[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16017-16019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07697]


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FEDERAL TRADE COMMISSION

[File No. 171 0058]


Tronox/Cristal USA; Analysis of Agreement Containing Consent 
Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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

DATES: Comments must be received on or before May 17, 2019.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``Tronox/Cristal USA'' 
on your comment, and file your comment online at https://www.regulations.gov by following the instructions on the web-based 
form. If you prefer to file your comment on paper, mail your comment to 
the following address: Federal Trade Commission, Office of the 
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580, or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024.

FOR FURTHER INFORMATION CONTACT: Joonsuk Lee (202-326-2823), Bureau of 
Competition, 600 Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis of Agreement Containing Consent Orders to Aid Public 
Comment describes the terms of the consent agreement and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
for April 10, 2019, on the World Wide Web, at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before May 17, 2019. 
Write ``Tronox/Cristal USA; File No. 1710085'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the https://www.regulations.gov website.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Tronox/Cristal 
USA; File No. 1710085'' on your comment and on the envelope, and mail 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), 
Washington, DC 20580; or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Constitution Center, 
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 
20024. If possible, submit your paper comment to the Commission by 
courier or overnight service.
    Because your comment will be placed on the publicly accessible FTC 
website at https://www.regulations.gov, you are solely responsible for 
making sure that your comment does not include any sensitive or 
confidential information. In particular, your comment should not 
include any sensitive personal information, such as your or anyone 
else's Social Security number; date of birth; driver's license number 
or other state identification number, or foreign country equivalent; 
passport number; financial account number; or credit or debit card 
number. You are also solely responsible for making sure that your 
comment does not include any sensitive health information, such as 
medical records or other individually identifiable health information. 
In addition, your comment should not include any ``trade secret or any 
commercial or financial information which . . . is privileged or 
confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the

[[Page 16018]]

requirements for such treatment under FTC Rule 4.9(c), and the General 
Counsel grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing it. The FTC Act and other laws that the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments that it 
receives on or before May 17, 2019. For information on the Commission's 
privacy policy, including routine uses permitted by the Privacy Act, 
see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') with Tronox Limited (``Tronox''), National 
Industrialization Company (``TASNEE''), National Titanium Dioxide 
Company Limited (``Cristal''), and Cristal USA Inc. The purpose of the 
Consent Agreement is to remedy the anticompetitive effects that would 
result from Tronox's proposed acquisition of Cristal's titanium dioxide 
(``TiO2'') business.
    On February 21, 2017, Tronox announced that it had entered into a 
definitive agreement to acquire all of Cristal's TiO2 business for 
$1.67 billion and a 24 percent stake in the combined entity 
(``Acquisition''). The proposed Acquisition would combine two of the 
three largest producers of TiO2 manufactured through the chloride 
process (``chloride TiO2'') in the United States and Canada (``North 
America''). On December 5, 2017, the Commission issued an 
administrative Complaint challenging the proposed Acquisition and 
authorized staff to seek, if necessary, a preliminary injunction in 
federal district court. The Commission's Complaint alleged that the 
proposed Acquisition, if consummated, would violate Section 7 of the 
Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as 
amended, 15 U.S.C. 45, by substantially lessening competition in the 
market for the sale of chloride TiO2 to North American customers 
(``North American chloride TiO2 market''). After extensive pre-trial 
discovery, the administrative trial before the Administrative Law Judge 
(``ALJ'') began on May 18, 2018 and was conducted over sixteen hearing 
days until June 22, 2018.
    In July 2018, because Tronox could have closed the transaction 
before the ALJ could issue a decision, however, the Commission filed a 
federal complaint in the U.S. District Court for the District of 
Columbia to seek a preliminary injunction. After a three-day hearing at 
the federal district court, Judge Trevor N. McFadden ruled for the 
Commission and issued an opinion and order granting the motion for a 
preliminary injunction on September 12, 2018. In his opinion, Judge 
McFadden found that the Commission established a strong presumption of 
anticompetitive effects in the market for chloride TiO2 in North 
America and that the parties' rebuttal evidence did not overcome the 
presumption. After the completion of the federal court action, the ALJ 
issued an Initial Decision on December 7, 2018. Like the decision in 
the federal court, the ALJ found that the Acquisition may substantially 
lessen competition in the relevant market in violation of Section 7 of 
the Clayton Act and Section 5 of the FTC Act. The parties thereafter 
engaged with Commission staff in settlement discussions to resolve the 
Commission's concerns relating to lost competition in the North 
American chloride TiO2 market.
    To remedy the anticompetitive effects that would result from the 
proposed Acquisition in the North American chloride TiO2 market, the 
proposed Decision and Order (``Order'') contained in the Consent 
Agreement requires Tronox to divest Cristal's North American TiO2 
business to INEOS Enterprises (``Ineos'') no later than 30 days from 
the close of the Acquisition. The divestiture package includes all of 
Cristal's North American TiO2 production assets, including two chloride 
TiO2 manufacturing plants located in Ashtabula, Ohio, a research, 
development, and administrative support facility near Baltimore, 
Maryland, necessary intellectual property associated with the 
manufacture and sale of chloride TiO2 in and from North America, an 
option to acquire rights to use the licensed intellectual property to 
produce chloride TiO2 products at a new manufacturing facility outside 
North America, customer contracts in North America with respect to 
chloride TiO2, the ability to hire all Cristal personnel necessary to 
operate the business, and access to various transitional services. In 
short, the Consent Agreement provides Ineos with everything it needs to 
compete effectively in the North American chloride TiO2 market, along 
with the ability to produce globally in the future if the business 
opportunity arises.
    The Commission has placed the Consent Agreement on the public 
record for 30 days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After 30 days, the Commission will again review the Consent 
Agreement and the comments received, and decide whether it should 
withdraw from the Consent Agreement, modify it, or make the Order 
final.

