B.F. Goodrich Company

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IN THE MATTER OF THE B.F. GOODRICH COMPANY, ET AL.

MODIFIED FINAL ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9159. Final Order, Mar. 1988 Modified Final Order, July, 1989 This modified final order, issued pursuant to a stipulation between the Commission and B.F. Goodrich and a joint motion granted in the court of appeals, requires Goodrich to divest its Calvert City, Ky. facility, for the production of vinyl chloride monomer (VCM) and ethylene dichloride, instead of the LaPorte VCM plant. Appearances For the Commission: Rhett R. Krulla. For the respondents: Tom D. Smith, Jones, Day, Reavis Pogue Washington, D. C. Richard W. Pogue, Jones, Day, Reavis Pogue Cleveland, OH.

MODIFIED FINAL ORDER The Commission issued a Final Order in this proceeding on March , 1988, and respondent, The B.F. Goodrich Company ("Goodrich" subsequently filed a petition for review of that Order in the United States Court of Appeals for the Second Circuit. On April 5, 1989, the Commission and Goodrich filed a joint motion asking that court to modify the Commission s Final Order pursuant to a Stipulation between the Commission and Goodrich. The parties expressly agreed that entering into the Stipulation did not "constitute an admission of any liability or of any issue of law or fact." Commissioner Azcuenaga issued the attached dissent to the Commission s entry into the Stipulation, later joined by Commissioner Strenio. On April 25, 1989 the court of appeals granted the parties' joint motion and entered its order modifying the Commission s Final Order of March 15 , 1988. Now therefore it is hereby ordered that the aforesaid "Final Order" be, and hereby is, modified in accordance with the order of the Court of Appeals to read as follows:

*Complaint, Final Order, etc. previou!\ly published at 110 FTC 207 (1988). FEDERA TRADE COMMISSION DECISIONS Modified Final Order 112 F. FINAL ORDER DEFINITIONS It is ordered, That for purposes of this order the following definitions shall apply:

A. Goodrih" means The B.F. Goodrich Company, a corporation organized under the laws of New York with its principal place of business in Akron, Ohio, and its directors, officers, agents, and employees, and its subsidiaries, divisions, affiliates, successors, and assigns.

B. Calvert City VCM Plant" means the manufacturing facility for the production of VCM and ethylene dichloride ("EDC") owned by Goodrich and located at Calvert City, Kentucky, and all of the VCM and EDC assets, titles, properties, interests, rights and privileges tangible and intangible, located at this facilty. C. VCM' means vinyl chloride monomer, a gaseous, reactive acyclic intermediate chemical, with chemical identity CH2=CHC1 , also called chloroethylene or monochloroethylene. 11.

It is ordered That within twelve (12) months from the date this order becomes final, Goodrich shall divest, absolutely and in good faith, at no minimum price, the Calvert City VCM Plant. At the option of the acquir€r Goodrich shall also divest to the acquirer, at an appraised fair market value, up to 58 acres of land adjacent to the Calvert City VCM Plant, as well as all necessary or appropriate easements and rights-of-way. The purpose of the divestiture is to establish the Calvert City VCM Plant as a viable competitor in VCM by insuring its continuation as an ongoing, viable enterprise in the VCM industry; and to remedy the lessening of competition resulting from the acquisition of certain VCM assets by Goodrich. The divestiture shall be made only to an acquirer or acquirers, and only in a manner, that receives the prior approval of the Federal Trade Commission.

Pending divestiture, Goodrich shall take all measures necessary to maintain the Calvert City VCM Plant in its present condition and to Modified Final Order prevent any deterioration, except for normal wear and tear, of any part of the Calvert City VCM Plant, so as not to impair the Calvert City VCM Plant' s present operating viabilty or market value. III.

It is further ordered That at the time of the divestiture required by this order, Goodrich shall provide to the acquirer of the Calvert City VCM Plant, on a nonexclusive basis, all VCM technology (including patent licenses and know-how) used by Goodrich or developed by Goodrich for use, in the Calvert City VCM Plant; and For a period of one (1) year following the divestiture required by this order, Goodrich shall provide the acquirer of the Calvert City VCM Plant, if the acquirer so requests, such additional know-how as may reasonably be required to enable such acquirer to manufacture and sell VCM. Goodrich shall charge the acquirer no more than its own costs for providing such additional know-how. IV.

