[Federal Register Volume 83, Number 87 (Friday, May 4, 2018)]
[Notices]
[Pages 19822-19836]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09458]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Martin Marietta Materials, Inc. et al.; 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 of America v. Martin Marietta Materials, Inc. et al., Civil
Action No. 1:18-cv-00973. On April 25, 2018, the United States filed a
Complaint alleging that Martin Marietta Materials, Inc.'s proposed
acquisition of Panadero Corp. and Panadero Aggregates Holdings, LLC,
including subsidiary Bluegrass Materials Company, LLC, would violate
Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed Final
Judgment, filed at the same time as the Complaint, requires that
Defendants divest the lease to Martin Marietta's Forsyth Quarry,
located in Suwanee, Georgia, and Bluegrass's Beaver Creek quarry,
located
[[Page 19823]]
in Hagerstown, Maryland, and related assets.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://www.justice.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 Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Maribeth Petrizzi,
Chief, Defense, Industrials, and Aerospace Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC
20530 (telephone: (202) 307-0924).
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, United States Department of Justice,
Antitrust Division, 450 Fifth Street, NW, Suite 8700, Washington, DC
20530 and State of Maryland, Attorney General's Office, 200 St. Paul
Place, 19th Floor, Baltimore, Maryland 21202, Plaintiffs, v. Martin
Marietta Materials, Inc., 2710 Wycliff Road, Raleigh, North Carolina
27607; LG Panadero, L.P., 630 Fifth Avenue, 30th Floor, New York,
New York 10111; Panadero Corp., 200 W. Forsyth Street, 12th Floor,
Jacksonville, Florida 32202; Panadero Aggregates Holdings, LLC, 200
W. Forsyth Street, 12th Floor, Jacksonville, Florida 32202; and
Bluegrass Materials Company, LLC, 200 W. Forsyth Street, 12th Floor,
Jacksonville, Florida 32202, Defendants.
Civil Action No.: 1:18-cv-00973
Judge: Randolph Moss
COMPLAINT
Plaintiffs, the United States of America (``United States''),
acting under the direction of the Attorney General of the United
States, and the State of Maryland, acting by and through the Attorney
General of Maryland, bring this civil antitrust action against
Defendants to enjoin Martin Marietta Materials, Inc.'s (``Martin
Marietta'') proposed acquisition of Bluegrass Materials Company, LLC
(``Bluegrass''). Plaintiffs allege as follows:
I. INTRODUCTION
1. On June 26, 2017, Martin Marietta and Bluegrass announced a
definitive agreement under which Martin Marietta would acquire
Bluegrass for $1.625 billion. The merger would expand the reach of one
of the largest aggregate producers in the United States and create a
combined firm with annual total revenues of approximately $4 billion.
2. Aggregate is a key input in asphalt and ready mix concrete and
is used to build roads, highways, bridges, and other construction
projects. The proposed acquisition would eliminate head-to-head
competition between Martin Marietta and Bluegrass in supplying
aggregate to customers in and immediately around Forsyth and north
Fulton County, Georgia, and in and immediately around Washington
County, Maryland. For a significant number of customers in these areas,
Martin Marietta and Bluegrass are two of only three competitive sources
of aggregate qualified by the respective states' Departments of
Transportation (``DOT''). Elimination of competition between Martin
Marietta and Bluegrass in these areas likely would give Martin Marietta
the ability to raise prices or decrease the quality of service provided
to these customers.
3. As a result, Martin Marietta's proposed acquisition of Bluegrass
likely would substantially lessen competition for DOT-qualified
aggregate in and immediately around Forsyth and north Fulton County,
Georgia, and in and immediately around Washington County, Maryland, in
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
II. THE PARTIES AND THE PROPOSED TRANSACTION
4. Defendant Martin Marietta is a North Carolina corporation with
its headquarters in Raleigh, North Carolina. Martin Marietta is a
leading supplier of aggregate and heavy building materials in the
United States, with operations in 26 states. In 2017, Martin Marietta
had net sales of $3.9 billion.
5. Defendant Bluegrass is a Delaware limited liability company with
its headquarters in Jacksonville, Florida. Bluegrass operates 17 rock
quarries, one sand plant, and two concrete manufacturing plants across
Kentucky, Tennessee, South Carolina, Georgia, Pennsylvania, and
Maryland.
6. Defendant Panadero Aggregates Holdings, LLC (``Panadero
Aggregates'') is a Delaware limited liability company with its
headquarters in Jacksonville, Florida. Panadero Aggregates was formed
to acquire, develop, and operate aggregate and other construction
materials businesses. Panadero Aggregates is the owner of Bluegrass.
7. Defendant Panadero Corp. (``Panadero'') is a Delaware
corporation with its headquarters in Jacksonville, Florida. Panadero is
a wholly-owned subsidiary of LG Panadero and is the majority owner of
Panadero Aggregates. Panadero, which reported consolidated net sales of
$199.5 million in 2016, was formed to acquire, develop, and operate
aggregate and other construction materials businesses.
8. Defendant LG Panadero, L.P. (``LG Panadero'') is a Delaware
limited partnership headquartered in New York, New York. LG Panadero is
the owner of Panadero.
9. Pursuant to the Securities Purchase Agreement dated June 23,
2017, Martin Marietta would acquire Panadero and Panadero Aggregates,
including Bluegrass, from LG Panadero for $1.625 billion.
III. JURISDICTION AND VENUE
10. The United States brings this action pursuant to Section 15 of
the Clayton Act, 15 U.S.C. Sec. Sec. 4 and 25, as amended, to prevent
and restrain Defendants from violating Section 7 of the Clayton Act, 15
U.S.C. Sec. 18.
11. The State of Maryland brings this action under Section 16 of
the Clayton Act, 15 U.S.C. Sec. 26, to prevent and restrain Defendants
from violating Section 7 of the Clayton Act, as amended, 15 U.S.C.
Sec. 18. The State of Maryland, by and through the Attorney General of
Maryland, brings this action as parens patriae on behalf of the
citizens, general welfare, and the general economy of the State of
Maryland.
12. Defendants produce and sell aggregate in the flow of interstate
commerce. Defendants' activity in the production and sale of aggregate
substantially affects interstate commerce. The Court has subject matter
jurisdiction over this action pursuant to Section 15 of the Clayton
Act, 15 U.S.C. Sec. 25, and 28 U.S.C. Sec. Sec. 1331, 1337(a), and
1345.
13. Defendants have consented to venue and personal jurisdiction in
this judicial district. Venue is therefore proper in this district
under Section 12 of the Clayton Act, 15 U.S.C. Sec. 22, and 28 U.S.C.
Sec. 1391(c).
IV. TRADE AND COMMERCE
A. Aggregate Is an Essential Input for Many Road and Construction
Projects
14. Aggregate is a category of material used for road and
construction projects.
[[Page 19824]]
Produced in quarries, mines, and gravel pits, aggregate is
predominantly limestone, granite, or other dark-colored igneous rock.
Different types and sizes of rock are needed to meet different
specifications for use in asphalt concrete, ready mix concrete,
industrial processes, and other products. Asphalt concrete consists of
approximately 95 percent aggregate, and ready mix concrete is made of
up of approximately 75 percent aggregate. Aggregate thus is an integral
input for road and other construction projects.
15. For each construction project, a customer establishes
specifications that must be met for each application for which
aggregate is used. For example, state DOTs, including the Georgia and
Maryland DOTs, set specifications for aggregate used to produce asphalt
concrete, ready mix concrete, and road base for state DOT projects.
State DOTs specify characteristics such as hardness, durability, size,
polish value, and a variety of other characteristics. The
specifications are intended to ensure the longevity and safety of the
roads, bridges and other projects for which aggregate is used.
16. State DOTs qualify quarries according to the end uses of the
aggregate, to ensure that the stone used in an application meets the
necessary specifications. In addition, state DOTs test the aggregate at
various points: at the quarry before it is shipped; when the aggregate
is sent to the purchaser to produce an end product such as asphalt
concrete; and after the end product has been produced. Many cities,
counties, commercial entities, and individuals in Georgia and Maryland
have adopted their respective state DOT-qualified aggregate
specifications when building roads, bridges, and other construction
projects in order to optimize the longevity of their projects.
