi S.p.A. (``Italcementi'') 
by HeidelbergCement AG (``Heidelberg'') (collectively, ``Respondents'' 
or ``the parties''). Heidelberg and Italcementi compete to sell 
portland cement in the United States through their respective 
subsidiaries, Lehigh Hanson, Inc. (``Lehigh'') and Essroc Cement Corp. 
(``Essroc''). Under the terms of the proposed Consent Agreement, the 
Respondents are required to divest Italcementi's cement plant in 
Martinsburg, West Virginia, along with up to ten cement terminals and 
all related assets to a buyer approved by the Commission (the 
``Martinsburg Assets''). In addition to the cement plant, the 
Martinsburg Assets include the following terminals that Essroc has used 
to distribute cement manufactured at Martinsburg: Ashland, Virginia; 
Baltimore, Maryland; Bessemer, Pennsylvania; Chesapeake, Virginia; 
Frederick, Maryland; Leetsdale, Pennsylvania; and Newport News, 
Virginia. Two additional Essroc terminals located in Columbus and 
Middlebranch, Ohio are required to be divested at the option of the 
buyer and subject to the prior approval of the Commission. In addition 
to these nine terminals that historically serve Essroc's Martinsburg 
cement plant, Respondents are required to divest to the buyer of the 
Martinsburg Assets Lehigh's cement terminal in Solvay, New York. 
Finally, the Consent Agreement requires Essroc to divest its cement 
terminal in Indianapolis, Indiana to Cemex, Inc. (``Cemex'').
    The Consent Agreement has been placed on the public record for 
thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the Consent 
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 Share Purchase Agreement dated July 28, 2015, 
Heidelberg proposes to acquire 100% of Italcementi's voting shares in a 
two-step transaction. First, Heidelberg has agreed to acquire 
approximately 45% of Italcementi voting securities held by 
Italmobiliare S.p.A. The aggregate consideration for these shares 
totals approximately $1.9 billion. Following the closing of the Share 
Purchase, Heidelberg will launch a mandatory public cash tender offer 
for the remaining outstanding shares of Italcementi, for an expected 
purchase price of approximately $2.3 billion. The total value of 
Italcementi shares to be acquired is thus approximately $4.2 billion.
    The Commission's Complaint alleges that the proposed transaction, 
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. The proposed Consent Agreement will remedy the 
alleged violations by preserving the competition that would otherwise 
be eliminated by the proposed acquisition.

The Parties

    Headquartered in Germany, Heidelberg is the second-largest global 
producer of cement, ready-mix concrete, and aggregates. It operates 
eighty-five cement plants in more than forty countries around the 
globe. Heidelberg operates as Lehigh in the United States, where it has 
twelve cement plants, one slag cement grinding facility, two cement-
grinding facilities, and thirty-nine cement terminals.
    Italcementi is an Italian public corporation that operates in the 
United States through its subsidiary, Essroc. Worldwide, Italcementi is 
the fourth-largest producer of cement. Essroc operates six cement 
plants and twenty-one cement terminals in North America.

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.
    The primary purchasers of portland cement are ready-mix concrete 
firms and producers of concrete products. These customers usually pick 
up portland cement from a cement company's plant or terminal in trucks. 
Because portland cement is a heavy and relatively cheap commodity, 
transportation costs limit the distance customers can economically 
travel to pick up cement. 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) Baltimore-Washington and surrounding areas; (2) Richmond, VA and 
surrounding areas; (3) Virginia Beach-Norfolk-Newport News and 
surrounding areas (i.e., Hampton Roads); (4) Syracuse, NY metropolitan 
and surrounding areas; and (5) Indianapolis and surrounding areas. Each 
of the relevant markets is highly concentrated, and the merger would 
reduce the number of competitively significant suppliers from three to 
two in each of the markets.

Entry

    Entry into the relevant portland 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. It is costly and time consuming to enter a new geographic 
market. Constructing a new

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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 build; even 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 
acquire a suitable location, obtain the necessary permits, and complete 
construction of a competitive terminal in the relevant markets. 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 harm to 
competition in each of the relevant portland cement markets. Those 
markets are already highly concentrated. By reducing the number of 
significant competitors, the merger would result in an effective 
duopoly in each relevant market. As explained below, the evidence shows 
that absent the required divestitures, the merger would likely both 
produce unilateral and coordinated effects in the relevant markets.
    For many customers in the relevant markets, the parties are the two 
most proximate suppliers, and other rival cement suppliers are more 
distant and thus have higher shipping costs. The merger would likely 
force these customers to pay higher prices by eliminating their ability 
to play one party off against the other in individual negotiations to 
obtain better cement prices. After the acquisition, the merged party 
could effectively target customers for whom the merged parties are the 
nearest competitors with price increases. The merged party could also 
target customers that prefer to buy cement from multiple sources to 
protect against supply disruptions with price increases because the 
merger would leave such customers with only two significant suppliers.
    The proposed transaction is also likely to enhance the likelihood 
of coordinated interaction by reducing the number of significant 
suppliers in relevant markets that are already vulnerable to 
coordination. The relevant markets are vulnerable because they are 
highly concentrated; cement is a homogenous product; and sales are 
small, frequent, and usually not made pursuant to long-term contracts. 
The markets also exhibit a high degree of transparency: competitors are 
commonly aware of each other's production capacities, costs, sales 
volumes, prices, and customers. The evidence indicates that the merging 
firms already closely monitor competitors' cement pricing and sales, 
which facilitates coordination.

The Consent Agreement

    The proposed Consent Agreement eliminates the competitive concerns 
raised by Heidelberg's proposed acquisition of Italcementi by requiring 
the divestiture of one party's cement operations in each of the 
relevant markets. Italcementi is required to divest a cement plant in 
Martinsburg, West Virginia, including its quarry and all other related 
assets, together with up to ten cement distribution terminals in 
Maryland, Virginia, Pennsylvania, and Ohio, to a Commission-approved 
buyer or buyers, at no minimum price, within 120 days of closing of the 
proposed transaction. Furthermore, Heidelberg is required to divest its 
distribution terminal in Solvay, New York, and all related assets to 
the Commission-approved buyer of the Martinsburg Assets, in order to 
remedy the competitive effects of the proposed acquisition in the 
Syracuse market. Finally, Essroc must divest its cement distribution 
terminal in Indianapolis and all related assets to Cemex within ten 
days of the closing of the proposed transaction to remedy the 
competitive effects of the proposed acquisition in the Indianapolis 
market.
    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 ninety 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.
    The Consent Agreement also contains an Order to Maintain Assets to 
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 Heidelberg and 
Italcementi 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.
Donald S. Clark,
Secretary.
[FR Doc. 2016-15859 Filed 7-5-16; 8:45 am]
 BILLING CODE 6750-01-P