Occidental Petroleum Corporation

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IN THE MATTER OF OCCIDENTAL PETROLEUM CORPORATION, ET AL.

FINAL ORDER, OPINION, ETC., INREGARD TO ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9205. Complaint,” April 11, 1986--Final Order, Dec. 22, 1992 This final order upholds the ruling of the administrative law judge, which requires Occidental, a California-based corporation, to divest certain Tenneco PVC plants to a Commission-approved acquirer within one year. The order prohibits Occidental, for 10 years, from acquiring all or any part of the stock or assets of, or any interest in, any producer of PVC located in the United States, without prior Commission approval. Appearances For the Commission: Rhett R. Krulla and Marc G, Schildkraut. For the respondents: Michael Sohn, Arnold & Porter, Washington, D.C. Louis Nizer Phillips, Nizer, Benjamin Krim & Ballon, New York, N.Y. and Robert Luss, in-house counsel for respondent Occidental Chemical Corporation, Dallas, TX. INITIAL DECISION BY THOMAS F. HOWDER, ADMINISTRATIVE LAW JUDGE SEPTEMBER 30, 1988 CITATION FORMAT Hearing testimony presented by affidavit or declaration in this proceeding is identified by the name of the witness, the exhibit number and the appropriate page and paragraph reference (e.g., Pflugrath CX 177F 10).

Hearing testimony from The B.F. Goodrich Co., FTC Docket 9159, is identified by the name of the witness followed by the * Complaint previously published at 111 FTC 27 (1988). OCCIDENTAL PETROLEUM CORPORATION, ETAL. 101] 1010 Initial Decision designation Dkt.5 1 3 1 1 3 902 619 114 35 94.704376 9159 and the Goodrich transcript page number (e.g., Kaserman Dkt. 9159, 2313).

Hearing testimony from the preliminary injunction proceeding in FTC v. Occidental Petroleum Corp., Civil No. 86-0900 (D.D.C. 1986), is identified by the name of the witness, the joint exhibit number (JX 1) and the appropriate page and line reference (e.g., Kaserman JX 1, 266 In. 19 - 267 In. 15).

Joint exhibits, comprised of the trial exhibits and transcripts of testimony from the hearing on the preliminary injunction in FTC v. Occidental Petroleum Corp., Civil No. 86-0900 (D.D.C. 1986), are identified by the prefix JX and the exhibit number, followed by the district court transcript page number and line reference for trial testimony, or by the prefix PX or DX, for plaintiff's exhibit and defendant's exhibit, respectively, and the district court exhibit number and page reference as appropriate (e.g., JX 3, PX 129 at 7). Complaint counsel's and respondents’ exhibits are identified by the prefix CX or RX, respectively, and the exhibit number and page reference as appropriate (e.g., CX 156F). References to exhibits in the record in The B.F. Goodrich Co., FTC Docket No. 9159, are identified by the prefix Dkt.5 1 3 5 2 11 1741 1727 114 36 94.724632 9159 followed by the exhibit number and appropriate page reference (e.g., Dkt. 9159 CX 1Z37).

References to the numbered findings in Goodrich, as adopted by the Commission in The B.F. Goodrich Company, Docket No. 9159, Final Order, March 15, 1988, at 2, are identified as Goodrich5 1 3 6 3 12 1718 2016 55 34 92.086731 F. and the finding number. Other references to the Initial Decision, as adopted by the Commission in Goodrich, are identified as Goodrich4 1 3 6 6 0 520 2187 1169 47 -1 5 1 3 6 6 1 520 2188 49 35 96.589302 ID5 1 3 6 6 2 585 2188 51 35 96.462067 at followed by the page number of the Initial Decision. References to complaint counsel's proposed findings are identified by CPF and the finding number. References to respondents’ proposed findings dated December 7, 1987, are identified by RPF and the finding number. PRELIMINARY STATEMENT The Federal Trade Commission issued its administrative complaint in this case on April 11, 1986, challenging the acquisition of Tenneco Polymers, Inc., a wholly-owned subsidiary of Tenneco, Initial Decision 115 F.T.C.

Inc., by Occidental Chemical Corporation, a wholly-owned subsidiary of Occidental Petroleum Corporation. Respondents filed their Answers on May 19, 1986, denying that the transaction violated Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act, as alleged in the complaint.’ Pursuant to agreement of the parties, the record in the instant case incorporates the record in The B.F. Goodrich Company case, Docket 9159 (decided by the Commission on March 15, 1988), together with additional documentary exhibits and witness testimony in the form of affidavits and declarations. The record also contains trial exhibits and testimony adduced by the parties in the Commission's unsuccessful attempt to obtain a preliminary injunction in the instant case.”

This proceeding is before me upon the pleadings, the record as described above, and the proposed findings of fact and conclusions of law filed by the parties. The proposed findings, conclusions and arguments of the parties have been considered, and those findings and conclusions not adopted either in the form proposed or in substance are rejected as not supported, or as involving immaterial issues unnecessary for this decision.

Any motions not heretofore or herein specifically ruled upon, either directly or by the necessary effect of the conclusions in this decision, are hereby denied.

FINDINGS OF FACT I. THE RESPONDENTS A. Occidental 1. Occidental Petroleum Corporation ("Occidental") is a California corporation with its principal offices in Los Angeles, California (JX 3, PX 15 at 17; JX 3, PX 16 at 56; JX 3, PX 46). 1 The Commission subsequently accepted a consent agreement on the part of the Tenneco respondents, the Decision and Order dated July 19, 1988. > See the description of this attempt set forth in note 3 and pages 2-3 of the Commission's opinion in the Goodrich case (March 15, 1988). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1013 1010 Initial Decision 2. Occidental Chemical Corporation ("Oxychem") is the Occidental subsidiary responsible for all of Occidental's PVC-related activities (JX 3, PX 15 at 14). Oxychem is the entity which acquired Tenneco Polymers, Inc. (JX 3, PX 17 at 904338A). 3. [##] (IX 3, PX 16 at 11-18). [##] (PX 3, PX 140 In Camera; JX 3, PX 16 at 17).

4. [##] (Lull JX 1, 506-508; JX 3, PX 15; Dkt. 159 CX 519M In Camera).

5. Oxychem is the successor corporation to Diamond Shamrock Chemicals Company ("DSCC"), a respondent in The B.F. Goodrich Company, FTC Docket No. 9159. In 1986, DSCC was acquired by Occidental and merged into Oxychem (CX 1D, N, Z2, Z12; CX 160).

6. At all times relevant herein, Occidental Petroleum Corporation and Occidental Chemical Corporation have engaged in commerce as commerce is defined in Section 1 of the Clayton Act, 15 U.S.C. 12, and Section 4 of the FTC Act, 15 U.S.C. 44 (Occidental Answer { 2; JX 3, PX 15 at 17; JX 3, PX 16 at 5; RPF 6). B. Tenneco 7. Tenneco Inc. ("Tenneco"), is a large, integrated oil company (JX 3, PX 19 at 1-5) [##] (JX 3, PX 140 In Camera; See Schaefer JX 1, 592 In. 10-13; JX 3, PX 20 at 11, 15, 17, 19). 8. Tenneco Polymers, Inc. ("Tenneco Polymers"), is a wholly-owned subsidiary of Tenneco Inc. (JX 3, PX 11 at 622 In. 12-14; Cunningham JX 1, 784 In. 2-5).

9. At all times relevant herein, Tenneco Inc., and Tenneco Polymers, Inc. have engaged in commerce as commerce is defined in Section 1 of the Clayton Act, 15 U.S.C. 44 (JX 3, PX 19 at 1, 3-17).

10. Prior to the acquisition, Oxychem and Tenneco Polymers were direct competitors in the relevant PVC (Schaefer JX 1, 592 In. 10-13; JX 3, PX 8 at 38 In. 6-9; Weimar JX 1, 34 In. 14-20 (copolymer); Mason JX 1, 196 In. 7-13 (dispersion); Beveridge JX 1, 87 In. 25-88 In. 2 (dispersion); Friedman JX 1, 131 In. 1-133 In. 12 (mass and suspension homopolymer)).

Initial Decision 115 F.T.C.

II. THE ACQUISITION 11. Through its wholly-owned subsidiary, Oxychem, Occidental acquired Tenneco Polymers' 750 million-pound capacity suspension PVC plant at Pasadena, Texas, and its 150 million-pound capacity suspension PVC copolymer and dispersion PVC resin plant at Burlington, New Jersey. In addition, Oxychem acquired all buildings, machinery, equipment, and intangible assets related to Tenneco Polymers’ PVC operations (Cunningham JX 1, 751 In. 6-21; See, e.g., JX 3, PX 97).? The total purchase price was approximately $70 million, plus approximately $30 million for Tenneco's PVC inventories (Cunningham JX 1, 805 In. 7-14; JX 3, PX 17 at 8). III. PVC INDUSTRY OVERVIEW A. Product Description 12. PVC resins are thermoplastic materials, i.e., plastics that become soft and malleable when heated. In virtually all applications, PVC resins must be compounded with a variety of additives, including stabilizers, plasticizers, and coloring agents to give the resins the desired characteristics required for processing and fabrication into end products. After compounding with other ingredients, PVC resins can be converted, through the application of heat and pressure, into a wide variety of finished vinyl products (The B.F. Goodrich Company, (FTC Docket No. 9159) slip op. at 1, 17 (March 21, 1988); Goodrich F 17-18; Kaserman JX 1, 270 In. 10-20, 266 In. 16 - 267 In. 11; Dkt. 9159 CX 427L-M; Dkt. 9159 CX 428M-N).

