Kennecott Corporation

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IN THE MATTER OF KENNECOTT CORPORATION CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT AND SEC. 7 01" THE CLAYTON ACT Docket C-307/J Complaint, Sept. 19B/-Decision, Sept. , 1981 This consent order requires, among other things, a Stamford, Conn., manufacturer engaged in the production of various products, including fabric air filter bags utilized in the control of industrial air pollution, to timely divest its subsidiary, the Filter Media Division FMD " in accordance with the terms of the order. Pending such divestiture, the firm is required to operate its prospective acquisition, National Filter Media, as a separately managed eptity. The order further bars the company from certain acquisitions for a period often years without prior Commission approval. Appearances For the Commission: Steven R. Newborn, Michael Antalics, Nancy Markowitz and Virginia L. $nider.

For the respondent: Richard E. Carlton and Richard Lyons, Sullivan Cromwell New York City.

COMPLAINT The Federal Trade Commission, having reason to believe that the respondent, Kennecott Corporation CKennecott"), a corporation subject to the jurisdiction of the Commission, has entered into an agreement which, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.sC. 18 and Section 5 of the Federal Trade Commission Act, as amended, 15 UB.C. 45; that said agreement constitutes a violation of Section 5 of the Federal Trade Commission Act, as amended; and that a proceeding in respect thereof would be in the public interest, hereby issues its complaint stating its charges as follows:

I. DEFINITIONS For purposes of this Complaint, the following definitions apply: a. The term baghouse means a system used for the filtration of particulate matter from gas streams for environmental and safety reasons or for the recapture of valuable particulates. b. The term fabric air filter bag means a tubular or non-tubular 776 FBDBRAL TRADE COMMISSION DECISIONS Complaint 98 F.

seamed or seamless bag, varying in length, width and material which is used within air pollution control systems called baghouses. II. KENNECOTT CORPORATION 2- Kennecott is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York with its principal executive offices at Ten Stamford Forum, High Park Ridge, Stamford, Connecticut.

3. At all times relevant herein, Kennecott has been and is a corporation whose business is in or affecting commerce within the meaning of the Federal Trade Commission and Clayton Acts, as amended.

III. DORR-OLIVER INCORPORATED 4. Curtiss-Wright Corporation ("Curtiss-Wright") is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its principal executive offices at One Passaic St., Wood-Ridge, New Jersey.

5. Dorr-Oliver Inc. ("Dorr-Oliver ) is a corporation organized and doing business under and by virtue of the laws of the State Delaware with its principal offices at 77 Havemcyer Lane, Stamford Connecticut. Dorr-Oliver is a wholly-owned subsidiary of Curtiss- Wright.

6. At all times relevant herein, Curtiss-Wright has been and is a corporation whose business is in or affecting commerce within the meaning of the Federal Trade Commission and Clayton Acts, as amended.

IV. ACQUISITION 7. On January 29, 1981, Kennecott and Curtiss-Wright entered into an agreement for the sale of Curtiss-Wright' s Dorr-Oliver subsidiary to Kennecott for approximately $110 000 000. v. TRADE AND COMMERCE 8. The relevant geographic market is the United States as a whole.

9. The relevant product market is the manufacture and sale of fabric air filter bags.

10. Concentration in the manufacture and sale of the relevant product is high.

KENNECOTl' LJUI\r.

775 Decision . and . Order 11. There are barriers to entry into the manufacture and sale of the relevant product.

12. Both Kennecott through its Filter Media Division and Dorr- Oliver, through its subsidiary, Nation.al Filter Media Corporation are significant competitors in the relevant market. VI. EFFECTS OF. THE ACQUISITION 13. The effects of the proposed acquisition may be to substantially lessen competition or tend to create a monopoly in the relevant market enumerated in Paragraphs 7 and 8 of this Complaint in the following ways, among others:

(a) it wil eliminate substantial actual competition between Kennecott and Dorr-Oliver in the relevant market; (b) it wil significantly increase the already high levels of concentration in the relevant market;

(c) it wil further raise the barriers to entry that exist in the relevant market;

(d) customers of fabric air filter bags may be denied the benefits of free and open competition.