It is further ordered That at the time of the divestiture required by this order, Goodrich shall assign to the acquirer of the Calvert City , toll, or exchange agreementsVCM Plant all VCM supply, sales pertaining to the Calvert City VCM Plant, except for those agreements describing Goodrich's VCM supply arrangements with Occidental Chemical Corporation; and Goodrich shall make available to the acquirer all customer records and files (other than those describing its VCM supply arrangements with Occidental Chemical Corporation) relating to merchant sales ofVCM (at any time since January 1, 1985) from the Calvert City VCM Plant, and Goodrich shall deliver to the acquirer such of those records and files as the acquirer may request. It is further ordered That if Goodrich has not divested the Calvert City VCM PJant within the twelve-month period provided in paragraph II of this order, the Federal Trade Commission may appoint a trustee to effect the divestiture. The trustee shall be a person with experience and expertise in acquisitions and divestitures. Neither the appointment of a trustee nor a Commission decision not to appoint a trustee under this paragraph V of the order shall preclude the Modified Final Order 112 F. Commission from seeking civil penalties and other relief available to it including a court-appointed trustee, for any failure by Goodrich to comply with this order.

Any trustee appointed by the Commission pursuant to this paragraph V shall have the following powers, authority, duties, and responsibilities:

A. The trustee shall have the exclusive power and authority, subject to the prior approval of the Commission, to divest the Calvert City VCM Plant. The trustee shall have twelve (12) months from the date of appointment to accomplish the divestiture. If, however, at the end of the twelve-month period, the trustee has submitted a plan of divestiture or believes that divestiture can be accomplished within a reasonable time, the divestiture period may be extended by the Commission.

B. The trustee shall have full and complete access to the personnel books, records and facilities of the Calvert City VCM Plant, and Goodrich shall develop such financial or other information relevant to the Calvert City VCM Plant as the trustee may reasonably request. Goodrich shall cooperate with the trustee, and shall take no action to interfere with or impede the trustec s accomplishment of the divestiture. Any delays in divestiture caused by Goodrich shall extend the time for divestiture under this paragraph V in an amount equal to the delay, as determined by the Commission. C. The power and authority of the trustee to divest shall be at the most favorable price and terms available consistent with this order absolute and unconditional obligation to divest at no minimum price and with the purposes of the divestiture as stated in paragraph II of this order, subject to the prior approval of the Commission. D. The trustee shall serve, without bond or other security, at the cost and expense of Goodrich on such reasonable and customary terms and conditions as the Commission may set. The trustee shall have authority to retain, at the cost and expense of Goodrich, such consultants, attorneys, investment bankers, business brokers, accountants, appraisers, and other representatives and assistants as are reasonably necessary to assist in the divestiture. The trustee shall account for all monies derived from the divestiture and for all expenses incurred. After approval by the Commission of the account of the trustee, including fees for his or her services, all remaining monies shall be paid to Goodrich, and the trustee s power shall be terminated. The trustee s compensation shall be based at least in Modified Final Order significant part on a commission arrangement contingent on the trustee divesting the Calvert City VCM Plant. E. Goodrich shall indemnify the trustee and hold the trustee harmless against any losses, claims, damages, or liabilities arising in any manner out of, or in connection with, the trustee s duties under this order, unless the Commission determines that such losses, claims damages, or liabilities arose out of the misfeasance, gross negligence or the wilful or wanton acts or bad faith of the trustee. F. Promptly upon appointment of the trustee and subject to the approval of the Federal Trade Commission, Goodrich shall, subject to the Federal Trade Commission s prior approval and consistent with provisions of this order, transfer to the trustee all rights and powers necessary to permit the trustee to effect the divestiture required by this order.

G. If the trustee ceases to act or fails to act diligently, the Commission may appoint a substitute trustee. H. The Commission may on its own initiative or at the request of the trustee issue such additional orders or directions as may be necessary or appropriate to accomplish the divestiture required by this order. I. The trustee shall have no obligation or authority to operate or maintain the Calvert City VCM Plant.

J. The trustee shall report in writing to Goodrich and to the Commission every sixty (60) days concerning the trustee s efforts to accomplish divestiture.

VI.