13. [##] (Dkt. 9159 CX 6D, 6Z37; Dkt. 9159 CX 8B; Dkt. 9159 CX 40Z2 In Camera; Dkt. 9159 CX 109E, In Camera). In 1987, > In addition to the resin and compounding plants and portions of the associated land, acquired assets include all buildings, machinery and equipment related to the manufacturing facilities; inventories; stores; spare equipment; and intangible assets such as trade secrets, patents, technology agreements, permits, trade names and customer rights (JX 3, PX 17 at 2-8). [##] (IX 3, PX 97; Taylor 181B J 2 Jn Camera). [##] (Taylor CX181B-D In Camera). OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1015 1010 Initial Decision United States production of PVC of all types was approximately 8.0 billion pounds (CX 213C).

14. PVC resins are derived from the chemicals ethylene and chlorine. The chemicals are converted into ethylene dichloride ("EDC"), from which the intermediate chemical product, vinyl chloride monomer ("VCM".), is manufactured by a thermal-cracking process (Goodrich, slip op. at 17, 20; Goodrich F 17, 30, 32; Dkt. 9159 CX 4G; Dkt. 9159 CX 6, Z35-Z36).

B. Production Processes 15. All PVC resins are produced by a polymerization process which links VCM molecules together in a vessel, commonly referred to as a reactor, under specific temperatures in the presence of catalysts. The resulting PVC resins, in the form of white powder or granules, can be compounded with auxiliary ingredients (e.g., stabilizers, plasticizers, and impact modifiers), and converted into a wide variety of vinyl end products through several types of fabricating and finishing processes. The processing and performance characteristics of PVC resins and, consequently, suitability for a particular end-use product, vary according to the resin type and, within each type, a number of variables that are controlled in the resin production process (Goodrich F 17-23; JX 3, PX 11 at 627 In. 13-631 In. 11, 656 In. 17 - 658 In. 17; Lull JX 1,504 In. 6-14). 16. There are four basic processes used to manufacture PVC resin: (1) suspension; (2) mass (or bulk); (3) dispersion (or emulsion); and (4) solution* (Goodrich F 20-23; JX 3, PX 11 at 627 In. 13 - 631 In. 11; JX 3, PX 8 at 7 In. 18-21; Dkt. 9159 CX 6D, 6Z37; Dkt. 9159 CX 427I-K).

17. The most common method is the suspension process (Disch Dkt. 9159, 627-628). VCM is added to a reactor that contains water, a colloid (a suspending agent), and initiators. The mixture is then heated, which starts the reaction. The process of polymerization, i.e., 4 The solution polymerization process is utilized at only one facility in the United States, exclusively for the production of specialty copolymers. It represents less than one percent of total U.S. production capacity (Goodrich F 23 n.6; Disch Dkt. 9159, 630-631; Dkt. 9159 CX 427L).

Initial Decision 115 F.T.C.

combining the VCM molecules into longer molecular chains, requires several hours. The manufacturer then stops the reaction, removes unreacted VCM from the mixture, and dries the PVC (JX 3, PX 11 at 627 In. 22-629 In. 5; Disch Dkt. 9159, 627-629; Dkt. 9159 CX 642Z26-Z29). Suspension PVC homopolymer resins account for approximately eighty-five percent of all PVC resin manufactured in the United States (Goodrich, slip op. at 17; Goodrich F 21; JX 3, PX 11 at 627 In. 22 - 628 In. 5; Dkt. 9159 CX 30G). 18. Another method of polymerization of homopolymer PVC resin is the mass process (also known as the bulk process). In this method, VCM is polymerized without the use of other liquids (Goodrich, slip op. at 17; Goodrich F 23; JX 3, PX 11 at 629 In. 7-13; Dkt. 9159 CX 642231). Mass polymerization consists of a two-stage process, which yields a resin comparable in appearance and properties to suspension PVC homopolymer resin (Goodrich F 23-24; JX 3, PX 11 at 631 In. 13 - 632 In. 24; JX 3, PX 8 at 12 In. 12-21; JX 3, PX 6 at 73 In. 18-21; Disch Dkt. 9159, 631-632; Dkt. 9159 CX 50V-W; Dkt. 9159 CX 427K-L; Dkt. 9159 CX 642Z31-Z36).

19. Suspension PVC copolymer resins are produced by a suspension process, but differ from suspension PVC homopolymer resin in that they are produced by the polymerization of two distinct monomers, introduced in controlled proportions in the reaction process. [##] (Hill CX 183F 13 Jn Camera; Flammer CX 184B 43, CX 184D ]6; JX 3, PX 9 at 15 In. 20-16 In. 4; JX 3, PX 8 at 13 In. 6 - 16 In. 20; Lull JX 1, 505 In. 4-8). VCM accounts for 80 to 90 percent of the raw material cost of the finished product, and vinyl] acetate accounts for 10 to 20 percent of the raw material cost of the finished product (JX 3, PX 8 at 30 In. 22 -31 In. 5). 20. [##] (Goodrich F 22; Hill CX 183F { 17 Jn Camera; Flammer CX 184B 7 4, CX 184D { 6; Boyer 185B-C J 3, | 5; JX 3, PX 8 at 7 In. 18 - 8 In. 23; JX 3, PX 11 at 630 In. 3-23, 632 In. 25 - 633 In. 10; Lull JX 1, 505 In. 12 - 506 In. 6; Dkt. 9159 CX 642Z29-Z31). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1017 1010 Initial Decision C. Uses 1. Mass and suspension PVC homopolymer 21. [##] (Goodrich F 97-193; Pflugrath CX 177B { 3 In Camera; Heath CX 178B-C J 3 In Camera; Stuart CX 201A-B J 2 In Camera; Friedman JX 1, 116 In. 7-14, 118 In. 1-16, 121 In. 6-14; Witsken JX 1, 610 In. 20 - 611 In. 1; DiLiddo Dkt. 9159 3108; Disch Dkt. 9159, 665-671, 674-677; Belt Dkt. 9159, 2010-2012; Dkt. 9159 CX 14F In Camera; Dkt. 9159 CX 40Z2-Z6 In Camera; Dkt. 9159 CX 92F; Dkt. 9159 CX 97C In Camera; Dkt. 9159 RX 143C; Dkt. 9159 RX 166A; Dkt. 9159 CX 244E-G; Dkt. 9159 CX 417A-Z22; See generally JX 3, PX 9 at 112 In. 7 - 116 In. 21). [##] (Wilhite CX 179B-C { 3 In Camera; Porter CX 198B-C { 3 In Camera; Alberti CX 199F-G J 9 In Camera; Stuart CX 201B-C J 4 Jn Camera; Underwood CX 203B q 3 In Camera; Yu Dkt. 9159, 2142-2144; Waggoner Dkt. 9159, 3646; Dkt. 9159 CX 300Z7 In Camera). [##] (Dkt. 9159 CX 92Y; Dkt. 9159 CX 300Z8 In Camera; Dkt. 9159 CX 428Z100). [##] (Friedman CX 191B {5 Jn Camera; Friedman JX 1, 116 In. 7-14, 118 In. 1-16, 121 In. 6-14; Disch Dkt. 9159, 665; Becker Dkt. 9159, 1317; Dkt. 9159 CX 300Z9 In Camera; Dkt. 9159 CX 92X; Dkt. 9159 RX 172T). [##] (Becker Dkt. 9159, 1268-1270; Dkt. 9159 CX 428E; Dkt. 9159 CX 542A In Camera; Dkt. 9159 CX 642Z9),. 22. [##] (Clark CX 193B J 2 In Camera; Bendavid CX 194B J 3 In Camera; JX 3, PX 9 at 112 In. 7-12; JX 3, PX 8 at 47 In. 23-48 In. 3; Kaserman JX 1, 270 In. 10-20; Dkt. 9159 CX 299744- 746, ZA9-Z50 In Camera).

23. Compounding gives mass and suspension PVC homopolymer a broad array of performance properties. Plasticizers can be used to make mass and suspension PVC homopolymer more flexible and less brittle. Stabilizers are added to protect against degradation from heat or light. For less demanding applications, fillers can be utilized to reduce raw material costs. Pigments add color (JX 3, PX 11 at 627 In. 13 - 631 In. 11, 656 In. 17 - 658 In. 17; Disch Dkt. 9159, 656-58; Dkt. 9159 CX 1842Z83-Z85; Dkt. 9159 CX 427L). 24. [##] (Goodrich F18 n.5; Dellevigne CX 188A J 4 Jn Camera; Friedman CX 191B { 4 Jn Camera; Dkt. 9159 CX 427M; Dkt. 9159 CX 642223).

Initial Decision 115 K.T.C.

2. Suspension PVC copolymer 25. [##] (Hill CX 183D { 10 In Camera; JX 3, PX 13 at 452726; JX 3, PX 9 at 14 In. 12-25; See Weimar JX 1, 30 In. 20 - 31 In. 2). 26. Suspension PVC copolymer resins are compounded with various additives before processing (Disch Dkt. 9159, 655-657). [##] (Hill CX 183E J 11 In Camera; Dkt. 9159 CX 427Z7). [##] (Goodrich F 186; Hill CX 183F J 13-14 In Camera; Flammer CX 184E-F J 10; Disch Dkt. 9159, 678-679; JX 3, PX 136 56 In. 24 - 57 In. 1; Dkt. 9159 CX 300Z10 Jn Camera).

27. Phonograph records are fabricated by the compressionmolding of suspension PVC copolymer compound (Disch Dkt. 9159, 661-662). [##] (Hill CX 183E { 12 Jn Camera). 28. [##] (Weimar CX 192F-G J 15 Jn Camera; Rawlins CX 197B ¥ 3 In Camera; Weimar JX 1, 30-32; Barlet JX 1, 56-57). 29. [##] (Weimar CX 192A-B 1 3 Jn Camera). [##] (Weimar CX 192A-B ¥ 3 In Camera; Rawlins CX 197A-B J 2 In Camera; Barlet JX 1 56-57).