VII. VIOLATIONS CHARGED 14. The proposed acquisition set forth in Paragraph 7, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 VB. C. , and would violate Section 5 of the Federal Trade Commission Act, as amended, 15 C. 45. 15. The agreement described in Paragraph 7, violates Section 5 of the Federal Trade Commission Act, as amended, 15 U . C. 45. DECISION AND ORDER The Federal Trade Commission having initiated an investigation of the proposed acquisition of Dorr-Oliver Incorporated (hereinafter Dorr-Oliver ), a wholly-owned subsidiary of Curtiss-Wright Corporation ("Curtiss- Wright"), by Kennecott Corporation (hereinafter Kennecott"), and Kennecott having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge Kennecott with violations of the Federal Trade Commission Act and the Clayton Act; and Kennecott, its attorneys, and counsel for the Commission having J - QL 3 Decision and Order 98 thereafter executed an agreement containing a consent order, an admission by Kennecott of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by Kennecott that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that Kennecott has violated the said Acts, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Kennecott is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York with its principal executive offices at Ten Stamford Forum, High Ridge Park, Stamford, Connecticut.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of Kennecott, and the proceeding is in the public interest.

Orner It is ordered That for the purposes of this order the following definitions shall apply:

1. Kennecott means Kennecott Corporation, a corporation organized, existing, and doing business under and by virtue of the laws of the State of New York, with its principal offices at Ten Stamford Forum, Stamford, Connecticut, as well as its officers, employees agents, its parents, divisions, subsidiaries, affiliates, successors assigns, and the officers, employees or agents of Kennecott's parents divisions, subsidiaries, affiliates, successors, or assigns. Curtiss- Wright means Curtiss-Wright Corporation, a corpora- 2. tion organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its principal offices at One Passaic St., Wood-Ridge, New Jersey, as well as its officers, employees, agents, it parents, divisions, subsidiaries, affiliates, successors KENNECOTT CORP. 779 775 Decision and Order assigns, and the officers, employees or agents of Curtiss-Wright' parents, divisions, subsidiaries, affiliates, successors, or assigns. 3. Darr-Oliver means Dorr-Oliver Inc. , a corporation organized existing and doing business under and by virtue of the laws of the State of Delaware and a wholly-owned subsidiary of Curtiss-Wright with its principal offices at 77 Havemeyer Lane, Stamford, Connecticut, as well as its officers employees, agents, its parents, divisions subsidiaries, affiliates successors, assigns and the officers, employees or agents of Dorf-Oliver s parents, divisions, subsidiaries, affiliates, successors, or assigns.

4. Filter Media Division or FMD means all assets, properties titles to property, interests, rights and privileges of whatever nature tangible and intangible, including, but not limited to, all real property, buildings, machinery, equipment, raw materials, inventory, customer lists, trade names, patents, patent applications, trademarks, orders for purchase that are unfilled on the date of the divestiture, and all other property of whatever description presently owned or operated, together with all additions, replacements, and improvements hereafter made, by the Filter Media Division of the Kennecott Engineered Systems Company, a division of Kennecott Corporation.

5. National Filter Media or NFM means the National Filter Media Corporation, a subsidiary of Don-Oliver. It includes all assets properties, titles to property, interests, rights and privileges of whatever nature, tangible and intangible, including but not limited , all real property, buildings, machinery, equipment, raw materials, inventory, customer lists, trade names, patents, patent applications, trademarks, orders for purchase that are unfilled on the date of the divestiture, and all other property of whatever description presently owned or operated by NFM.

6. Relevant products means fabric air filter bags, wet filtration media, and cages.

a. The term fabric air filter bag means a tubular or non-tubular seamed or seamless bag, varying in length, width, and material which is used within air pollution control systems called bag houses. b. The term bag house means a system used for the filtration of particulate matter from gas streams for environmental or safety reasons or for the recapture of valuable particulate. c. The term wet filtration media means fabric filters of any shape used in industrial applications to separate liquids from solids. d. The term cages means cylindrical wire mesh forms used in bag houses as a support for fabric air filter bags. Decision and Order 98 F. 7. Eligible Person means any individual, corporation (including subsidiaries thereof), partnership, joint venture, trust, unincorporat-: d association, other business or legal entity, or any combination thereof, ilpprovedby the Commission. Such approval shall be in the sale discretion of the Commission.