B. Transportation Is a Significant Component of the Cost of Aggregate
17. Aggregate is priced by the ton and is a relatively inexpensive
product, with prices typically ranging from approximately five to
twenty dollars per ton. A variety of approaches are used to price
aggregate. For small volumes, aggregate often is sold according to a
posted price. For large volumes, customers typically either negotiate
prices for a particular job or negotiate yearly requirements contracts,
seeking bids from multiple aggregate suppliers.
18. In areas where aggregate is locally available, it is
transported from quarries to customers by truck. Truck transportation
is expensive, and transportation costs can become a significant portion
of the total cost of aggregate.
C. Relevant Markets
1. State DOT-Qualified Aggregate Is a Relevant Product Market
19. Within the broad category of aggregate, different types and
sizes of stone are used for different purposes. For instance, aggregate
qualified for use as road base may not be the same size and type of
rock as aggregate qualified for use in asphalt concrete. Accordingly,
aggregate types and sizes are not interchangeable with one another and
demand for each is separate. Thus, each type and size of aggregate
likely is a separate line of commerce and a relevant product market
within the meaning of Section 7 of the Clayton Act.
20. State DOTs qualify aggregate for use in road construction and
other projects in that particular state. DOT-qualified aggregate meets
particular standards for size, physical composition, functional
characteristics, end uses, and availability. A customer whose job
specifies aggregate qualified by a particular state's DOT cannot
substitute aggregate or other materials that have not been so
qualified.
21. Although numerous narrower product markets exist, the
competitive dynamic for most types of state DOT-qualified aggregate is
nearly identical, as a quarry can typically produce all, or nearly all,
types of DOT-qualified aggregate for a particular state. Therefore,
most types of DOT-qualified aggregate for a particular state may be
combined for analytical convenience into a single relevant product
market for the purpose of evaluating the competitive impact of the
acquisition.
22. A small but significant increase in the price of state DOT-
qualified aggregate would not cause a sufficient number of customers to
substitute to another type of aggregate or another material so as to
make such a price increase unprofitable. Accordingly, the production
and sale of Georgia DOT-Qualified Aggregate and Maryland DOT-Qualified
Aggregate (hereinafter ``DOT-Qualified Aggregate'') are distinct lines
of commerce and relevant product markets within the meaning of Section
7 of the Clayton Act.
2. The Relevant Geographic Markets Are Local
23. Aggregate is a relatively low-cost product that is bulky and
heavy. As a result, the cost of transporting aggregate is high compared
to the value of the product.
24. When customers seek price quotes or bids, the distance from the
quarry to the project site or plant location will have a considerable
impact on the selection of a supplier, due to the high cost of
transporting aggregate relative to the low value of the product.
Suppliers know the importance of transportation costs to a potential
customer's selection of an aggregate supplier; they know the locations
of their competitors, and they often will factor the cost of
transportation from other suppliers into the price or bid that they
submit.
25. The primary factor that determines the area a supplier will
serve is the location of competing quarries. When quoting prices or
submitting bids, aggregate suppliers will account for the location of
the project site or plant, the cost of transporting aggregate to the
project site or plant, and the locations of the competitors that might
bid on a job. Therefore, depending on the location of the project site
or plant, suppliers are able to adjust their bids to account for the
distance other competitors are from a job.
a. The Forsyth and North Fulton County Area Is a Relevant Geographic
Market
26. Martin Marietta operates the Forsyth quarry in Suwanee,
Georgia, and Bluegrass owns and operates the Cumming quarry in Cumming,
Georgia. Customers in and immediately around Forsyth County and Fulton
County north of the Chattahoochee River (hereinafter referred to as the
``Forsyth and North Fulton County Area'') are served by both the
Forsyth and Cumming quarries. Customers with plants or jobs in the
Forsyth and North Fulton County Area may, depending on the location of
their plant or job sites, economically procure Georgia DOT-Qualified
Aggregate from the Forsyth and Cumming quarries, or from quarries
operated by a third firm located in Norcross, Buford, and Ball Ground,
Georgia. Other more distant quarries cannot compete successfully on a
regular basis for a significant number of customers with plants or jobs
in the Forsyth and North Fulton County Area because they are too far
away and transportation costs are too great.
27. Customers likely would be unable to switch to suppliers outside
the Forsyth and North Fulton County Area to defeat a small but
significant price increase. Accordingly, the Forsyth and North Fulton
County Area is a relevant geographic market for the production and sale
of Georgia DOT-Qualified Aggregate within the meaning of Section 7 of
the Clayton Act.
[[Page 19825]]
b. The Washington County Area Is a Relevant Geographic Market
28. Martin Marietta owns and operates the Boonsboro quarry in
Boonsboro, Maryland, and the Pinesburg quarry in Williamsport,
Maryland, and Bluegrass owns and operates the Beaver Creek quarry in
Hagerstown, Maryland. The Boonsboro, Pinesburg, and Beaver Creek
quarries each serve customers in and immediately around Washington
County, Maryland (hereinafter referred to as the ``Washington County
Area''). Customers with plants or jobs in the Washington County Area
may, depending on the location of their plant or job site, economically
procure Maryland DOT-Qualified Aggregate from the Boonsboro, Pinesburg,
or Beaver Creek quarries, or from a quarry operated by a third firm
located in nearby Chambersburg, Pennsylvania. Other more distant
quarries cannot compete successfully on a regular basis for customers
with plants or jobs in the Washington County Area because they are too
far away and transportation costs are too great.
29. Customers likely would be unable to switch to more distant
suppliers outside of the Washington County Area to defeat a small but
significant price increase. Accordingly, the Washington County Area is
a relevant geographic market for the production and sale of Maryland
DOT-Qualified Aggregate within the meaning of Section 7 of the Clayton
Act.
D. Martin Marietta's Acquisition of Bluegrass Is Anticompetitive
30. Vigorous competition between Martin Marietta and Bluegrass on
price and customer service in the production and sale of DOT-Qualified
Aggregate has benefitted customers in the Forsyth and North Fulton
County Area and in the Washington County Area.
31. In each of these areas, the competitors that constrain Martin
Marietta and Bluegrass from raising prices on DOT-Qualified Aggregate
are limited to those who are qualified by the Georgia and Maryland DOTs
to supply aggregate and can economically transport the aggregate into
these areas. As alleged above, for a significant number of customers in
each area, there is only one other firm that produces DOT-Qualified
Aggregate and can economically serve customers at their plants or job
sites. The proposed acquisition will eliminate the competition between
Martin Marietta and Bluegrass and reduce from three to two the number
of suppliers of DOT-Qualified Aggregate for a significant number of
customers in each area.
32. For a significant number of customers in each area, a combined
Martin Marietta and Bluegrass will have the ability to increase prices
for DOT-Qualified Aggregate and decrease service by limiting
availability or delivery options. DOT-Qualified Aggregate producers
know the distance from their own quarries and their competitors'
quarries to a customer's job site. Generally, because of transportation
costs, the farther a supplier's closest competitor is from a job site,
the higher the price and margin that supplier can expect for that
project. Post-acquisition, in instances where Martin Marietta and
Bluegrass quarries are the closest locations to a customer's project,
the combined firm, using the knowledge of its competitors' locations,
will be able to charge such customers higher prices or decrease the
level of customer service.
33. The response of other suppliers of DOT-Qualified Aggregate will
not be sufficient to constrain a unilateral exercise of market power by
Martin Marietta after the acquisition.
34. The proposed acquisition will therefore substantially lessen
competition in the market for DOT-Qualified Aggregate in the Forsyth
and North Fulton County Area and in the Washington County Area and will
likely lead to higher prices and reduced customer service for consumers
of such products, in violation of Section 7 of the Clayton Act.
E. Difficulty of Entry
35. Timely, likely, and sufficient entry in the production and sale
of DOT-Qualified Aggregate in the Forsyth and North Fulton County Area
and in the Washington County Area is unlikely, given the substantial
time and cost required to open a quarry.