3. Dispersion PVC 30. [##] (van Haaren CX 187B { 5-6 In Camera; Boulay CX 189A-B J 2 In Camera; Truog CX 202A { 1 In Camera; Baker CX 205A-B §[ 1; Kaserman JX 1, 262 In. 9 - 264 In. 9, 266 In. 16 - 267 In. 15 Rutland JX 1, 731; JX 3, PX 8 at 8 In. 24 - 9 In. 11, 32 In. 15-21, 47 In. 16-23; JX 3, PX 9 at 14 In. 12-18; JX 3, PX 13 at 452717). [##] (Flammer CX 184E-F J 10; van Haaren CX 187B { 5 In Camera; JX 3, PX 8 at 32 In. 15 - 37 In. 24). 31. The consumption of approximately 40 percent of the United States market for dispersion PVC resin is accounted for in the manufacture of vinyl resilient sheet flooring (JX 3, PX 8 at 43 In. 16-23). [##] (van Haaren CX 187B-C J 6 In Camera; Barlet JX 1, 63-66; JX 3, PX 9 at 98 In. 3-7).

32. A major group of applications for dispersion resin involve coating a surface with a plastisol of resin (dispersion particles suspended in fluid plasticizers) compounded with other ingredients. These applications primarily comprise the coating of fabric or paper with resin which is then fused to the substrate. Products using OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1019 1010 Initial Decision dispersion-coated fabric include vinyl upholstery covering, handbags, shoe uppers, wall coverings, luggage, apparel, hospital equipment and carpet backing (Mason JX 1, 192; JX 3, PX 9 at 96 In. 25 - 97 In. 19) In addition, dispersion resin may be used for coating containers, such as paint cans or bottles (JX 3, PX 8 at 34 In. 15 - 35 In. 7; JX 3, PX 9 at 95 In. 8-10, 97 In. 20-23).

33. [##] (Flammer CX 184E-F 710; Boulay CX 189A-B J 2 In Camera; Lore JX 1, 177-179, 186-188; JX 3, PX 8 at 35 In. 15 - 37 In. 12).

D. History of PVC 34. [##] (Dkt. 9159 CX 200M Jn Camera). [##] (Goodrich F 27; DiLiddo Dkt. 9159, 3106; Dkt. 9159 CX 92G; Dkt. 9159 CX 40Z2 In Camera).

1. Mass and suspension PVC homopolymer 35. The initial growth and development of mass and suspension PVC homopolymer as a product in the 1950's and 1960's occurred as flexible (plasticized) PVC resin found markets in wire and cable, calendered sheet, and specialty applications (Goodrich F 28; See DiLiddo Dkt. 9159, 3106-08). [##] (Goodrich F 28; Dkt. 9159 RX 639H In Camera).

36. [##] (Goodrich F 29; Dkt. 9159 RX 639H In Camera). [##] (Goodrich F 29; Dkt. 9159 RX 639H, P In Camera). [##] (Goodrich F 29; Disch Dkt. 9159, 641, 648-653; Dkt. 9159 CX 374G, Q In Camera, Dkt. 9159 CX 405R; Dkt. 9159 CX 420F; Dkt. 9159 CX 428Z12).

37. [##] (H. Wheeler Dkt. 9159, 1734-35; Disch Dkt. 9159, 641- 42; See Dkt. 9159 CX 505S-T; Dkt. 9159 CX 515G; Dkt. 9159 RX 639H, R Jn Camera; Dkt. 9159 CX 6420), and the development and implementation of vinyl chloride emission control technology to comply with newly-instituted environmental regulations (See Dkt. 9159 CX 642 U-V; Dkt. 9159 CX 597 A-E).

38. [##] (Dkt. 9159 CX 42A-Z64 In Camera; Dkt. 9159 RX 639H In Camera). [##] (See Eades Dkt. 9159, 1464-1465; See Dkt. 9159 RX 639H Jn Camera).

Initial Decision 115 F.T.C.

39. The mid-to-late 1970's were also a period of fundamental changes in the regulatory environment facing the PVC and VCM industries which had a profound effect on the technological design, siting, and operation of plants, capital costs, and the structure of the markets (See Dkt. 9159 CX 642Z5-Z6; Dkt. 9159 CX 504D-O; DKkt. 9159 CX 505S-U; Dkt. 9159 CX 597A-E). While regulations promulgated by both federal and state agencies during this period affected all aspects of business, environmental regulations had the greatest overall impact on the PVC and VCM industries (See Dkt. 9159 CX 597C). Following the finding of VCM as a highly specific cause of liver cancer, the Occupational Health and Safety Administration (OSHA) announced a standard in 1975 to reduce occupational exposure to residual VCM. And in 1976, the Environmental Protection Agency (EPA) promulgated a standard to reduce atmospheric VCM emissions (Goodrich, slip op. at 32; See Dkt. 9159 CX 642U). Additional environmental regulations affecting other aspects of PVC and VCM production facilities were subsequently adopted (Dkt. 9159 CX 597C-D; Dkt. 9159 CX 642Z,164- Z177).

40. [##] (Dkt. 9159 CX 200L Jn Camera; Dkt. 9159 CX 642Z5). Most of the requirements regarding VCM control technology pertain to PVC plants, which, as batch process operations, contribute proportionately more emissions than VCM/EDC plants, which operate through a self-contained continuous flow process (Dkt. 9159 CX 642).

2. Suspension PVC copolymer 41. [##] (Hill CX 183F { 16 In Camera; Flammer CX 184D 77; Boyer CX 185G-H { 16; Fisher CX 208A-B {[ 2; Schaefer JX 1, 586; Kaserman JX 1, 329, 473-474; JX 3, PX 9 at 42 In. 17 - 43 In. 11; JX 3, PX 13 at 452726) 3. Dispersion PVC 42. [##] (Flammer CX 184D J 7; Boyer CX 185E J 10; van Haaren CX 187C J 8 Jn Camera; Kaserman JX 1, 329, 473; JX 3, PX OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1021 1010 Initial Decision 8 at 34 In. 21 - 35 In. 1, 80 In. 20-24; JX 3, PX 9 at 93 In. 25 - 94 In. 16; JX 3, PX 13 at 452717).

IV. THE RELEVANT PRODUCT MARKETS 43. In its landmark decision in Brown Shoe Co. v. United States, 370 U.S. 294 (1962), the Supreme Court outlined a two-step process for product market analysis. First, the outer boundaries of a product market are to be identified by determining reasonable interchangeability of use or cross-elasticity of demand between the product itself and substitutes for it. Jd. at 325. See also United States v. Continental Can Co., 378 U.S. 441, 447-49 (1964); Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961); United States v. E.]. du Pont de Nemours & Co., 351 U.S. 377, 393-395, 400-401, 404 (1956).

44. Further Brown Shoe explains that the boundaries of markets for antitrust purposes may be determined by examining such4 1 5 2 3 0 523 1614 1337 53 -1 5 1 5 2 3 1 523 1620 166 47 96.164299 practical5 1 5 2 3 2 706 1620 133 35 96.880081 indicia5 1 5 2 3 3 855 1629 37 25 96.916946 as5 1 5 2 3 4 907 1619 160 45 96.959030 industry5 1 5 2 3 5 1083 1629 40 24 96.985931 or5 1 5 2 3 6 1136 1617 122 46 96.717445 public5 1 5 2 3 7 1273 1616 223 45 96.864914 recognition5 1 5 2 3 8 1511 1615 42 35 96.885414 of5 1 5 2 3 9 1565 1615 58 35 96.982170 thes 1 5 2 3 10 1640 1614 164 43 96.809059 [market]5 1 5 2 3 11 1822 1623 38 25 96.958519 as4 1 5 2 4 0 525 1673 1335 52 -1 5 1 5 2 4 1 525 1691 20 24 95.996193 a5 1 5 2 4 2 556 1686 157 39 95.996193 separates 1 5 2 4 3 725 1677 186 36 96.830193 economics 1 5 2 4 4 924 1677 119 45 96.500290 entity,5 1 5 2 4 5 1056 1677 58 34 96.258827 thes 1 5 2 4 6 1125 1676 172 46 88.709656 product's5 1 5 2 4 7 1309 1674 185 47 96.598801 particulars 1 5 2 4 8 1505 1673 274 36 96.598801 characteristics5 1 5 2 4 9 1793 1673 67 34 96.946381 anda 1 5 2 5 0 524 1730 1337 52 -1 5 1 5 2 5 1 524 1747 93 31 96.943245 uses,5 1 5 2 5 2 633 1737 132 45 96.382988 unique5 1 5 2 5 3 779 1735 211 47 96.716866 productions 1 5 2 5 4 1005 1734 176 41 95.621368 facilities,5 1 5 2 5 5 1198 1733 142 36 95.621368 distinct5 1 5 2 5 6 1354 1733 124 46 96.064308 prices,5 1 5 2 5 7 1496 1731 201 45 96.064308 sensitivity5 1 5 2 5 8 1712 1737 36 29 96.980705 to5 1 5 2 5 9 1764 1730 97 46 96.992668 price4 1 5 2 6 0 524 1789 1335 51 -1 5 1 5 2 6 1 524 1796 165 44 96.797775 changes,5 1 5 2 6 2 704 1794 68 36 96.926086 ands 1 5 2 6 3 786 1793 213 46 96.537315 specialized5 1 5 2 6 4 1013 1792 180 35 86.447540 vendors. Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). The overriding principle in this two-step analysis is to identify meaningful competition where it actually exists. United States v. Continental Can Co., 378 U.S. 441, 449 (1964).