2. The Parties

    Tronox, a publicly traded company headquartered in Stamford, 
Connecticut, is one of the top three manufacturers of chloride TiO2 in 
North America. Tronox operates one TiO2 pigment manufacturing plant in 
Hamilton, Mississippi, and two other plants in Botlek, the Netherlands, 
and Kwinana, Australia. Tronox's three plants produce chloride TiO2 
exclusively.
    Cristal, headquartered in Jeddah, Saudi Arabia, is a corporation 
majority-owned by National Industrialization Company (``TASNEE''), a 
limited company, headquartered in Riyadh, Saudi Arabia. Cristal's 
primary U.S. subsidiary is Cristal USA Inc., a corporation with its 
executive offices and principal place of business located in Glen 
Burnie, Maryland. Cristal, through various subsidiaries, owns and 
operates chloride TiO2 manufacturing plants in Ashtabula, Ohio, the 
United Kingdom, Australia, and Saudi Arabia. Cristal also produces 
sulfate TiO2 at plants in Brazil, China, and France. All of Cristal's 
TiO2 production in North America is chloride TiO2.

3. The Relevant Market for Chloride TiO2 in North America

    The relevant product market in which to assess the competitive 
effects of the proposed Acquisition is chloride TiO2. TiO2 is a white 
pigment used to provide opacity, whiteness, and brightness to a vast 
array of products, including paint, industrial coatings, plastics, 
paper, and other products. Chloride TiO2 has distinct, superior 
characteristics that cannot be provided by any other type of TiO2, 
including sulfate TiO2. Most North American customers would not 
substitute sulfate TiO2 for chloride TiO2 in response to a small but 
significant increase in price.
    The relevant geographic market is North America, defined as the 
United States and Canada. The North American market has competitive 
dynamics, including pricing and demand characteristics, that differ 
from other geographic regions and limit the ability of North American 
customers to engage in arbitrage across different geographic regions. 
Import duties, shipping and handling costs, and other logistical

[[Page 16019]]

challenges would render such efforts uneconomical and impractical.
    The market for chloride TiO2 in North America is characterized by a 
limited number of suppliers. Tronox and Cristal are two of the three 
largest producers of chloride TiO2 in North America and together with 
The Chemours Company, the top three TiO2 companies control the vast 
majority of chloride TiO2 sales to North American customers and more 
than 80 percent of overall North American chloride TiO2 manufacturing 
capacity.
    The proposed Acquisition would cause the already concentrated North 
American chloride TiO2 market to become even more concentrated, 
increasing the Herfindahl-Hirschman Index (``HHI'') by more than 700, 
resulting in a post-Acquisition HHI exceeding 3,000. This increase in 
concentration far exceeds the thresholds set out in the Horizontal 
Merger Guidelines for raising a presumption that the Acquisition would 
create or enhance market power.