36. Quarries are particularly difficult to locate and permit.
First, securing the proper site for a quarry is challenging and time-
consuming. Finding land with the correct rock composition requires
extensive investigation and testing of candidate sites, as well as the
negotiation of necessary land transfers, leases, and/or easements.
Further, the site must be close to customer plants and likely job sites
given the high cost of transporting aggregate.
37. Second, once a suitable location is chosen, obtaining the
necessary permits is difficult and time-consuming. Attempts to open a
new quarry often face fierce public opposition, which can prevent a
quarry from opening altogether or make the process of opening it much
more time-consuming and costly.
38. Third, even after a site is acquired and permitted, the owner
must spend significant time and resources to prepare the land for
quarry operations and purchase and install the necessary equipment.
39. Because of the cost and difficulty of establishing a quarry,
entry will not be timely, likely or sufficient to mitigate the
anticompetitive effects of Martin Marietta's proposed acquisition of
Bluegrass.
V. VIOLATION ALLEGED
40. Martin Marietta's proposed acquisition of Bluegrass likely will
substantially lessen competition in the production and sale of DOT-
Qualified Aggregate in the Forsyth and North Fulton County Area and in
the Washington County Area, in violation of Section 7 of the Clayton
Act, 15 U.S.C. Sec. 18.
41. Unless enjoined, the proposed acquisition likely will have the
following anticompetitive effects, among others:
(a) actual and potential competition between Martin Marietta and
Bluegrass in the production and sale of DOT-Qualified Aggregate in the
Forsyth and North Fulton County Area and in the Washington County Area
will be eliminated; and
(b) prices for DOT-Qualified Aggregate in the Forsyth and North
Fulton County Area and in the Washington County Area likely will
increase and customer service likely will decrease.
VI. REQUESTED RELIEF
42. Plaintiffs request that this Court:
(a) adjudge and decree that Martin Marietta's acquisition of
Bluegrass would be unlawful and violate Section 7 of the Clayton Act,
15 U.S.C. Sec. 18;
(b) preliminarily and permanently enjoin and restrain the
Defendants and all persons acting on their behalf from consummating the
proposed acquisition of Bluegrass by Martin Marietta, or from entering
into or carrying out any other contract, agreement, plan, or
understanding, the effect of which would be to combine Martin Marietta
with Bluegrass;
(c) award Plaintiffs their costs for this action; and
(d) award Plaintiffs such other and further relief as the Court
deems just and proper.
Dated: April 25, 2018
For Plaintiff United States of America
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Makan Delrahim (D.C. Bar #457795)
[[Page 19826]]
Assistant Attorney General
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Andrew C. Finch (D.C. Bar #494992)
Principal Deputy Assistant Attorney General
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Bernard A. Nigro, Jr. (D.C. Bar #412357)
Deputy Assistant Attorney General
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Patricia A. Brink
Director of Civil Enforcement
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Maribeth Petrizzi (D.C. Bar #435204)
Chief Defense, Industrials, and Aerospace Section
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Stephanie A. Fleming
Assistant Chief Defense, Industrials, and Aerospace Section
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David E. Altschuler (D.C. Bar #983023)
Assistant Chief Defense, Industrials, and Aerospace Section
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Kerrie J. Freeborn* (D.C. Bar #503143)
James K. Foster
Stephen A. Harris
John M. Lynch (D.C. Bar #418313)
Jay D. Owen
Angela Y. Ting (D.C. Bar #449576)
Attorneys, United States Department of Justice, Antitrust Division,
Defense, Industrials, and Aerospace Section, 450 Fifth Street NW,
Suite 8700, Washington, D.C. 20530, Tel.: (202) 598-2300; Fax: (202)
514-9033; Email: [email protected], *Attorney of Record.
For Plaintiff State of Maryland
Brian E. Frosh
Maryland Attorney General
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John R. Tennis
Assistant Attorney General
Chief, Antitrust Division
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Gary Honick
Senior Assistant Attorney General, 200 St. Paul Place, 19th Floor,
Baltimore, MD 21202, Tel: (410) 576-6470; Fax: (410) 576-7830;
Email: [email protected]; Email: [email protected].
United States District Court for the District of Columbia
United States of America and State of Maryland, Plaintiffs, v.
Martin Marietta Materials, Inc., LG Panadero, L.P., Panadero Corp.,
Panadero Aggregates Holdings, LLC and Bluegrass Materials Company,
LLC, Defendants.
Civil Action No.: 1:18-cv-00973
Judge: Randolph Moss
PROPOSED FINAL JUDGMENT
WHEREAS, Plaintiffs, United States of America and the State of
Maryland, filed their Complaint on April 25, 2018, Plaintiffs and
Defendants, Martin Marietta Materials, Inc., LG Panadero, L.P.,
Panadero Corp, Panadero Aggregates Holdings, LLC, and Bluegrass
Materials Company, LLC, 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, Defendants agree 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 Defendants to assure
that competition is not substantially lessened;
AND WHEREAS, Plaintiffs require Defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
AND WHEREAS, Defendants have represented to Plaintiffs that the
divestitures required below can and will be made and that Defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture 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 Defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. Sec. 18).
II. DEFINITIONS
As used in this Final Judgment:
A. ``Acquirer'' or ``Acquirers'' means the entity or entities to
whom Defendants divest the Divestiture Assets.
B. ``Acquirer of the Georgia Divestiture Assets'' means Midsouth
Paving, Inc., or another entity to which Defendants divest the Georgia
Divestiture Assets.
C. ``Acquirer of the Maryland Divestiture Assets'' means the entity
to which Defendants divest the Maryland Divestiture Assets.
D. ``Closing'' means the consummation of the divestiture of all the
Divestiture Assets pursuant to either Section IV or Section V of this
Final Judgment.
E. ``Completion of the Transaction'' means the closing of Martin
Marietta's acquisition of Panadero Corp. and Panadero Aggregates
Holdings, LLC, including Bluegrass Materials Company, LLC.
F. ``Martin Marietta'' means Defendant Martin Marietta Materials,
Inc., a North Carolina corporation with its headquarters in Raleigh,
North Carolina, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships, and joint ventures, and
their directors, officers, managers, agents, and employees.
G. ``LG Panadero'' means Defendant LG Panadero, L.P., a Delaware
limited partnership with its headquarters in New York, New York, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
H. ``Panadero'' means Defendant Panadero Corp., a Delaware
corporation with its headquarters in Jacksonville, Florida, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships, and joint ventures, and their directors,
officers, managers, agents, and employees.
I. ``Panadero Aggregates'' means Defendant Panadero Aggregates
Holdings, LLC, a Delaware limited liability company with its
headquarters in Jacksonville, Florida, its successors and assigns, and
its subsidiaries, divisions, groups, affiliates, partnerships, and
joint ventures, and their directors, officers, managers, agents, and
employees.
J. ``Bluegrass'' means Defendant Bluegrass Materials Company, LLC,
a Delaware limited liability company with its headquarters in
Jacksonville, Florida, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships, and joint
ventures, and their directors, officers, managers, agents, and
employees.
K. ``Bluegrass Entities'' means LG Panadero, Panadero, Panadero
Aggregates, and Bluegrass.
L. ``Midsouth'' means Midsouth Paving, Inc., a Delaware corporation
with its headquarters in Birmingham, Alabama, its successors and
assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures, and their directors, officers,
managers, agents, and employees. Midsouth is a subsidiary of CRH plc
and CRH Americas Materials, Inc.