45.The Department of Justice Merger Guidelines and the Statement of Federal Trade Commission Concerning Horizontal Mergers? provide principles for defining the relevant product market. > In 1982, the Justice Department issued revised Merger Guidelines. Department of Justice Merger Guidelines (1982), 2 Trade Reg. Rep. (CCH) { 4500, et seg. Those 1982 Guidelines were further revised by the Department in 1984. See U.S. Department of Justice Guidelines, 2 Trade Reg. Rep. (CCH) | 4490, er seq. (June 14, 1984) ("DOJ Merger Guidelines"). Also in 1982 the Federal Trade Commission issued a statement concerning horizontal mergers. Statement of Federal Trade Commission Concerning Horizontal Mergers, 2 Trade Reg. Rep. (CCH) J 4516 (June 14, 1982) ("FTC Merger Statement"). While these statements are not binding on the courts, courts have applied them when determining the impact on competition of a proposed acquisition. See, e.g., Initial Decision 115 F.T.C.

The DOJ Merger Guidelines establish the following test for determining a relevant product market:

[T]he Department will begin with each product (narrowly defined) produced or sold by each merging firm and ask what would happen if a hypothetical monopolist of that product imposed a small5 1 4 1 3 6 1171 896 51 29 96.976219 but5 1 4 1 3 7 1234 894 167 39 96.946709 significant5 1 4 1 3 8 1413 894 57 30 93.306000 ands 1 4 1 3 9 1482 893 242 38 40.362164 non-transitory”5 1 4 1 3 10 1738 892 132 29 96.006905 increases 1 4 1 3 11 1882 891 29 30 96.006905 in5 1 4 1 3 12 1923 891 89 39 96.939995 price.4 1 4 1 4 0 676 940 1338 45 -1 5 1 4 1 4 1 676 947 28 31 96.810341 If5 1 4 1 4 2 715 947 48 30 96.810341 thes 1 4 1 4 3 776 947 81 38 96.550385 prices 1 4 1 4 4 871 946 132 29 96.526123 increases 1 4 1 4 5 1017 944 101 30 97.003799 would5 1 4 1 4 6 1130 953 90 21 96.069550 causes 1 4 1 4 7 1234 952 34 21 96.408394 so5 1 4 1 4 8 1281 952 89 29 96.748764 many5 1 4 1 4 9 1382 942 108 39 96.603691 buyers5 1 4 1 4 10 1504 947 30 25 97.001045 to5 1 4 1 4 11 1548 941 71 30 96.909790 shifts 1 4 1 4 12 1631 946 30 25 96.959221 to5 1 4 1 4 13 1674 941 84 29 96.777596 others 1 4 1 4 14 1770 940 140 39 96.777596 products5 1 4 1 4 15 1924 940 61 29 96.552017 that5 1 4 1 4 16 1998 948 16 21 96.552017 a4 1 4 1 5 0 676 987 1337 48 -1 5 1 4 1 5 1 676 995 199 40 96.558189 hypothetical5 1 4 1 5 2 888 993 181 39 96.972290 monopolist5 1 4 1 5 3 1081 992 99 30 96.129578 would5 1 4 1 5 4 1192 996 51 25 96.129578 not5 1 4 1 5 5 1254 991 63 30 96.312843 finds 1 4 1 5 6 1329 991 21 29 96.312843 it5 1 4 1 5 7 1360 990 157 39 96.666855 profitable5 1 4 1 5 8 1530 995 30 24 96.860641 to5 1 4 1 5 9 1573 989 116 39 96.057335 imposes 1 4 1 5 10 1702 989 73 29 96.057335 such5 1 4 1 5 11 1789 997 36 21 96.249771 an5 1 4 1 5 12 1838 988 133 29 96.413902 increases 1 4 1 5 13 1984 987 29 30 96.846329 in4 1 4 1 6 0 676 1036 1338 47 -1 5 1 4 1 6 1 676 1045 90 38 96.874962 price,5 1 4 1 6 2 783 1044 69 30 96.857780 then5 1 4 1 6 3 868 1043 48 30 96.467834 thes 1 4 1 6 4 931 1043 193 37 96.969513 Departments 1 4 1 6 5 1139 1040 62 31 96.302551 will5 1 4 1 6 6 1216 1040 57 30 96.281868 adds 1 4 1 6 7 1288 1045 31 25 96.037361 to5 1 4 1 6 8 1333 1040 49 30 96.037361 thes 1 4 1 6 9 1396 1039 125 39 96.836731 products 1 4 1 6 10 1536 1047 94 30 96.889580 groups 1 4 1 6 11 1645 1038 49 30 96.910934 thes 1 4 1 6 12 1709 1037 125 39 96.897263 products 1 4 1 6 13 1849 1037 60 29 96.958183 that5 1 4 1 6 14 1924 1036 25 30 97.000343 is5 1 4 1 6 15 1965 1036 49 30 96.991661 thea 1 4 1 7 0 676 1085 1336 43 -1 5 1 4 1 7 1 676 1093 148 30 93.182144 next-best5 1 4 1 7 2 835 1091 153 31 96.750832 substitutes 1 4 1 7 3 998 1091 47 29 96.954170 for5 1 4 1 7 4 1054 1091 47 28 96.989220 thes 1 4 1 7 5 1112 1089 133 39 96.702202 merging5 1 4 1 7 6 1256 1088 90 30 93.217804 firm's5 1 4 1 7 7 1356 1088 123 38 96.937820 products 1 4 1 7 8 1489 1087 57 29 96.900414 ands 1 4 1 7 9 1556 1086 53 30 96.900414 asks 1 4 1 7 10 1619 1086 48 30 96.839600 thes 1 4 1 7 11 1678 1094 81 22 96.839600 same5 1 4 1 7 12 1769 1085 137 39 97.012688 questions 1 4 1 7 13 1917 1085 95 38 96.952698 again.4 1 4 1 8 0 676 1133 1338 46 -1 5 1 4 1 8 1 676 1141 71 29 96.750275 This5 1 4 1 8 2 767 1148 123 31 96.796745 process5 1 4 1 8 3 910 1139 61 29 96.974213 will5 1 4 1 8 4 990 1138 140 30 96.885582 continues 1 4 1 8 5 1148 1136 74 31 96.540337 until5 1 4 1 8 6 1240 1145 16 21 96.605186 a5 1 4 1 8 7 1275 1145 93 30 96.605186 groups 1 4 1 8 8 1387 1135 35 30 96.832260 of5 1 4 1 8 9 1438 1135 139 38 96.324203 products5 1 4 1 8 10 1597 1134 24 30 96.056084 is5 1 4 1 8 11 1640 1133 156 31 96.056084 identified5 1 4 1 8 12 1815 1133 47 30 96.986443 for5 1 4 1 8 13 1880 1133 99 29 96.981094 which5 1 4 1 8 14 1998 1141 16 20 96.981094 a4 1 4 1 9 0 676 1181 1338 48 -1 5 1 4 1 9 1 676 1189 202 40 96.745743 hypothetical5 1 4 1 9 2 899 1187 184 39 96.792717 monopolist5 1 4 1 9 3 1103 1186 90 30 96.723763 could5 1 4 1 9 4 1213 1184 159 40 96.805717 profitably5 1 4 1 9 5 1393 1184 116 38 96.503922 imposes 1 4 1 9 6 1530 1192 17 21 96.503922 a5 1 4 1 9 7 1569 1183 101 29 93.684792 small but significant and nontransitory" increase in price. The Department generally will consider the relevant product market to be the smallest group of products that satisfies this test. DOJ Merger Guidelines, supra, J 492.101, at 6879-9. The Department has identified an example of a5 1 5 1 2 8 1495 1447 103 36 95.961380 small5 1 5 1 2 9 1624 1447 62 35 96.518715 but5 1 5 1 2 10 1711 1446 209 45 96.561951 significant5 1 5 1 2 11 1945 1445 69 35 96.946915 anda 1 5 1 3 0 677 1504 1338 53 -1 5 1 5 1 3 1 677 1512 264 45 92.115189 nontransitory5 1 5 1 3 2 960 1510 161 35 96.940323 increases 1 5 1 3 3 1139 1509 36 35 96.720345 in5 1 5 1 3 4 1193 1508 115 46 91.951920 price as a price increase of five percent lasting for one year. Jd.

46. Although direct evidence of the likely effects of a price increase is sometimes available, it is often necessary to rely on circumstantial evidence to delineate a product market. Such indicia are set out in both the DOJ Merger Guidelines and the FTC Statement. The evidence may include the buyer's perception that the products are not substitutes, DOJ Merger Guidelines, supra, J] 4492.102, at 6879-9; differences or similarities in price movements that are not explained by common costs or similar variables, Id.; differences between products in usage, physical composition or technical characteristics; Id.; sellers' perceptions that the products are not substitutes, /d.; and persistent price differences over time. FTC Merger Statement, supra, J 4516, at 6901-6-7; See Goodrich, slip op. at 16; Grand Union Co., 102 FTC 812, 1041 (1983). FTC v. Bass Brothers Enterprises, Inc., 1984-1 Trade Cas. (CCH) 7 66,041, at 68,620 (N.D. Ohio 1984); FTC v. PPG Industries, Inc., 628 F. Supp. 881, 884-85 (D.D.C.), aff'd in part & rev'd in part on other grounds, 798 F.2d 1500, 1503 (D.C. Cir. 1986); Monfort of Colorado, Inc. v. Cargill, Inc., 591 F. Supp. 683 (D. Colo. 1983), aff'd, 761 F.2d 570 (10th Cir. 1985), rev'd on other grounds, 107 S. Ct. 484 (1986); Marathon Oil Co. v. Mobil Corp., 530 F. Supp. 315, 325 (N.D. Ohio), aff, 669 F.2d 378 (6th Cir. 1981), cert. denied, 455 U.S. 982 (1982). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1023 1010 Initial Decision 47. A meaningful economic market is a market that could be subject to the exercise of market power, i.e., a market in which firms could exercise market power if they possessed the ability to coordinate their actions. DOJ Merger Guidelines, supra, J 4,492 at 6879-8; Goodrich slip op. at 15-16; Kaserman JX 1, 252; See also Klass Dkt. 9159, 5030-32. The group of products (product market) and geographic area (geographic market) that comprise a market for purposes of merger analysis are defined in terms of the probable demand responses of consumers and supply responses of other firms to a price increase for the product of the merging firms. DOJ Merger Guidelines, supra, J 4,492 at 6879-8.