It is further ordered That for a period of ten (10) years from the date the Calvert City VCM Plant is divested, Goodrich shall, at the acquirer s request, contract with the acquirer to provide to the Calvert City VCM Plant such utilties and services as are necessary for the operation of the Calvert City VCM Plant and such commercially reasonable quantities of ethylene and chlorine as the acquirer desires up to the average 1986-1988 practical production capacity of Goodrich' s ethylene and chlorine production facilties located at, or near, Calvert City. The price, terms, and conditions Goodrich shall offer the acquirer of the Calvert City VCM Plant for ethylene and chlorine shall be not greater than the prevailng market price, terms and conditions for comparable domestic sales of chlorine and ethylene to Gulf Coast EDC/VCM producers, adjusted for a freight differential FEDERA TRADE COMMISSION DECISIONS Modified Final Order 112 F. to Calvert City (such freight differential for chlorine shall be no greater than the lowest available price for transportation of chlorine by barge from a mid-point location on the Gulf Coast; such per pound freight differential for ethylene shall be no greater than the then current average actual per pound cost which Goodrich incurs for the transportation of propane to Calvert City). The prices, terms, and conditions Goodrich shall offer the acquirer of the Calvert City VCM Plant for utilties and servces shall not be greater than an amount that would be suffcient to allow Goodrich to recover its fully allocated costs, including a fair return on its investment. In the event of any dispute between Goodrich and the acquirer over the price, terms, and conditions at which Goodrich shall offer such utilties and services to the Calvert City VCM Plant, Goodrich shall submit to binding arbitration to resolve the dispute. Goodrich shall also supply to the acquirer, f. b. Gulf Coast manufacturing location, until November 30 1991 , at Goodrich' s acquisition cost, such quantities of EDC as requested by the acquirer for use in the Calvert City VCM Plant. VII.

It is further ordered That, at the acquirer s request, and on fourteen (14) months' notice prior to the expiration of Goodrich' s then current supply contract(s) for ethylene and/or chlorine for use in VCM manufacture at its La Porte, Texas plant, Goodrich shall exchange with the acquirer on a pound- for-pound basis with no differential payment by either party, such quantities as the acquirer may designate (not to exceed the amount under the contract then expiring and in total not to exceed the average 1986-1988 practical production capacity of Goodrich's ethylene and/or chlorine (as applicable) production facilties located at, or near, Calvert City) of ethylene chlorine or both, by delivery by Goodrich to the Calvert City VCM Plant in exchange for delivery by the acquirer, or by such person(s) as the acquirer may designate, to Goodrich's La Port VCM Plant. The length of such exchange shall be commercially reasonable, but in any event no less than the length of the common practice in the industry and shall not extend more than ten (10) years from the date of divestiture without Goodrich's consent. Goodrich shall notify the acquirer of the termination daters) and quantities of each of its ethylene and chlorine supply contracts, subject to, in all instances appropriate confidentiality agreements negotiated between Goodrich Modified Final Order and the acquirer. In the case of an ethylene or chlorine supply contract that by its term requires Goodrich to give notice in order for the contract to terminate, the acquirer may give the notice required by this paragraph six (6) months prior to any date such notice by Goodrich may be given. Goodrich's obligation to effect an exchange pursuant to such notice by the acquirer shall commence on the date the underlying contract would expire if Goodrich gave timely notice of cancellation to its supplier.

VII It is further ordered That Goodrich shall take all reasonable measures necessary to maintain in good operating condition the ethylene, chlorine, utilties, and service facilities that it owns and that are located at, or near, the Calvert City VCM Plant so long as Goodrich has any supply obligations pursuant to paragraphs VI or VII of this order; provided, however Goodrich shall have no obligation to maintain in good operating condition the particular facilities used to provide ethylene, chlorine, utilities, and services if the acquirer permits the utilties contract(s), service contract(s), supply contract(s) or exchange agreement(s) pertaining to that particular utilty, service or feedstock to lapse without requesting renewal or if the acquirer does not, at the time of the divestiture, enter into utilities contract(s), servce contract(s), supply contract(s), or exchange agreement(s) pertaining to that particular utilty, servce, or feedstock. Goodrich shall give the acquirer a right of first refusal on the purchase of the aforesaid ethylene facilities, chlorine facilties, utilties and servce facilties located at or near the Calvert City VCM Plant; and Goodrich shall take no action that may unreasonably interfere with any plan, or attempt, by the acquirer to build or acquire ethylene, chlorine, utilties servce, or any other facility related to the production, sale, or distribution of VCM at or near the Calvert City VCM Plant. IX.