M. ``Forsyth Quarry'' means Martin Marietta's quarry located at
3561 Peachtree Pkwy., Suwanee, Georgia 30024.
N. ``Beaver Creek Quarry'' means Bluegrass's quarry located at
10101 Mapleville Rd., Hagerstown, Maryland 21740.
O. ``Georgia Divestiture Assets'' means:
[[Page 19827]]
1. Martin Marietta's lease to the Forsyth Quarry;
2. all tangible assets used at the Forsyth Quarry, including, but
not limited to, all manufacturing equipment, tooling, and fixed assets,
mining equipment, aggregate reserves, personal property, inventory,
office furniture, materials, supplies, on- or off-site warehouses or
storage facilities, and all other tangible property and assets used in
connection with the Forsyth Quarry; all licenses, permits, and
authorizations issued by any governmental organization relating to the
Forsyth Quarry; all contracts, agreements, teaming arrangements, leases
(including renewal rights), commitments, certifications and
understandings, including sales agreements and supply agreements
relating to the Forsyth Quarry, except for regional or national service
agreements; all customer lists, contracts, accounts, and credit records
relating to the Forsyth Quarry; all repair and performance records and
all other records relating to the Forsyth Quarry; and
3. all intangible assets used in the production and sale of
aggregate at the Forsyth Quarry, including but not limited to, all
contractual rights, patents, licenses and sublicenses, intellectual
property, copyrights, trademarks, trade names, service marks, service
names (provided, however, that such marks and names shall not include
the term ``Martin Marietta''), technical information, computer software
(including dispatch software and management information systems) and
related documentation (provided, however, that the Acquirer may elect
to acquire extracted data relating to the Forsyth Quarry without the
accompanying software), 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 Martin
Marietta provides to its own employees, customers, suppliers, agents,
or licensees, and all data (including aggregate reserve testing
information) concerning the Forsyth Quarry.
P. ``Maryland Divestiture Assets'' means:
1. the Beaver Creek Quarry;
2. all tangible assets used at the Beaver Creek Quarry, including,
but not limited to, all manufacturing equipment, tooling, and fixed
assets, mining equipment, aggregate reserves, personal property,
inventory, office furniture, materials, supplies, on- or off-site
warehouses or storage facilities, and all other tangible property and
assets used in connection with the Beaver Creek Quarry; all licenses,
permits, and authorizations issued by any governmental organization
relating to the Beaver Creek Quarry; all contracts, agreements, teaming
arrangements, leases (including renewal rights), commitments,
certifications and understandings, including sales agreements and
supply agreements, except for regional or national service agreements;
all customer lists, contracts, accounts, and credit records relating to
the Beaver Creek Quarry; all repair and performance records and all
other records relating to the Beaver Creek Quarry; and
3. all intangible assets used in the production and sale of
aggregate at the Beaver Creek Quarry, including but not limited to, all
contractual rights, patents, licenses and sublicenses, intellectual
property, copyrights, trademarks, trade names, service marks, service
names (provided, however, that such marks and names shall not include
the word ``Bluegrass''), technical information, computer software
(including dispatch software and management information systems) and
related documentation (provided, however, that the Acquirer may elect
to acquire extracted data relating to the Beaver Creek Quarry without
the accompanying software), 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 Bluegrass provides to its own employees,
customers, suppliers, agents, or licensees, and all data (including
aggregate reserve testing information) concerning the Beaver Creek
Quarry.
Q. ``Divestiture Assets'' means the Georgia Divestiture Assets and
the Maryland Divestiture Assets.
III. APPLICABILITY
A. This Final Judgment applies to Martin Marietta and the Bluegrass
Entities, as defined above, and all other persons in active concert or
participation with any of them who receive actual notice of this Final
Judgment by personal service or otherwise.
B. If, prior to complying with Section IV and Section V of this
Final Judgment, Defendants sell or otherwise dispose of all or
substantially all of their assets or of lesser business units that
include the Divestiture Assets, they shall require the purchaser to be
bound by the provisions of this Final Judgment. Defendants need not
obtain such an agreement from the Acquirers of the assets divested
pursuant to this Final Judgment.
IV. DIVESTITURES
A. Defendants are ordered and directed, within twenty-one (21)
calendar days after the Court's signing of the Hold Separate
Stipulation and Order in this matter, to divest the Georgia Divestiture
Assets in a manner consistent with this Final Judgment to Midsouth or
another Acquirer of the Georgia Divestiture Assets acceptable to the
United States, in its sole discretion. The United States, in its sole
discretion, may agree to one or more extensions of this time period not
to exceed sixty (60) calendar days in total, and shall notify the Court
in such circumstances. Defendants agree to use their best efforts to
divest the Georgia Divestiture Assets as expeditiously as possible.
B. Defendants are ordered and directed, within ninety (90) calendar
days after the filing of the Complaint in this matter, or five (5)
calendar days after notice of the entry of this Final Judgment by the
Court, whichever is later, to divest the Maryland Divestiture Assets in
a manner consistent with this Final Judgment to an Acquirer of the
Maryland Divestiture Assets acceptable to the United States, in its
sole discretion, after consultation with the State of Maryland. The
United States, in its sole discretion, may agree to one or more
extensions of this time period not to exceed sixty (60) calendar days
in total, and shall notify the Court in such circumstances. Defendants
agree to use their best efforts to divest the Maryland Divestiture
Assets as expeditiously as possible.
C. In the event Defendants are attempting to divest the Georgia
Divestiture Assets to an Acquirer other than Midsouth, and in
accomplishing the divestiture of the Maryland Divestiture Assets
ordered by this Final Judgment, Defendants promptly shall make known,
by usual and customary means, the availability of the Divestiture
Assets. Defendants shall inform any person making an inquiry regarding
a possible purchase of the Divestiture Assets that they are being
divested pursuant to this Final Judgment and provide that person with a
copy of this Final Judgment. Defendants shall offer to furnish to all
prospective Acquirers, subject to customary confidentiality assurances,
all information and documents relating to the Divestiture
[[Page 19828]]
Assets customarily provided in a due diligence process except such
information or documents subject to the attorney-client privilege or
work-product doctrine. Defendants shall make available such information
to the United States at the same time that such information is made
available to any other person.
D. Defendants shall provide the Acquirer(s) and the United States
information relating to the personnel involved in the operation of the
Divestiture Assets to enable the Acquirer(s) to make offers of
employment. Defendants will not interfere with any negotiations by the
Acquirer(s) to employ any Defendant employee whose primary
responsibility is the operation of the Divestiture Assets.
E. Defendants shall permit prospective Acquirers of the Divestiture
Assets to have reasonable access to personnel and to make inspections
of the physical facilities of 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. Defendants shall warrant to the Acquirer(s) that each
Divestiture Asset will be operational on the date of sale.
G. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
H. Defendants shall warrant to the Acquirer(s) that (1) there are
no material defects in the environmental, zoning, or other permits
pertaining to the operation of each Divestiture Asset, and (2)
following the sale of the Divestiture Assets, Defendants will not
undertake, directly or indirectly, any challenges to the environmental,
zoning, or other permits relating to the operation of the Divestiture
Assets.
I. Unless the United States otherwise consents in writing, the
divestitures pursuant to Section IV, or by Divestiture 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, after
consultation with the State of Maryland with respect to the Maryland
Divestiture Assets, that the Divestiture Assets can and will be used by
the Acquirer(s) as part of a viable, ongoing business in the production
and sale of Georgia and Maryland Department of Transportation-qualified
aggregate (``State DOT-Qualified Aggregate''). The divestitures,
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, after consultation with the State of Maryland with respect to
the Maryland Divestiture Assets, has the intent and capability
(including the necessary managerial, operational, technical, and
financial capability) of competing effectively in the business of
producing and selling State DOT-Qualified Aggregate; and
(2) shall be accomplished so as to satisfy the United States, in its
sole discretion, after consultation with the State of Maryland with
respect to the Maryland Divestiture Assets, that none of the terms of
any agreement between an Acquirer and Defendants give Defendants the
ability unreasonably to raise the Acquirer's or Acquirers' costs, to
lower the Acquirer's or Acquirers' efficiency, or otherwise to
interfere in the ability of the Acquirer to compete effectively.
V. APPOINTMENT OF DIVESTITURE TRUSTEE
A. If Defendants have not divested all of the Divestiture Assets
within the time periods specified in Paragraphs IV(A) and IV(B),
Defendants shall notify the United States, and the State of Maryland
with respect to the Maryland Divestiture Assets, of that fact in
writing. Upon application of the United States, the Court shall appoint
a Divestiture Trustee selected by the United States and approved by the
Court to effect the divestiture of the remaining Divestiture Assets.
B. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the remaining Divestiture Assets. The Divestiture Trustee shall have
the power and authority to accomplish the divestitures to an Acquirer
acceptable to the United States, after consultation with the State of
Maryland with respect to the Maryland Divestiture Assets, at such price
and on such terms as are then obtainable upon reasonable effort by the
Divestiture 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 Paragraph V(D) of this Final
Judgment, the Divestiture Trustee may hire at the cost and expense of
Defendants any investment bankers, attorneys, or other agents, who
shall be solely accountable to the Divestiture Trustee, reasonably
necessary in the Divestiture Trustee's judgment to assist in the
divestitures. Any such investment bankers, attorneys, or other agents
shall serve on such terms and conditions as the United States approves,
including confidentiality requirements and conflict of interest
certifications.
C. Defendants shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objections by Defendants must be conveyed in writing to the United
States and the Divestiture Trustee within ten (10) calendar days after
the Divestiture Trustee has provided the notice required under Section
VI.
D. The Divestiture Trustee shall serve at the cost and expense of
Defendants pursuant to a written agreement, on such terms and
conditions as the United States approves, including confidentiality
requirements and conflict of interest certifications. The Divestiture
Trustee shall account for all monies derived from the sale of the
assets sold by the Divestiture Trustee and all costs and expenses so
incurred. After approval by the Court of the Divestiture Trustee's
accounting, including fees for its services yet unpaid and those of any
professionals and agents retained by the Divestiture Trustee, all
remaining money shall be paid to Defendants and the trust shall then be
terminated. The compensation of the Divestiture Trustee and any
professionals and agents retained by the Divestiture Trustee shall be
reasonable in light of the value of the Divestiture Assets and based on
a fee arrangement providing the Divestiture Trustee with an incentive
based on the price and terms of the divestitures and the speed with
which it is accomplished, but timeliness is paramount. If the
Divestiture Trustee and Defendants are unable to reach agreement on the
Divestiture Trustee's or any agents' or consultants' compensation or
other terms and conditions of engagement within fourteen (14) calendar
days of appointment of the Divestiture Trustee, the United States may,
in its sole discretion, take appropriate action, including making a
recommendation to the Court. The Divestiture Trustee shall, within
three (3) business days of hiring any other professionals or agents,
provide written notice of such hiring and the rate of compensation to
Defendants and the United States.
E. Defendants shall use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestitures. The
Divestiture Trustee and any consultants, accountants, attorneys, and
other agents retained by the Divestiture Trustee shall have full
[[Page 19829]]
and complete access to the personnel, books, records, and facilities of
the business to be divested, and Defendants shall develop financial and
other information relevant to such business as the Divestiture Trustee
may reasonably request, subject to reasonable protection for trade
secret or other confidential research, development, or commercial
information or any applicable privileges. Defendants shall take no
action to interfere with or to impede the Divestiture Trustee's
accomplishment of the divestitures.
F. After its appointment, the Divestiture Trustee shall file
monthly reports with the United States and, as appropriate, the Court
setting forth the Divestiture Trustee's efforts to accomplish the
divestitures ordered under this Final Judgment. To the extent such
reports contain information that the Divestiture 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 Divestiture Trustee shall maintain
full records of all efforts made to divest the Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the divestitures
ordered under this Final Judgment within six months after its
appointment, the Divestiture Trustee shall promptly file with the Court
a report setting forth (1) the Divestiture Trustee's efforts to
accomplish the required divestitures, (2) the reasons, in the
Divestiture Trustee's judgment, why the required divestitures have not
been accomplished, and (3) the Divestiture Trustee's recommendations.
To the extent such report contains information that the Divestiture
Trustee deems confidential, such report shall not be filed in the
public docket of the Court. The Divestiture 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
Divestiture Trustee's appointment by a period requested by the United
States.
H. If the United States determines that the Divestiture Trustee has
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute
Divestiture Trustee.
VI. NOTICE OF PROPOSED DIVESTITURE
A. Within two (2) business days following execution of a definitive
divestiture agreement, Defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestitures required herein,
shall notify the United States, and the State of Maryland with respect
to the Maryland Divestiture Assets, of any proposed divestitures
required by Section IV or Section V of this Final Judgment. If the
Divestiture Trustee is responsible, it shall similarly notify
Defendants. The notice shall set forth the details of the proposed
divestitures 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, after consultation with the
State of Maryland with respect to the Maryland Divestiture Assets, may
request from Defendants, the proposed Acquirer(s), any other third
party, or the Divestiture Trustee, if applicable, additional
information concerning the proposed divestitures, the proposed
Acquirer(s), and any other potential Acquirer. Defendants and the
Divestiture Trustee shall furnish any additional information requested
within fifteen (15) calendar days of the receipt of the 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 Defendants, the
proposed Acquirer(s), any third party, and the Divestiture Trustee,
whichever is later, the United States shall provide written notice to
Defendants and the Divestiture Trustee, if there is one, stating
whether or not it objects to the proposed divestitures. If the United
States provides written notice that it does not object, the
divestitures may be consummated, subject only to Defendants' limited
right to object to the sale under Paragraph V(C) of this Final
Judgment. Absent written notice that the United States does not object
to the proposed Acquirer(s) or upon objection by the United States, the
divestitures proposed under Section IV or Section V shall not be
consummated. Upon objection by Defendants under Paragraph V(C), the
divestitures proposed under Section V shall not be consummated unless
approved by the Court.
VII. FINANCING
Defendants shall not finance all or any part of any purchase made
pursuant to Section IV or Section V of this Final Judgment.
VIII. HOLD SEPARATE
Until the divestitures required by this Final Judgment have been
accomplished, the Bluegrass Entities shall until the Completion of the
Transaction, and Martin Marietta shall until Closing, take all steps
necessary to comply with the Hold Separate Stipulation and Order
entered by this Court. Defendants shall take no action that would
jeopardize the divestitures ordered by this Court.
IX. 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 divestitures have been completed under Section IV or Section V, the
Bluegrass Entities shall until the Completion of the Transaction, and
Martin Marietta shall until Closing, deliver to the United States an
affidavit, which shall describe the fact and manner of Defendants'
compliance with Section IV or Section V of this Final Judgment.
Affidavits provided by Martin Marietta must be signed by its Chief
Financial Officer and General Counsel; each affidavit provided by the
Bluegrass Entities must be signed by the highest ranking officer of
each Defendant included in the Bluegrass Entities; and affidavits
provided by Bluegrass Materials Co., LLC must also be signed by its
CFO. 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 Defendants have taken to solicit buyers for the Divestiture
Assets, and to provide required information to 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 Defendants,
including limitation on
[[Page 19830]]
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 the Bluegrass Entities shall until the Completion of the
Transaction, and Martin Marietta shall until Closing, deliver to the
United States an affidavit that describes in reasonable detail all
actions Defendants have taken and all steps Defendants have implemented
on an ongoing basis to comply with Section VIII of this Final Judgment.
Defendants shall deliver to the United States an affidavit describing
any changes to the efforts and actions outlined in Defendants' earlier
affidavits filed pursuant to this Section within fifteen (15) calendar
days after the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestitures have been completed.
X. COMPLIANCE INSPECTION
A. For the purposes of determining or securing compliance with this
Final Judgment, or of any related orders such as any Hold Separate
Stipulation and Order, 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 Defendants, be
permitted:
(1) access during Defendants' office hours to inspect and copy, or at
the option of the United States, to require Defendants to provide hard
copy or electronic copies of, all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of
Defendants, relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record, Defendants'
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 Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
Defendants 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, or the Maryland Attorney General's Office, 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
Defendants to the United States, Defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and Defendants mark each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United
States shall give Defendants ten (10) calendar days' notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XI. NO REACQUISITION
Defendants may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment.