48. A product market defines a group of products that are close substitutes such that the producers of that group of products could profit from a price increase without experiencing a degree of substitution by other suppliers or to other products sufficient to defeat the profitability of that price increase (Kaserman JX 1, 252-54; Kaserman Dkt. 9159, 2222, 2229). See Goodrich, slip op. at 16. Products which are not close substitutes in consumption or production for those of the merging firms are excluded from the relevant product market because changes in the prices or availability of such products do not directly or substantially affect the pricing decisions for the product of the merging firms (Kaserman JX 1, 252; Klass Dkt. 9159, 5025).

49. The purpose of defining a relevant product market is to provide a context for analysis of industry structure so that a meaningful prediction of industry performance may be made on the basis of the effects of the acquisition on industry structure (Kaserman JX 1, 252; Kaserman Dkt. 9159, 2226; FTC Merger Statement J 4516 at 6901-6; See also Klass Dkt. 9159, 2227). 50. The Supreme Court has concluded that both demand and supply substitutability are relevant to determining the contours of a relevant product market,° (Goodrich, slip op. at 15). Thus, a relevant product market is defined in light of both demand and supply side substitution (Goodrich, slip op. at. 15; Kaserman JX 1, 255; ® Brown Shoe Co. v. United States, 370 U.S. 294, 325 & n. 42 (1962); United States v. Columbia Steel Corp., 334 U.S. 495, 510-11 (1948); See also United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956). Initial Decision 115 F.T.C.

Kaserman Dkt. 9159, 2223-24; See also Klass Dkt. 9159, 5025, 5021). A relevant product market can also be delineated by measuring cross-elasticities of supply and demand: that is, by determining the degree to which -- within a given period of time -changes in the price of a given product or service will induce changes in the quantities of a second product or services that are demanded or supplied’ (Goodrich, slip op. at 15). The economic issue in defining a product market is to locate the point beyond which products are no longer close substitutes in terms of either demand or supply for the product of the merging firms (Klass Dkt. 9159, 5025). 51. On the demand side, the Commission seeks to5 1 3 2 1 10 1846 1214 123 37 96.800041 defines 1 3 2 1 11 1993 1226 20 25 96.977699 a4 1 3 2 2 0 672 1259 1339 58 -1 5 1 3 2 2 1 672 1259 152 44 96.888283 products 1 3 2 2 2 841 1270 40 25 96.997017 or5 1 3 2 2 3 895 1270 114 36 96.735542 groups 1 3 2 2 4 1026 1261 42 36 96.735542 of5 1 3 2 2 5 1080 1263 169 45 96.076538 products5 1 3 2 2 6 1267 1265 222 48 96.076538 sufficiently5 1 3 2 2 7 1507 1268 144 37 95.580589 distinct5 1 3 2 2 8 1667 1271 72 35 96.976814 that5 1 3 2 2 9 1755 1272 130 45 96.844368 buyers5 1 3 2 2 10 1903 1275 108 35 96.857475 could4 1 3 2 3 0 672 1317 1342 60 -1 5 1 3 2 3 1 672 1323 62 28 96.764519 not5 1 3 2 3 2 756 1317 121 36 96.950569 defeat5 1 3 2 3 3 898 1329 44 25 96.950569 an5 1 3 2 3 4 965 1322 192 44 96.135925 attempted5 1 3 2 3 5 1180 1323 160 36 97.000366 exercises 1 3 2 3 6 1362 1325 43 34 97.012688 of5 1 3 2 3 7 1423 1327 136 35 96.687271 markets 1 3 2 3 8 1579 1338 124 35 96.561218 powers 1 3 2 3 9 1723 1340 47 25 96.561218 on5 1 3 2 3 10 1793 1331 58 35 96.877403 thes 1 3 2 3 11 1873 1338 76 39 96.499092 parts 1 3 2 3 12 1971 1333 43 35 96.464577 of4 1 3 2 4 0 672 1375 1337 56 -1 5 1 3 2 4 1 672 1375 124 35 96.463516 sellers5 1 3 2 4 2 823 1376 43 35 96.463516 of5 1 3 2 4 3 888 1377 103 36 96.998100 those5 1 3 2 4 4 1016 1380 168 45 96.921371 products5 1 3 2 4 5 1212 1381 45 46 96.738625 by5 1 3 2 4 6 1285 1382 148 47 96.840210 shifting5 1 3 2 4 7 1459 1386 193 45 96.487823 purchases5 1 3 2 4 8 1678 1394 37 28 95.989990 to5 1 3 2 4 9 1741 1388 71 36 95.989990 still5 1 3 2 4 10 1839 1389 170 37 94.652855 different4 1 3 2 5 0 669 1428 1339 63 -1 5 1 3 2 5 1 669 1428 207 51 78.627098 products® (Goodrich at 16; Kaserman JX 1, 253-54). The Commission thus seeks to determine whether purchasers are likely to shift purchases away from the products of the merging firms in sufficient magnitude to defeat any constraint by the merging firms to raise prices, restrict supply, or lower quality (FTC Merger Statement {4516 at 6901-6; Goodrich, slip op. at 16). 52. Inclusion of products within a product market means that the cross-price elasticity of demand between those products is positive and sufficiently large that they should be considered to be close substitutes (Kaserman Dkt. 9159, 2224: FTC Merger Statement, 4516 at 6901-6. See Kaserman JX 1, 254-55). Alternative sources of supply to which users could reasonably turn should all be included in the relevant product market (Klass Dkt. 9159, 5017). 53. Therefore, to hold that something is a product market means that, whatever other products there are that might substitute for this product, they are not close enough substitutes to defeat a price increase (Kaserman Dkt. 9159, 2227; Goodrich, slip op. at 15-16; ’ Grand Union Co., 102 FTC 812, 1039-40 (1983); Beatrice Foods Co., 101 FTC 733, 836 (1983) (Douglas, Commissioner and Miller, Chairman, concurring); FTC Merger Statement, J 4516 at 6901-7.

8 Hospital Corporation of America, 106 FTC 361, 464, 466 (1985) (hereinafter HCA), aff'd, 807 F.2d 1381 (1986), cert. denied, 107 S. Ct. 1975 (1987). OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1025 1010 Initial Decision Kaserman JX 1, 254-56). This follows from the fact that products that are close enough substitutes to defeat a price increase are included in the market definition (Kaserman Dkt. 9159, 2227; Kaserman JX 1, 252-54, 257; See also Klass Dkt. 9159, 4141). 54. On the supply side, market definition takes into account close substitutes in production so as to include those producers who could easily and economically produce and sell the product of the merging firms in response to an increase in price by existing producers of the product (DOJ Merger Guidelines, J 4492 at 6879-10; Kaserman Dkt. 9159, 2230; Kaserman JX 1, 255).

A. Mass and Suspension PVC 55. The parties agree that mass and suspension PVC constitutes a relevant product market (Complaint { 13(a); Answer of Occidental 4 5; Harris JX 1, 858 In. 13-18; JX 3, PX 14 at 2). The Commission has held that this stipulation is consistent with the record (Goodrich, slip op. at 19).

56. [##] (See Hornack CX 182B-D J 6-8 In Camera; Hill CX 183B-D ¥ 4-7 In Camera; Flammer CX 184B-E J 3-8; Boyer CX 185G { 15; See Goodrich, slip op. at 79-80). 57. Further, PVC homopolymer resin produced by the mass process and PVC homopolymer resin produced by the suspension process belong in one product market because the resins are interchangeable in use (Goodrich F 24; Friedman JX 1, 113 In. 5-16, 126 In. 8-11; JX 3, PX 11 at 632 In. 17-24; RPF 16; JX 3, PX 6 at 73 In. 18-21; JX 3, PX 8 at 12 In. 12-21) over a large variety of applications, such as PVC pipe and pipe fitting, wire and cable applications, packaging film and sheet, vinyl siding, bottles, vinyl window components, medical applications, and miscellaneous calendered products (Goodrich F 97; Kaserman JX 1, 270 In. 12-20; JX 3, PX 9 at 112 In.7-12; JX 3, PX 8 at 47 In. 23-48 In. 3). 58. Because mass and suspension PVC constitutes a relevant product market, producers of mass and suspension PVC homopolymer could succeed in raising prices a small but significant amount (such as 5 percent) for a sustained period if they coordinated their actions and engaged in collusion. This means that such a price increase would succeed because demand for mass and suspension Initial Decision 115 F.T.C.

PVC resin is significantly inelastic (e.g., consumers cannot economically and feasibly switch to substitute input products) so that customers could not switch their demand to another raw material to defeat the price increase (Goodrich at 19, 73-75; See Kaserman JX 1, 252-54, 256-57, 270-71, 345).