It is further ordered That, for a period of ten (10) years from the date this order becomes final, Goodrich shall not directly or indirectly acquire-other than the acquisition of manufactured product in the ordinary course of business-all or any part of the stock or assets of or any interest in, any producer of VCM located in the United States without the prior approval of the Federal Trade Commission. FEDERA TRADE COMMISSION DECISIONS Modified Final Order 112 F.

It is further ardered That Goodrich shall, within sixty (60) days after the date this order becomes final and every sixty (60) days thereaftr until it has fully complied with the provisions of paragraph II of this order, submit in writing to the Commission a report setting forth in detail the manner and form in which it intends to comply, is complying, or has complied with that provision. Such compliance reports shall include, among other things that may be required from time to time, a full description of all contacts and negotiations relating to the divestiture of the Calvert City VCM Plant, including the name and address of all parties contacted, copies of all written communications to and from such parties, and all internal memoranda, reports and recommendations concerning divestiture; and Goodrich shall submit such further written reports of its compliance as the staff of the Commission may from time to time request writing.

XI.

It is further ardered That Goodrich, upon written request and on reasonable notice, for the purpose of securing compliance with this order, and subject to any legally recognized privilege, shall permit duly authorized representatives of the Commission or of the Director of the Bureau of Competition:

A. Reasonable access during the office hours of Goodrich, which may have counsel present, to inspect and copy books, ledgers accounts, correspondence, memoranda, reports, and other records and documents in the possession or control of Goodrich that relate to any matter contained in this order; and B. Subject to the reasonable convenience of Goodrich, an opportunity to interview offcers or employees of Goodrich, who may have counsel present, regarding such matters.

XII.

It is further ardered That Goodrich shall notify the Federal Trade Commission at least thirty (30) days prior to any proposed corporate change, such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of Dissenting Statement subsidiaries or any other change in the corporation, which may affect compliance with the obligations arising out of this order. DISSENTING STATEMENT OF COMMISSIONER MARY 1. AZCUENAGA The Commission now joins, by a vote of 3 to 2, in a settement to resolve the appeal of the B.F. Goodrich Co. from the Commission order in this matter, which required a divestiture to restore competition in the vinyl chloride monomer ("VCM") market. Under the settlement, B.F. Goodrich will divest its Calvert City, Kentucky, VCM plant instead of divesting the LaPorte, Texas, VCM plant, as required by the Commission s order. I dissent.

With this settlement, the Commission relinquishes a procompetitive divestiture for a substantially less efficacious remedy. Indeed, the Calvert City plant is unlikely to be an independent competitive force in the industry for the long term, primarily because Goodrich wil control essential raw materials. In agreeing to this settement, the Commission also casts aside a substantial investment of time and resources both public and private, in litigating and adjudicating this case, for no compellng reason and in haste.

This settement perversely secures the worst of two worlds. On one hand, the settement is insuffcient to eliminate the competitive concerns at the heart of this case. On the other hand, the settlement which requires detailed Commission review of complex pricing decisions for an extended time, is highly regulatory and usually would be rejected on that ground alone. The settlement establishes the Commission as a kind of "Office of Price Administration " intrusively monitoring and policing pricing decisions for years. What is the rationale for this extraordinary "compromise ? Nothing has changed since the Commission issued its opinion and final order except that the case has been briefed and argued before the court. Does the Commission have second thoughts about its opinion and order? (One of the three commissioners who now supports the relief imposed by the settement found no violation of law on which to predicate any relief whatsoever when the Commission issued its opinion and order. 1 Presumably, this commissioner now believes that Goodrich has indeed violated the law.) If we made a mistake in fact or in law, vacating the order would be the appropriate remedy. If we continue to believe that we have applied the law correctly, then See Separate Statement of Chainnan Daniel Oliver in The F. Goodrnh Co. FTC Docket No. 9159. Dissenting Statement 112 F. prosecution of the appeal, rather than evisceration of the order, would seem to be consistent with the public interest. I believe that the Commission s original opinion and order with respect to the VCM market are correct. Acceptance of this settlement with its inadequate remedy and regulatory format most assuredly is not in the public interest. 2 2 I also dissnt frm the decision fie the settlement under seal. Initial Decision