II.

It is ordered That Kennecott shall divest absolutely and unqualifiedly FMD to an Eligible Person within nine months from the date of the issuance of this order.

III.

It is further ordered That divestiture under Paragraph II shall be in a manner which preserves the assets and business divested as a viable competitor.

IV.

It is further ordered That, pending the divestiture of FMD required by Paragraph II of this Order, Kennecott shall not take any action other than in the ordinary course of business, without the consent of the Federal Trade Commission, to diminish the value of FMD.

It further ordered, That pending divestiture under Paragraph II required by this order:

A. Kennecott shall operate NFM as a separately managed subsidiary, separately maintaining its own financial books and records, internal auditors, employees and management. Earnings and profits of NFM shall be retained by NFM and shall not be distributed to Kennecott or any third party as dividends or in any other form; provided, however that ordinary dividends may declared by NFM and that portion of dividends due the Filter Fabrics Company may be paid to the Filter Fabrics Company. B. Kennecott: (1) shall exert no control over or influence on or interfere in any way in any of the business decisions or operations of NFM; (2) shall not cause NFM, directly or indirectly, to adopt policies preferred, suggested, or dictated by Kennecott; (3) shall not change NFM's existing policies or methods of operation. Furthermore, no Kennecott officer, director, employee, representative, or KENm;COTT CORP. 781 775 Decision and Order agent shall serve in any NFM position and no Kennecott officer director, employee, representative or agent shall serve on NFM' Board of Directors; provided, howeoer that Messrs. S. P. Felt, Jr., P. S. Felt, R G. McElhanney, C. B. Scobie, G. Ehinger, and W. P. Holden may continue to serve on NFM's Board of Directors if they provide to the Commission an executed copy ofthe affidavit attached as Appendix I to this Order.

VI.

It is further ordered That, for a period of ten years from the date of issuance of this order, Kennecott, its parents, divisions, subsidiaries, affiliates, successors, or assigns, shall not, directly or indirectly, acquire any stock, share capital, or equity interest in or assets used in the manufacture of any relevant product by, any concern corporate or non-corporate, engaged in the manufacture or sale of any relevant product without the prior approval of the Federal Trade Commission.

VII.

It is further ordered That Kennecott shall, within ninety days from the date of issuance of this order, and every ninety days thereafter until divestiture is completed, submit in writing to the Commission a report setting forth in detail the manner and form in which Kennecott intends to comply, is complying, and has complied with the terms of this order and such additional information relating thereto as may from time to time reasonably be required. All such reports shall include a summary of contacts or negotiations with anyone for the specified assets, the identity of all such persons, and copies of all written communications to and from such persons. After divestiture is completed, Kennecott shall submit in writing annual reports showing the manner and form of compliance with this order. VIII.

It is further ordered That for a period of ten years from the date of issuance of this order, Kennecott shall notify the Commission at least thirty days prior to any change in Kennecott which may affect compliance with the obligations arising out of this consent order such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation.

Decision and Order 98 F.T. Appendix I AFFIDAVIT STATE OF CITY OF being duly sworn, hereby deposes and says: affirm that I have read the Agreement Containing Consent Order to which this Sworn Statement is attached, and that pending divestiture of FMD as ordered in Paragraph II of that Agreement; (1) I shall not cause NFM, directly or indirectly, to adopt policies or methods of operation preferred, suggested, or dictated by Kennecott and that Kennecott shall exert no control over or influence on or interfere in any way in, my consideration of any of the business decisions or operations of NFM; (2) I wil in no way, either directly or indirectly, participate in the business decisions or operations of FMD;

(3) I wil make any reports on the business or operations of NFM to either Dorr- Oliver or Kennecott only in writing and will simultaneously forward a copy of each such report to the Commission.

Sworn to before me this day of 1981. Notary Public My Commission expires COMMERCIAL CREDIT CO. 'Co 783 Modifying Order