4. Effects of the Acquisition

    As both the federal and administrative courts have already 
determined, absent a divestiture, the proposed Acquisition is likely to 
cause competitive harm in the North American chloride TiO2 market. As 
stated in the Decision, for the sole purpose of settling this matter, 
Tronox and Cristal do not dispute that the likely effect of the 
proposed Acquisition, if consummated without a divestiture, may be 
substantially to lessen competition in the North American chloride TiO2 
market. Tronox and Cristal are two of the three largest producers of 
chloride TiO2 in North America. The proposed Acquisition would have 
anticompetitive effects in two ways: (1) Increasing the likelihood of 
anticompetitive coordination among the North American chloride TiO2 
companies; and (2) increasing Tronox's incentive and ability to 
unilaterally curtail production of chloride TiO2 in North America, 
which would lead to higher prices for chloride TiO2 in North America.

5. Entry

    Entry into the North American chloride TiO2 market is neither 
likely nor timely to deter or counteract any anticompetitive effects of 
the proposed Acquisition. The chloride TiO2 market is characterized by 
substantial barriers to entry. Market participants confirmed that 
building a new TiO2 plant would take multiple years and a large capital 
investment. Moreover, chloride plants rely on closely held proprietary 
technology. Expansion or repositioning by the remaining firms that 
would defeat anticompetitive effects is also unlikely in the already 
mature North American chloride TiO2 market.

6. The Proposed Consent Agreement

    The proposed Consent Agreement restores the competition that would 
have been lost from the proposed Acquisition by requiring Tronox to 
divest Cristal's North American TiO2 business to Ineos, a multinational 
corporation comprised of chemical manufacturing businesses. The 
proposed divestiture package provides everything needed for Ineos to 
compete effectively in the North American chloride TiO2 market.
    Under the Order, Tronox is required to divest Cristal's North 
American TiO2 business to Ineos no later than 30 days from the close of 
the Acquisition. The divestiture package consists of the following: Two 
chloride TiO2 manufacturing plants and all related facilities in 
Ashtabula, Ohio; other physical assets in North America, such as a 
research and development, and administrative support facility near 
Baltimore (``Baltimore Administration and Technical Center'' or 
``BATC'') and research and development equipment located at BATC; the 
ability to hire the relevant Cristal personnel located in North 
America, including all employees at the Ashtabula complex and almost 
all of the support personnel located at BATC; transfer or license of 
all intellectual property right necessary to manufacture chloride TiO2 
products at Ashtabula; an option, exercisable by Ineos during a ten-
year period after closing, to acquire rights to use the licensed 
intellectual property to produce chloride TiO2 products at a new 
manufacturing facility outside North America; and customer contracts 
related to Cristal's chloride TiO2 sales in North America. The Order 
also provides that, during a discrete period, the Commission has a 
limited ability to modify the lists of excluded assets and retained 
employees if needed for Ineos to run the business effectively.
    The Order requires that, at the request of Ineos, Tronox must 
provide transition assistance for a period of at least two years, and 
imposes other terms designed to ensure the viability of the divested 
business. The Commission also requires the parties to maintain all of 
the assets in the ordinary course of business pending divestiture to 
Ineos, and is issuing a separate Order to Maintain Assets at the time 
it accepts the Consent Agreement for public comment.
    A Monitor will oversee Tronox's compliance with the obligations set 
forth in the Order, the Order to Maintain Assets, and the divestiture 
agreements. If Tronox does not fully comply with the divestiture 
requirements of the Order, the Commission may appoint a Divestiture 
Trustee to divest Cristal's North American TiO2 business and perform 
Tronox's other obligations consistent with the Order.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement to aid the Commission in determining whether it 
should make the Consent Agreement final. This analysis is not an 
official interpretation of the proposed Consent Agreement and does not 
modify its terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2019-07697 Filed 4-16-19; 8:45 am]
 BILLING CODE 6750-01-P