59. No suppliers of resins other than mass and suspension PVC can economically or practicably produce mass and suspension PVC homopolymer to defeat a small but significant price increase for a sustained period (DOJ Merger Guidelines, supra, J 4,492 at 6878-9; Kaserman Dkt. 9159, 2222, 2229: Kaserman JX 1, 344; See also Klass Dkt. 9159, 5221, 5225; Harris JX 1, 858 In. 13-859 In. 2). Moreover, because of their higher costs and extremely limited capacity, it makes little difference to the success of any collusive arrangement whether the copolymer producers elect to go along with the collusion by homopolymer producers or elect to take advantage of higher homopolymer prices by increasing their production of suspension PVC homopolymer (Kaserman JX 1, 271, 335-36). 60. In addition, firms producing other products are unlikely to switch to producing mass and suspension PVC in response to a small increase in PVC resin prices, because the machinery needed to produce PVC is essentially unique to that application (Goodrich, slip op. at 19-20; See Disch Dkt. 9159 at 663). 61. [##] (Goodrich, slip op. at 19; Kaserman JX 1, 252-55; Kaserman Dkt. 9159, 2231-32; Hornack CX 182B-E JJ 5-6, 8-9 In Camera; Hill CX 183B-G {J 4-8, 10-17 in Camera; Flammer CX 184B-F JJ 3-10; Boyer 185D, G JJ 8,15). Indeed, respondents’ economic expert himself has examined the product market definition and concluded that he could properly work with the mass and suspension PVC market (Harris JX 1, 858 In. 13-18). 62. [##] (Goodrich F 94; Kaserman JX ], 270 In. 13-25). [##] (Barlet JX 1, 74 In. 12-21 In Camera, Friedman JX 1, 121 In. 25-122 In. 5; Goodrich F 95; JX 3, PX 11 at 661 In. 10-662 In. 22). As found by the Commission:

Firms that currently purchase [mass and suspension] PVC resin to manufacture PVC end use products cannot substitute other inputs in response to a small increase in PVC resin prices; there are simply no substitutes for PVC resin as an input to produce these products.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1027 1010 Initial Decision (Goodrich, slip op. at 19. See Goodrich F 95; JX 3, PX 11 at 662 In. 23-663 In. 5; JX 3, PX 8 at 48 In. 12-20; Kaserman Dkt. 9159, 2232; H. Wheeler Dkt. 9159, 1751-1752).

63. Mass and suspension PVC homopolymer is used to manufacture hundreds of products. The major applications include: pipe and fittings, wire and cable, packaging, film and sheet, siding, and bottles (Goodrich, slip op. at 18-19; Goodrich F 97; Kaserman JX 1, 270 In. 12-20; See JX 3, PX 11 at 663 In. 14-680 In. 8; JX 3, PX 8 at 47 In. 23-48 In. 3; JX 3, PX 9 at 112 In. 7-12). As discussed in detail infra, the price elasticity of demand for mass and suspension PVC homopolymer products is low, and there is relatively little substitutability between mass and suspension PVC homopolymer products and products manufactured from other materials (Goodrich, slip op. at 72-75; Kaserman JX 1, 254-57, 270-71). Mass and suspension PVC homopolymer products possess unique characteristics that make them highly desirable in their end uses. Consequently, PVC homopolymer finished goods are often selected on the basis of their distinctive properties and not on the basis of changes in price. Mass and suspension PVC homopolymer finished goods generally offer substantial cost savings to purchasers, compared to products manu-factured from other materials (Friedman JX 1, 116 In. 7-14, 118 In. 1-16, 121 In. 6-14; Witsken JX 1, 610 In. 20-611 In. 1; Goodrich FF 97-193; JX 3, PX 11 at 672 In. 10-677 In. 19; See generally JX 3, PX 9 at 112 In. 7-116 In. 21). 64. There is no supply side substitution for mass and suspension PVC. Apart from the relatively small level of suspension PVC copolymer capacity that can be used to produce suspension PVC homopolymer, machinery and facilities of producers who manufacture products other than mass and suspension PVC homopolymer cannot be converted economically to the manufacture of mass and suspension PVC homopolymer (Kaserman JX 1, 270-72, 335-36; Kaserman Dkt. 9159, 2233; Klass Dkt. 9159, 4119; Dkt. 9159 CX 46A). Moreover, firms producing other products are unlikely to switch to producing mass and suspension PVC homopolymer in response to a small increase in PVC resin prices, because the machinery needed to produce PVC is essentially unique to that application (Goodrich, slip op. at 19-20; See Disch Dkt. 9159, 663). Initial Decision 115 FT.C.

65. For the reasons discussed, infra, demand for mass and suspension PVC homopolymer is inelastic (Kaserman JX 1, 270 In. 10-271 In. 5; JX 3, PX 10 at 1141 In. 10-18; (See generally Goodrich FF 97-193; Goodrich, slip op. at 72-75)). There is very little effect on the volume consumed based on the industry-wide movements in mass and suspension PVC homopolymer price (JX 3, PX 6 at 151 In. 4-152 In. 5; JX 3, PX 10 at 1141 In. 10-18; JX 3, PX 136 at 71 In. 23-72 In. 2; JX 3, PX 82 at 900139: See CPF 512). This creates a natural incentive for companies to restrict output to raise prices (Kaserman JX 1, 255 In. 2-9; JX 3, PX 82 at 900138). The strong inference is that mass and suspension PVC homopolymer producers could probably profitably raise prices by five percent or more (Friedman JX 1, 118 In. 1-20).

66. [##] (Hill CX 183B-F J 4-8, 10-16 In Camera; Flammer CX 184B-F J 3-10; Boyer CX 185G-H J 15-16; Weimar CX 192B-C I 4-5 In Camera; Rawlins CX 197B- C 73-4 In Camera; JX 3, PX 136 at 60 In. 21-61 In. 10; Kaserman JX 1, 260 In. 10-21; 261 In. 21-25; Harris JX 1, 858 In. 19-859 In.2; See Hornack CX 182C-E {J 7-9 In Camera). On the supply side, however, as noted, because specialty grades of suspension PVC homopolymer resin can be produced at suspension PVC copolymer plants, the relatively small level of suspension PVC copolymer capacity is included as part of the mass and suspension PVC market (See Kaserman JX 1, 270-72, 335-36). 67. Solution PVC resin does not compete with any other PVC resin product, including mass and suspension PVC homopolymer, and is not produced by Occidental or the former Tenneco Polymers (JX 3, PX 7 at 133 In. 3-134 In.3; JX 3, PX 8 at 11 In. 13-12 In. 11). 68. It is accordingly found that mass and suspension PVC (including suspension PVC copolymer production capacity) constitutes a relevant product market (Goodrich, slip op. at 19; Complaint J 13(a); Answer of Occidental J 5; Kaserman JX 1, 252 In. 6-9, 269 In. 21-272 In. 25).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1029 1010 Initial Decision B. Suspension PVC Copolymer 1. Suspension PVC copolymer is recognized in the PVC industry as a distinct market 69. Suspension PVC copolymer resin is recognized by producers as a separate,5 1 5 1 2 4 822 917 145 36 96.940750 distinct5 1 5 1 2 5 980 919 169 44 90.499695 product from other PVC resins selling into distinct5 1 5 1 3 2 695 974 152 36 96.344658 end-uses 1 5 1 3 3 862 976 173 35 95.230309 markets (JX 3, PX 8 at 31 In. 21-32 In. 14; JX 3, PX 9 at 14 In. 3-16 In. 14, 85 In. 11-86 In. 14, 145 In. 24-146 In. 15; See Harris JX 1, 858 In. 19-859 In. 2). [##] (IX 3, PX 8 25 In. 6-16; JX 3, PX 9 32 In. 25 - 33 In. 9; Fisher CX 208B J 2; Hill CX 183C J 3 In Camera; Boyer CX 185G ] 16; Beveridge JX 1 82 In. 25 - 83 In. 6; Weimar JX 1, 34 In. 14-20; Marcus CX 209D 8 In Camera; Kaserman JX 1, 261 In. 18-20). As noted by Mr. Flammer of Vista: Both dispersion PVC and copolymer PVC are completely different businesses from suspension PVC homopolymer production. Suspension PVC homopolymer resins do not compete with... copolymer PVC resins because these products are sold into different markets.

(Flammer CX 184E 10).

70. [##] (CX 81B In Camera; CX 82C In Camera). One such memorandum noted that the acquisition would reduce the number of copolymer producers to two, providing Occidental with5 1 7 2 3 8 1624 1872 128 36 96.807266 almost5 1 7 2 3 9 1767 1874 77 35 96.807266 half4 1 7 2 4 0 504 1920 1336 49 -1 5 1 7 2 4 1 504 1920 58 35 96.651680 thes 1 7 2 4 2 577 1921 233 36 75.906227 market... (JX 3, PX 12). The memorandum then stated that [this)5 1 7 2 5 2 645 1979 74 36 95.790977 will5 1 7 2 5 3 739 1980 244 48 95.790977 significantly5 1 7 2 5 4 1002 1983 160 37 96.980934 enhances 1 7 2 5 5 1180 1985 58 35 96.970795 thes 1 7 2 5 6 1256 1986 234 46 96.903419 profitability5 1 7 2 5 7 1510 1988 42 35 97.004448 of5 1 7 2 5 8 1566 1989 58 34 96.994476 thes 1 7 2 5 9 1642 1989 196 37 95.414322 Pottstown4 1 7 2 6 0 502 2037 470 48 -1 5 1 7 2 6 1 502 2037 215 46 96.486443 suspension5 1 7 2 6 2 732 2040 99 45 92.860985 plants 1 7 2 6 3 847 2040 13 13 91.635742 (Id.).

71. [##] (CX 96B In Camera).

2. Suspension PVC copolymer is characterized by distinct prices and insensitivity to changes in prices of other materials. 72. The prices of suspension PVC copolymer resin move independently of the prices of other PVC resins (Kaserman JX 1, 260 In. 24 - 261 In. 9; JX 3, PX 6 at 63 In. 16-66 In. 8; JX 3, PX 7 at 54 In. 4-5; JX 3, PX 8 at 31 In. 21-32 In. 14; JX 3, PX 9 at 26 In. 14-20: JX 3, PX 136 at 121 In. 2-122 In. 8; JX 3, PX 13 at 452726; JX 3, PX 128 at PVC 10; JX 3, PX 130 at 131). Copolymer resin is priced higher than other suspension resins (JX 3, PX 13 at 452726). [HH] Initial Decision 115 F.T.C.