XII. 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.
XIII. ENFORCEMENT OF FINAL JUDGMENT
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including its right to seek an order
of contempt from this Court. Defendants agree that in any civil
contempt action, any motion to show cause, or any similar action
brought by the United States regarding an alleged violation of this
Final Judgment, the United States may establish a violation of the
decree and the appropriateness of any remedy therefor by a
preponderance of the evidence, and they waive any argument that a
different standard of proof should apply.
B. In any enforcement proceeding in which the Court finds that the
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with such other relief as may be appropriate. In connection
with any successful effort by the United States to enforce this Final
Judgment against a Defendant, whether litigated or resolved prior to
litigation, that Defendant agrees to reimburse the United States for
any attorneys' fees, experts' fees, and costs incurred in connection
with that enforcement effort, including the investigation of the
potential violation.
XIV. EXPIRATION OF FINAL JUDGMENT
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry, except that after
five (5) years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States to the Court and the
Defendants that the divestitures have been completed and that the
continuation of the Final Judgment no longer is necessary or in the
public interest.
XV. 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 responses 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
United States District Court for the District of Columbia
United States of America and State of Maryland, Plaintiffs, v.
Martin Marietta Materials, Inc., LG Panadero, L.P., Panadero Corp.,
Panadero Aggregates Holdings, LLC, and Bluegrass Materials Company,
LLC, Defendants.
Civil Action No.: 1:18-cv-00973
Judge: Randolph Moss
[[Page 19831]]
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 June 26, 2017, Martin Marietta Materials, Inc. (``Martin
Marietta'') and Bluegrass Materials Company, LLC (``Bluegrass'')
announced a definitive agreement under which Martin Marietta would
acquire Bluegrass for approximately $1.625 billion. The United States
and the State of Maryland (``Plaintiffs'') filed a civil antitrust
Complaint on April 25, 2018, seeking to enjoin the proposed
acquisition. The Complaint alleges that the likely effect of the
proposed acquisition would be to substantially lessen competition in
the production and sale of Department of Transportation (``DOT'')-
qualified aggregate in and immediately around Forsyth and north Fulton
County, Georgia and in and immediately around Washington County,
Maryland, in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.
18. This loss of competition likely would result in increased prices
and decreased customer service for customers in those areas.
At the same time the Complaint was filed, Plaintiffs also filed a
Hold Separate Stipulation and Order (``Hold Separate'') and proposed
Final Judgment, which are designed to eliminate the anticompetitive
effects of the acquisition. Under the proposed Final Judgment, which is
explained more fully below, Defendants are required to divest the lease
to Martin Marietta's Forsyth quarry and all of the quarry's assets to
Midsouth Paving, Inc., a subsidiary of CRH, plc and CRH Americas
Materials, Inc., and to divest Bluegrass's Beaver Creek quarry and all
of the quarry's assets to a yet-to-be determined purchaser that must be
approved by the United States (collectively, the ``Divestiture
Assets''). Under the terms of the Hold Separate, Defendants will take
certain steps to ensure that prior to their divestiture the Divestiture
Assets are operated as competitively independent, economically viable
and ongoing business concerns, that they will remain independent and
uninfluenced by the consummation of the acquisition, and that
competition is maintained during the pendency of the ordered
divestitures.
Plaintiffs and Defendants 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. The Defendants and the Proposed Transaction
Defendant Martin Marietta is a North Carolina corporation with its
headquarters in Raleigh, North Carolina. Martin Marietta is a leading
supplier of aggregates and heavy building operations, with operations
in 26 states. In 2017, Martin Marietta had net sales of $3.9 billion.
Defendant Bluegrass is a Delaware limited liability company with
its headquarters in Jacksonville, Florida. Bluegrass operates 17 rock
quarries, one sand plant, and two concrete manufacturing plants across
Kentucky, Tennessee, South Carolina, Georgia, Pennsylvania, and
Maryland.
Defendant Panadero Aggregates Holdings, LLC (``Panadero
Aggregates'') is a Delaware limited liability company with its
headquarters in Jacksonville, Florida. Panadero Aggregates was formed
to acquire, develop, and operate aggregate and other construction
materials businesses, and is the owner of Bluegrass.
Defendant Panadero Corp. (``Panadero'') is a Delaware corporation
with its headquarters in Jacksonville, Florida. Panadero is a wholly-
owned subsidiary of LG Panadero and is the majority owner of Panadero
Aggregates. Panadero, which reported consolidated net sales of $199.5
million in 2016, was formed to acquire, develop, and operate aggregate
and other construction materials businesses.
Defendant LG Panadero, L.P. (``LG Panadero'') is a Delaware limited
partnership headquartered in New York, New York. LG Panadero is the
owner of Panadero.
Pursuant to a Securities Purchase Agreement dated June 23, 2017,
Martin Marietta would acquire Panadero and Panadero Aggregates,
including Bluegrass, from LG Panadero for $1.625 billion. The proposed
transaction, as initially agreed to by Defendants on June 23, 2017,
would lessen competition substantially in the production and sale of
DOT-qualified aggregate in and immediately around Forsyth and north
Fulton County, Georgia and in and immediately around the Washington
County, Maryland Area. This acquisition is the subject of the Complaint
and proposed Final Judgment that Plaintiffs filed today.
B. Industry Overview
Aggregate is a category of material used for road and construction
projects. Produced in quarries, mines, and gravel pits, aggregate is
predominantly limestone, granite, or other dark-colored igneous rock.
Different types and sizes of rock are needed to meet different
specifications for use in asphalt concrete, ready mix concrete,
industrial processes, and other products. Asphalt concrete consists of
approximately 95 percent aggregate, and ready mix concrete is made of
up of approximately 75 percent aggregate. Aggregate thus is an integral
input for road and other construction projects.
For each construction project, a customer establishes
specifications that must be met for each application for which
aggregate is used. For example, state DOTs, including the Georgia and
Maryland DOTs, set specifications for aggregate used to produce asphalt
concrete, ready mix concrete, and road base for state DOT projects.
State DOTs specify characteristics such as hardness, durability, size,
polish value, and a variety of other characteristics. The
specifications are intended to ensure the longevity and safety of the
roads, bridges and other projects for which aggregate is used.
State DOTs qualify quarries according to the end uses of the
aggregate, to ensure that the stone used in an application meets the
necessary specifications. In addition, state DOTs test the aggregate at
various points: at the quarry before it is shipped; when the aggregate
is sent to the purchaser to produce an end product such as asphalt
concrete; and after the end product has been produced. Many cities,
counties, commercial entities, and individuals in Georgia and Maryland
have adopted their respective state DOT-qualified aggregate
specifications when building roads, bridges, and other construction
projects in order to help ensure the longevity of their projects.
Aggregate is priced by the ton and is a relatively inexpensive
product, with prices typically ranging from approximately five to
twenty dollars per ton. A variety of approaches are used to price
aggregate. For small volumes, aggregate often is sold according to a
[[Page 19832]]
posted price. For large volumes, customers typically either negotiate
prices for a particular job or negotiate yearly requirements contracts,
seeking bids from multiple aggregate suppliers.
In areas where aggregate is locally available, it is transported
from quarries to customers by truck. Truck transportation is expensive
relative to the cost of the product itself, and transportation costs
can become a significant portion of the total cost of aggregate.
C. Relevant Markets
1. State DOT-Qualified Aggregate Is a Relevant Product Market
According to the Complaint, within the broad category of aggregate,
different types and sizes of stone are used for different purposes. For
instance, aggregate qualified for use as road base may not be the same
size and type of rock as aggregate qualified for use in asphalt
concrete. Accordingly, aggregate types and sizes are not
interchangeable for one another and demand for each is separate. Thus,
the Complaint alleges that each type and size of aggregate likely is a
separate line of commerce and a relevant product market within the
meaning of Section 7 of the Clayton Act.
State DOTs qualify aggregate for use in road construction and other
projects in that particular state. DOT-qualified aggregate meets
particular standards for size, physical composition, functional
characteristics, end uses, and availability. A customer whose job
specifies aggregate qualified by a particular state's DOT cannot
substitute aggregate or other materials that have not been so
qualified.