(CX 114 In Camera; Accord JX 3, PX 13 at 452726; Hill CX 183D | 8 In Camera; Flammer CX 184E 9). The price of copolymer resin is also independent of the level of supply of other PVC resins (JX 3, PX 6 at 63 In. 16 - 66 In. 8; JX 3, PX 9 at 14 In. 14-20). 73. Mr. Stevens, in explaining that there is little relation between the level of output of suspension PVC copolymer and the price of suspension PVC homopolymer, testified that the copolymer market and the homopolymer market are separates 1 3 2 4 7 1557 1050 159 36 90.171455 entities (JX 3, PX 9 at 14 In. 14-20). Similarly, Mr. Disch testified that Tenneco did not look at homopolymer prices in setting copolymer prices because the two are separate,5 1 3 2 7 4 1069 1220 145 37 96.777374 distinct5 1 3 2 7 5 1231 1223 150 45 96.543404 products 1 3 2 7 6 1399 1235 131 35 96.980225 groups5 1 3 2 7 7 1551 1226 79 41 96.526268 and,5 1 3 2 7 8 1650 1226 36 35 96.706696 in5 1 3 2 7 9 1705 1234 95 29 96.870514 most5 1 3 2 7 10 1818 1238 115 31 96.425735 cases,5 1 3 2 7 11 1954 1235 71 30 96.425735 two4 1 3 2 8 0 687 1277 1335 52 -1 5 1 3 2 8 1 687 1277 145 36 96.788910 distinct5 1 3 2 8 2 848 1278 69 35 96.751686 ends 1 3 2 8 3 934 1289 64 25 96.700768 uses 1 3 2 8 4 1013 1280 174 35 96.254959 markets (JX 3, PX 8 at 31 In. 21 - 32 In. 2). Mr. Schaefer echoed this testimony, noting that copolymer and homopolymer prices may show similar movements in price at times not because they are used in the same end-use markets, but because of general economic conditions (JX 3, PX 136 at 121 In. 1 - 122 In. 8). 74. Occidental's actual realized prices for its suspension PVC copolymer resins and for its mass and suspension PVC homopolymer resins, as presented in the following table, confirm the relative independence of prices and price movements for suspension PVC copolymer compared to homopolymer resins. [##] 3. The distinct customers, characteristics, and uses of suspension PVC copolymer give suspension PVC copolymer a low cross-elasticity of demand 75. Substitution between suspension PVC copolymer and suspension PVC homopolymer is limited by the unique characteristics of copolymer that require its use in certain product applications, particularly viny] resilient floor tile and vinyl records. 76. [##] (Weimar JX 1, 31 In. 21 - 32 In. 1; Barlet JX 1, 56 In. 22 - 57 In. 7; Marcus CX 209B {[ 4 In Camera; Rawlins CX 197B-C ] 4 In Camera). Suspension PVC copolymer resin is used in floor tile because its properties allow the tile manufacturer to use a substantial amount of inexpensive filler, which the copolymer binds together in the tile (Weimar JX 1, 31 In. 21 - 32 In. ]; Barlet JX 1, 56 In. 22 - 57 In. 7). Homopolymer resin does not have melt or flow properties similar to copolymer resin, and therefore substitution of homo- OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1031 1010 Initial Decision polymer for copolymer requires that greater amounts of PVC relative to filler be used, or that the PVC be blended for longer periods of time at higher temperatures. In either case, the manufacturing cost of the tile would be higher (Weimar JX 1, 32 In. 9 - 33 In. 9; Barlet JX 1, 58 In. 13 - 59 In. 2). [##] (Weimar JX 1, 32 In. 3-5; Weimar CX 192C ¥ 5 In Camera; Barlet JX 1, 62 In. 22-25, 73 In. 7-13 In Camera; Rawlins CX 197B-C { 4 In Camera; JX 3, PX 136 at 60 In. 21 - 61 In. 10).

77. [##] (Hill CX 183E 13-14 In Camera; JX 3, PX 8 at 13 In. 6-21; JX 3, PX 9 at 33 In. 15-22, 37 In. 25 - 38 In. 7, IX 3, PX 136 at 56 In. 18 - 57 In. 1). Significant increases in the price of suspension PVC copolymer resin would not result in substitution of other materials for copolymer resin in the manufacture of phonograph records (JX 3, PX 8 at 22 In. 25 - 23 In. 25; JX 3, PX 9 at 42 In. 17-25; JX 3, PX 136 56 In. 24 - 57 In. 1). 78. The demand for suspension PVC copolymer resin is inelastic. This means that there would be little substitution of other material by purchasers in response to significant increases in the price of suspension PVC resin. Substitution of products manufactured from materials other than PVC, moreover, is limited by the low cost share of copolymer resin in vinyl resilient floor tile and phonograph records, and by the characteristics of these products that reduce the substitutability between them and other products (See Goodrich F 95; Goodrich ID Discussion at 93).

4. There is a low cross-elasticity of supply between suspension PVC copolymer and other materials 79. There would be no supply-side substitution by producers of suspension PVC homopolymer in response to significant increases in the price of suspension PVC copolymer resin. Mr. Disch has noted that Tenneco did not shift capacity between suspension PVC homopolymer and suspension PVC copolymer in response to changes in the relative prices of the two resins, because, in his view, they are two distinct situations (JX 3, PX 8 at 32 In. 7-14). [##] (Boyer CX 185G J 16; Fisher CX 208C { 3; Hornack CX 182C {7 In Camera). 80. Concluding the above discussion, it must be noted that under the Merger Guidelines, the issue is whether it would be possible for Initial Decision 115 F.T.c.

a hypothetical monopolist in the sale of suspension PVC copolymer resin profitably to impose a small5 1 3 1 2 7 1357 695 61 35 96.300377 but5 1 3 1 2 8 1432 694 201 46 96.279137 significant5 1 3 1 2 9 1646 693 67 35 93.270111 ands 1 3 1 2 10 1726 692 292 45 91.543716 non-transitory increase in price. The factors described above show that such an increase would be profitable. On the demand side, there would be little substitution between copolymer resin and other materials. Indeed, both complaint counsel's and respondent's economic experts described the demand for suspension PVC copolymer as inelastic, which is the prime issue posed under the Guidelines (Kaserman JX 1, 345 In. 2-6; Harris JX 1, 858 In. 19-24). On the supply side, there would similarly be no substitution.

81. Thus, it must be found that suspension PVC copolymer resin constitutes a relevant product market.

C. Dispersion PVC 82. The parties agree that dispersion PVC resin constitutes a relevant product market (Complaint J 13(c); Answer of Occidental q 5; Harris JX 1, 858 In. 13-18; JX 3, PX 14 at 2; See JX 3, PX 8 at 8 In. 3-9 In. 11; JX 3, PX 9 at 13 In. 23-14 In. 25, 146 In. 3-15). 83. By definition, because dispersion PVC resin constitutes a relevant product market, producers could succeed in raising prices a sustained 5 percent if they coordinated their actions and engaged in collusion. This means that such a price increase would succeed because demand for dispersion PVC is sufficiently inelastic so that consumers could not use other raw materials in sufficient quantities to defeat the price increase (Kaserman JX 1, 262-69, 345). This small but significant and nontransitory price increase would be programed to succeed because no producer of raw materials other than dispersion PVC could practicably and economically supply the marketplace with dispersion PVC to defeat the price increase (DOJ Merger Guidelines, supra, J 4,492 at 6879-8; Kaserman Dkt. 9159, 2222, 2229; Kaserman JX 1, 262-69, 345; See also Klass Dkt. 9159, 5221, 5225).

84. The evidence submitted in this proceeding fully supports the agreement of the parties that dispersion PVC resin constitutes a relevant product market. The respondents’ expert economist utilized a dispersion PVC resin product market to analyze the effects of OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1033 1010 Initial Decision Occidental's acquisition of Tenneco Polymers (Harris JX 1, 858 In. 13-In. 18).

85. Dispersion PVC resin uses differ from the uses for mass and suspension PVC homopolymer resin and suspension PVC copolymer resin. As the Commission found in Goodrich: Bulk5 1 3 2 3 9 1559 862 68 35 96.852341 ands 1 3 2 3 10 1642 863 209 46 96.416214 suspension4 1 3 2 4 0 513 912 1336 53 -1 5 1 3 2 4 1 513 912 94 36 96.694481 PVC5 1 3 2 4 2 620 913 113 36 96.183266 resins5 1 3 2 4 3 748 914 91 35 96.976013 have5 1 3 2 4 4 854 914 103 46 94.367577 ‘quite5 1 3 2 4 5 971 914 174 37 13.595840 different’5 1 3 2 4 6 1160 917 234 46 96.836678 applications5 1 3 2 4 7 1408 918 83 36 96.480637 than5 1 3 2 4 8 1504 919 201 46 96.873009 dispersion5 1 3 2 4 9 1718 920 131 36 96.376656 resins (Goodrich, slip op. at 17-18 n.37; See Disch, Dkt. 9159, 634). [##] (Hill CX 183F-G { 17 In Camera; Flammer CX 184E-F ¥ 10; Boyer CX 185D-F 4 7-12; JX 3, PX 6 at 65 In. 6-66 In. 18, 106 In. 23-107 In. 7; JX 3, PX 8 at 8 In. 11, 40 In. 8-18; JX 3, PX 9 at 13 In. 23-14 In. 25, 89 In. 17-90 In. 1, 111 In. 3-12, 146 In. 3-15; Harris JX 1, 858 In. 13-18).