The Complaint alleges that although numerous narrower product
markets exist, the competitive dynamic for most types of state DOT-
qualified aggregate is nearly identical, as a quarry can typically
produce all, or nearly all, types of DOT-qualified aggregate for a
particular state. Therefore, most types of DOT-qualified aggregate for
a particular state may be combined for analytical convenience into a
single relevant product market for the purpose of evaluating the
competitive impact of the acquisition.
According to the Complaint, a small but significant increase in the
price of state DOT-qualified aggregate would not cause a sufficient
number of customers to substitute to another type of aggregate or
another material so as to make such a price increase unprofitable.
Accordingly, the Complaint alleges that the production and sale of
Georgia DOT-Qualified Aggregate and Maryland DOT-Qualified Aggregate
(hereinafter ``DOT-Qualified Aggregate'') are distinct lines of
commerce and relevant product markets within the meaning of Section 7
of the Clayton Act.
2. The Relevant Geographic Markets Are Local
When customers seek price quotes or bids for aggregate, the
distance from the quarry to the project site or plant location will
have a considerable impact on the selection of a supplier, due to the
high cost of transporting aggregate relative to the low value of the
product. Suppliers know the importance of transportation costs to a
potential customer's selection of an aggregate supplier; they know the
locations of their competitors, and they often will factor the cost of
transportation from other suppliers into the price or bid that they
submit. For these reasons, the primary factor that determines the area
a supplier will serve is the location of competing quarries.
a. The Forsyth and North Fulton County Area Is a Relevant Geographic
Market
According to the Complaint, Martin Marietta operates the Forsyth
quarry in Suwanee, Georgia, and Bluegrass owns and operates the Cumming
quarry in Cumming, Georgia. Customers in and immediately around Forsyth
County and Fulton County north of the Chattahoochee River (hereinafter
referred to as the ``Forsyth and North Fulton County Area'') are served
by both the Forsyth and Cumming quarries. Customers with plants or jobs
in the Forsyth and North Fulton County Area may, depending on the
location of their plant or job sites, economically procure Georgia DOT-
Qualified Aggregate from the Forsyth and Cumming quarries, or from
quarries operated by a third firm located in Norcross, Buford, and Ball
Ground, Georgia. Other more distant quarries cannot compete
successfully on a regular basis for a significant number of customers
with plants or jobs in the Forsyth and North Fulton County Area because
they are too far away and transportation costs are too great.
According to the Complaint, customers likely would be unable to
switch to suppliers outside the Forsyth and North Fulton County Area to
defeat a small but significant price increase. The Complaint therefore
alleges that the Forsyth and North Fulton County Area is a relevant
geographic market for the production and sale of Georgia DOT-Qualified
Aggregate within the meaning of Section 7 of the Clayton Act.
b. The Washington County Area Is a Relevant Geographic Market
According to the Complaint, Martin Marietta owns and operates the
Boonsboro quarry in Boonsboro, Maryland, and the Pinesburg quarry in
Williamsport, Maryland, and Bluegrass owns and operates the Beaver
Creek quarry in Hagerstown, Maryland. The Boonsboro, Pinesburg, and
Beaver Creek quarries each serve customers in and immediately around
Washington County, Maryland (hereinafter referred to as the
``Washington County Area''). Customers with plants or jobs in the
Washington County Area may, depending on the location of their plant or
job site, economically procure Maryland DOT-Qualified Aggregate from
the Boonsboro, Pinesburg, or Beaver Creek quarries, or from a quarry
operated by a third firm located in nearby Chambersburg, Pennsylvania.
Other more distant quarries cannot compete successfully on a regular
basis for customers with plants or jobs in the Washington County Area
because they are too far away and transportation costs are too great.
According to the Complaint, customers likely would be unable to
switch to more distant suppliers outside of the Washington County Area
to defeat a small but significant price increase. The Complaint
therefore alleges that the Washington County Area is a relevant
geographic market for the production and sale of Maryland DOT-Qualified
Aggregate within the meaning of Section 7 of the Clayton Act.
D. Martin Marietta's Acquisition of Bluegrass Is Anticompetitive
According to the Complaint, vigorous competition between Martin
Marietta and Bluegrass on price and customer service in the production
and sale of DOT-Qualified Aggregate has benefitted customers in the
Forsyth and North Fulton County Area and in the Washington County Area.
The Complaint alleges that in each of these areas, the competitors
that constrain Martin Marietta and Bluegrass from raising prices on
DOT-Qualified Aggregate are limited to those who are qualified by the
Georgia and Maryland DOTs to supply aggregate and can economically
transport the aggregate into these areas. According to the Complaint,
for a significant number of customers in each area, there is only one
other firm that produces DOT-Qualified Aggregate and can economically
serve customers at their plants or job sites. The proposed acquisition
will eliminate the competition between Martin Marietta and Bluegrass
and reduce from
[[Page 19833]]
three to two the number of suppliers of DOT-Qualified Aggregate for a
significant number of customers in each area.
According to the Complaint, for a significant number of customers
in each area, a combined Martin Marietta and Bluegrass will have the
ability to increase prices for DOT-Qualified Aggregate and decrease
service by limiting availability or delivery options. DOT-Qualified
Aggregate producers know the distance from their own quarries and their
competitors' quarries to a customer's job site. Generally, because of
transportation costs, the farther a supplier's closest competitor is
from a job site, the higher the price and margin that supplier can
expect for that project. Post-acquisition, in instances where Martin
Marietta and Bluegrass quarries are the closest locations to a
customer's project, the combined firm, using the knowledge of its
competitors' locations, will be able to charge such customers higher
prices or decrease the level of customer service.
The Complaint alleges that the response of other suppliers of DOT-
Qualified Aggregate will not be sufficient to constrain a unilateral
exercise of market power by Martin Marietta after the acquisition. For
all of these reasons, the Complaint alleges that the proposed
acquisition will therefore substantially lessen competition in the
market for DOT-Qualified Aggregate in the Forsyth and North Fulton
County Area and in the Washington County Area and likely lead to higher
prices and reduced customer service for consumers of such products, in
violation of Section 7 of the Clayton Act.
E. Barriers to Entry
The Complaint alleges that entry in the production and sale of DOT-
Qualified Aggregate in the Forsyth and North Fulton County Area and in
the Washington County Area is unlikely to be timely or sufficient to
offset the anticompetitive effects of the acquisition, given the
substantial time and cost required to open a quarry.
According to the Complaint, quarries are particularly difficult to
locate and permit. First, securing the proper site for a quarry is
challenging and time-consuming. Finding land with the correct rock
composition requires extensive investigation and testing of candidate
sites, as well as the negotiation of necessary land transfers, leases,
and/or easements. Further, the site must be close to customer plants
and likely job sites given the high cost of transporting aggregate.
Second, once a suitable location is chosen, obtaining the necessary
permits is difficult and time-consuming. Attempts to open a new quarry
often face fierce public opposition, which can prevent a quarry from
opening altogether or make the process of opening it much more time-
consuming and costly. Finally, even after a site is acquired and
permitted, the owner must spend significant time and resources to
prepare the land for quarry operations and purchase and install the
necessary equipment.
For all of these reasons, the Complaint alleges that entry will not
be timely, likely or sufficient to mitigate the anticompetitive effects
of the acquisition.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The divestiture requirement of the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in the
production and sale of DOT-qualified aggregate in the Forsyth and North
Fulton County Area and the Washington County Area by establishing a
new, independent, and economically viable competitor in each area.
A. Divestiture
In the Forsyth and North Fulton County Area, Paragraph IV(A) of the
proposed Final Judgment requires Defendants to divest the lease to
Martin Marietta's Forsyth quarry and all tangible and intangible assets
related to the quarry (the ``Georgia Divestiture Assets'') to Midsouth
Paving, Inc. (``Midsouth''), or an alternative Acquirer acceptable to
the United States, in its sole discretion, within twenty-one (21) days
after the Court's signing of the Hold Separate. The United States
required an upfront buyer for the divestiture of the Georgia
Divestiture Assets because of the unique nature of the short-term lease
being divested and the accompanying need to minimize the time before an
Acquirer assumed control of the Forsyth quarry's operations. Midsouth,
which is a subsidiary of CRH plc and CRH Americas Materials, Inc.
(commonly known in the industry as ``Oldcastle''), is an experienced
operator of quarries in the region, with locations in Georgia, Alabama,
and Tennessee.
In the Washington County Area, Paragraph IV(B) of the proposed
Final Judgment requires the Defendants to divest Bluegrass's Beaver
Creek quarry and all tangible and intangible assets related to the
quarry (the ``Maryland Divestiture Assets'') to an Acquirer acceptable
to the United States, in its sole discretion, after consultation with
the State of Maryland. Defendants must complete the divestiture within
ninety (90) days after the filing of the Complaint, or five (5) days
after notice of entry of the Final Judgment by the Court, whichever is
later.
With respect to the divestiture of both the Georgia and Maryland
Divestiture Assets, Defendants must take all reasonable steps necessary
to accomplish the divestitures quickly and shall cooperate with
prospective purchasers. Paragraph IV(I) of the proposed Final Judgment
further provides that Defendants must accomplish the divestitures in
such a way as to satisfy the United States in its sole discretion,
after consultation with the State of Maryland with respect to the
Maryland Divestiture Assets, that the Divestiture Assets can and will
be operated by the respective purchasers as viable, ongoing businesses
that can compete effectively in the production and sale of State DOT-
Qualified Aggregate.
The proposed Final Judgment also contains provisions intended to
facilitate the respective purchasers' efforts to hire the employees
involved in the operation of the Divestiture Assets. Paragraph IV(D) of
the proposed Final Judgment requires Defendants to provide the
Acquirers of the Divestiture Assets with information relating to the
personnel involved in the operation of the Divestiture Assets to enable
the Acquirers to make offers of employment, and provides that
Defendants will not interfere with any negotiations by the Acquirers to
hire these employees.
In the event that Defendants do not accomplish the divestitures
within the periods prescribed in the proposed Final Judgment, Paragraph
V(A) of the Final Judgment provides that the Court will appoint a
trustee selected by the United States to effect the divestiture of any
remaining Divestiture Assets. If a trustee is appointed, the proposed
Final Judgment provides that Defendants will pay all costs and expenses
of the trustee. The trustee's commission will be structured so as to
provide an incentive for the trustee based on the price obtained and
the speed with which the divestiture is accomplished. Paragraph V(F) of
the proposed Final Judgment requires that, after his or her appointment
becomes effective, the trustee will file monthly reports with the Court
and the United States setting forth his or her efforts to accomplish
the divestiture. Paragraph V(G) of the proposed Final Judgment requires
that, at the end of six months, if the divestiture has not been
accomplished, the trustee and the United States will make
recommendations to the Court,
[[Page 19834]]
which shall enter such orders as appropriate, in order to carry out the
purpose of the trust, including extending the trust or the term of the
trustee's appointment.
B. Compliance Affidavits
The proposed Final Judgment requires, in Paragraph IX(A), that the
Defendants inform the United States of their compliance with the
divestiture requirements of the proposed Final Judgment by delivering
affidavits to the United States 20 days after the filing of the
Complaint, and every 30 days thereafter until the divestitures have
been completed. Martin Marietta's affidavits must be signed by its
Chief Financial Officer and General Counsel. Defendants LG Panadero,
Panadero, and Panadero Aggregates lack both a General Counsel and a
Chief Financial Officer, so those entities must submit affidavits from
each company's highest ranking officer. Bluegrass also is not
represented by a General Counsel, but will submit affidavits from both
its highest ranking officer and Chief Financial Officer.
C. Enforcement and Expiration of the Final Judgment
The proposed Final Judgment contains provisions designed to promote
compliance and make enforcement of Division consent decrees as
effective as possible. Paragraph XIII(A) provides that the United
States retains and reserves all rights to enforce the provisions of the
proposed Final Judgment, including its right to seek an order of
contempt from the Court. Under the terms of this paragraph, Defendants
have agreed that in any civil contempt action, any motion to show
cause, or any similar action brought by the United States regarding an
alleged violation of the Final Judgment, the United States may
establish the violation and the appropriateness of any remedy by a
preponderance of the evidence and that the Defendants have waived any
argument that a different standard of proof should apply. This
provision aligns the standard for compliance obligations with the
standard of proof that applies to the underlying offense that the
compliance commitments address.
Paragraph XIII(B) of the proposed Final Judgment further provides
that should the Court find in an enforcement proceeding that the
Defendants have violated the Final Judgment, the United States may
apply to the Court for a one-time extension of the Final Judgment,
together with such other relief as may be appropriate. In addition, in
order to compensate American taxpayers for any costs associated with
the investigation and enforcement of violations of the proposed Final
Judgment, Paragraph XIII(B) provides that in any successful effort by
the United States to enforce this Final Judgment against a Defendant,
whether litigated or resolved prior to litigation, that Defendant
agrees to reimburse the United States for any attorneys' fees, experts'
fees, or costs incurred in connection with any enforcement effort,
including the investigation of the potential violation.
Finally, Section XIV of the proposed Final Judgment provides that
the Final Judgment shall expire ten (10) years from the date of its
entry, except that after five (5) years from the date of its entry, the
Final Judgment may be terminated upon notice by the United States to
the Court and Defendants that the divestitures have been completed and
that the continuation of the Final Judgment is no longer necessary or
in the public interest.
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 Defendants.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
Plaintiffs and Defendants 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 website and, under certain circumstances,
published in the Federal Register.
Written comments should be submitted to:
Maribeth Petrizzi
Chief, Defense, Industrials, and Aerospace Section
Antitrust Division
United States Department of Justice
450 Fifth Street, NW, Suite 8700
Washington, D.C. 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
Plaintiffs considered, as an alternative to the proposed Final
Judgment, a full trial on the merits against Defendants. Plaintiffs
could have continued the litigation and sought preliminary and
permanent injunctions against Martin Marietta's acquisition of
Bluegrass. Plaintiffs are satisfied, however, that the divestiture of
assets described in the proposed Final Judgment will preserve
competition for the production and sale of DOT-Qualified Aggregate in
the Forsyth and North Fulton County and Washington County Areas. Thus,
the proposed Final Judgment would achieve all or substantially all of
the relief Plaintiffs would have obtained through litigation, but
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
[[Page 19835]]
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 (D.C. 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. U.S. Airways Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014)
(explaining that the ``court's inquiry is limited'' in Tunney Act
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009-
2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, 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.'').\1\
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\1\ 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) (quoting
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).\2\ 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 the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also U.S. Airways, 38 F. Supp. 3d at 75 (noting
that a court should not reject the proposed remedies because it
believes others are preferable); 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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\2\ 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''').
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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 U.S.
Airways, 38 F. Supp. 3d at 74 (noting that room must be made for the
government to grant concessions in the negotiation process for
settlements (citing Microsoft, 56 F.3d at 1461); 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 U.S. Airways,
38 F. Supp. 3d at 74 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); 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 confirmed in SBC Communications, courts
``cannot look beyond the complaint in making the public interest
determination unless the
[[Page 19836]]
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); see also U.S. Airways, 38 F.
Supp. 3d at 75 (indicating that a court is not required to hold an
evidentiary hearing or to permit intervenors as part of its review
under the Tunney Act). 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
Sen. 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.\3\ A court can make its public
interest determination based on the competitive impact statement and
response to public comments alone. U.S. Airways, 38 F. Supp. 3d at 75.
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\3\ 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., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (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, 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.'').
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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: April 25, 2018
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA
Kerrie J. Freeborn* (D.C. Bar #503143)
United States Department of Justice
Antitrust Division
Defense, Industrials, and Aerospace Section
450 Fifth Street, N.W., Suite 8700
Washington, D.C. 20530
Tel: (202) 598-2300
Fax: (202) 514-9033
Email: [email protected]
*Attorney of Record
[FR Doc. 2018-09458 Filed 5-3-18; 8:45 am]
BILLING CODE 4410-11-P