86. Purchasers of dispersion PVC resin perceive that dispersion PVC constitutes a distinct and separate market from any other PVC resin. As noted by Mr. Flammer of Vista:

Both dispersion PVC and copolymer PVC are completely different businesses from suspension PVC homopolymer production. Suspension PVC homopolymer resins do not compete with .. . dispersion PVC . . . because these products are sold into different markets.

(Flammer, CX 184E J 10).

87. [##] (van Haaren CX 187B-C {9 5-7 In Camera; Baker CX 205B { 2; Boulay CX 189B-C, D Tf 4-5, 10 Jn Camera; JX 3, PX 8 at 32 In. 15-37 In. 24; JX 3, PX 9 at 96 In. 21-99 In. 11, 103 In. 8-104 In. 14; Kaserman JX 1, 267 In. 22-268 In. 12). 88. [##] (IX 3, PX 9 at 15 In. 1-19, 97 In.10-98 In. 2. See Hill CX 183F-G { 17 In Camera; Flammer CX 184B-D J 4-6; Boyer CX 185B-C {J 3-4).

89. Purchasers and producers recognize that dispersion PVC prices and mass and suspension PVC homopolymer prices and suspension PVC copolymer prices are independent of each other (Flammer, CX 184E 9; Boyer 185E-F J 11; Beveridge JX 1, 88 In. 18-23; Kaserman JX 1, 269 In. 7-12).

90. Dispersion PVC prices move independently of the price of mass and suspension PVC homopolymer or suspension PVC copolymer (Kaserman JX 1, 269; Boyer CX 185E-F { 11; Flammer CX 184E J 9; JX 3, PX 136 at 63-64, 67, 122; Schaefer JX 1, 583; JX Initial Decision 115 F.T.C.

3, PX 8 at 40, 87- 89; JX 3, PX 9 at 13-14, 26-27, 100, JX 3, PX 6 at 33-34, 64-67; JX 3, PX 7 at 127-28, 163-64). 91. [##] (CX 100 A-L Jn Camera; Kaserman JX 1, 269 In. 7-12). 92. [##] (See CX 100 A-L In Camera). [##] 93. Producers and purchasers report that dispersion PVC prices remained stable or declined slightly from 1981 until the time of the acquisition (See JX 3, PX 8 at 40; JX 3, PX 9 at 81; Schaefer JX 1, 583). Since the acquisition, dispersion PVC prices have increased: once in July 1987 by $.03 a pound and once in January 1988 by another $.03 a pound (Baker CX 205C { 4). [##] (Hill CX 183D { 8 In Camera; Flammer CX 184E 99; Boyer CX 185E-F J 11; Baker CX 205C 74. See, e.g., Pflugrath CX 177D-E ff 8-9 In Camera; Heath CX 178D-E Jf 7-8 In Camera; Weimar CX 192E 4 11 Jn Camera). 94. The only common factor affecting the price of dispersion PVC resins and other PVC resins is the cost of the major feedstock, vinyl chloride monomer (VCM) (Schaefer JX 1, 583 In. 13-15; JX 3, PX 6 at 66 In. 19-68 In. 3; JX 3, PX 7 at 83; Disch JX 3, PX 8 at 40 In. 8-18; JX 3, PX 9 at 100 In. 15-101 In. 16; JX 3, PX 136 at 123; Kaserman JX 1, 268 In. 23-269 In. 13).

95. As a result of its unique physical characteristics, dispersion PVC resin is essential in the production of a variety of coating, molding, and dipping end-use applications (Kaserman JX 1, 262 In. 20-21; See JX 3, PX 9 at 104 In. 20-22). Suspension PVC homopolymer resin cannot be processed in the way dispersion resin is processed, because suspension resin is not dispersible in a liquid form (Flammer CX 184E-F J 10).

96. Dispersion PVC resin is used to manufacture products grouped in essentially three end-use segments. These segments are: (1) vinyl resilient sheet flooring; (2) coated fabrics and textiles such as carpet tile; and (3) molding and coating applications, including can or bottle coating (Kaserman JX 1, 266-67, JX 3, PX 138; See JX 3, PX 8 at 32-41). Vinyl sheet flooring accounts for consumption of between approximately 33% and 40% of the United States market for dispersion PVC resin (Kaserman JX 1, 266-67, JX 3, PX 138; JX 3, PX 8 at 40; JX 3, PX 9 at 92). Bottle closure and sealant applications account for consumption of approximately 16% of dispersion PVC resin, vinyl automotive molded products account for approximately 7% of consumption of dispersion PVC resin, and coated fabrics OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1035 1010 Initial Decision account for approximately 25% of United States consumption of dispersion PVC resin (Kaserman JX 1, 266-67; JX 3, PX 138). The remaining consumption of dispersion PVC resin is accounted for by miscellaneous applications (Kaserman JX 1, 266 In. 19-267 In. 15; JX 3, PX 138; Disch JX 3, PX 8 at 43 In. 16-23). 97. [##] (Barlet JX 1, 64 In. 13-19, 64 In. 25-65 In. 13; van Haaren CX 187B-C [{ 5-7 In Camera; Baker CX 205B J 2). No other raw material can presently provide these characteristics. 98. [##] (Barlet JX 1, 65 In. 17-21; van Haaren CX 187C { 6-7 In Camera). [##] (Barlet JX 1, 73 In. 14-74 In. 11 In Camera; Van Haaren CX 187C,E { 7, 9, 15 In Camera; Baker CX 205B, D { 2,4). [##] (Barlet JX 1, 68 In. 9-69 In. 5; van Haaren CX 187C-D J 7, 9, 13-14 In Camera; Baker CX 205B 2; JX 3, PX 8 at 32 In. 15-37 In. 24, 42 In. 3-17, 44 In. 3-10; JX 3, PX 9 at 98 In. 3-7). 99. Can coatings, bottle cap closures, and adhesives and sealants account for about 50 percent of the approximately 160 million pounds of dispersion PVC consumed in molding applications, or approximately 16% of all dispersion PVC consumed in the United States (Kaserman JX 1, 266-67; JX 3, PX 138). Vinyl dispersion PVC coating is the formulation used to perform those applications. The liquid or paste-like coating consists of a formulation of dispersion PVC resin and several other ingredients, including solvents and plasticizers (Lore JX 1, 177). A 5% increase in the price of dispersion PVC resin would not be likely to lead manufacturers to substitute any other raw material for dispersion PVC resin, because the dispersion PVC would continue to be a lower cost material than any present potential substitutes (Lore JX 1, 177 In. 8-178 In. 5, 179 In. 24-180 In. 25; See JX 3, PX 6 at 44 In. 2-18, 45 In. 18-21; JX 3, PX 9 at 95 In. 8-10; JX 3, PX 138). In addition, dispersion PVC coating creates less environmental concerns than do potential substitutes (Lore JX 1, 180).

100. Vinyl backed carpet tile accounts for consumption of 14 million pounds of dispersion PVC annually, or over 10% of dispersion PVC resin used in all coating applications. Vinyl backed carpet tile accounts for approximately 3.2% of all dispersion PVC consumed in the United States (Kaserman JX 1, 266-67; JX 3, PX 138). Carpet tile contains a fixed formulation of dispersion PVC resin to blending PVC resin (Mason JX 1, 193, 194-95). The two Initial Decision 115 F.T.C.

PVC resins complement each other. The carpet tile is fabricated by adding the vinyl backing, which contains dispersion PVC resin to a tile covered with carpet (Mason JX 1, 192-93). A 5% increase in the price of dispersion PVC resin would not be likely to allow a substitution of blending PVC or any other raw material for the dispersion PVC (Mason JX 1, 194 In. 25-195 In. 8: Kaserman JX l, 266 In. 16-267 In. 11). The dispersion PVC resin gives the carpet tile properties that cannot presently be duplicated by any other raw material (Mason JX 1, 194 Jn. 25-195 In. 8; Kaserman JX 1, 266 In. 16-267 In. 11; See JX 3, PX 9 at 95 In. 11-13; JX 3, PX 138). 101. [##] (Hill CX 183F-G { 17 Jn Camera; Flammer CX 184B-F {4 4-8, 10; Boyer CX 185B-E {J 3-9; JX 3, PX 9 at 14 In. 3-25, 100 In. 15-101 In. 16; JX 3, PX 8 at 86 In. 5-10). 102. [##] (Hill CX 183F-G J 17 In Camera; Flammer CX 184D-E { 8; Boyer CX 185B-E {J 5-9). [##] (van Haaren CX 187D JJ 13-14 In Camera; Boyer CX 185E 9).

103. [#4#] (Hill CX 183F-G J 17 Jn Camera; Flammer CX 184B-D {Sl 4-6; Boyer CX 185B-D ff 3-8; JX 3, PX 9 at 14 In. 3-25, 100 In. 15-101 In. 16; JX 3, PX 8 at 86 In. 5-10). 104. [##] (See Hill CX 183F-G J 17 In Camera; Flammer CX 184B-F; {J 4-8, 10; Boyer CX 185B-F J 3-11). Therefore, from the supply side, it must be found that dispersion PVC resin constitutes a separate relevant product market.

105. Accordingly, it is clear that dispersion PVC resin constitutes a relevant product market (Complaint J 13(c); Answer of Occidental q.5; Harris JX 1, 858 In. 13-18; JX 3, PX 14 at 2; See JX 3, PX 8 at 8 In. 3-9 In. 11; JX 3, PX 9 at 13 In. 23-14 In. 25, 146 In. 3-15). V. THE RELEVANT GEOGRAPHIC MARKET 106. The purpose of a geographic market definition is to establish a geographic boundary separating firms that are important factors in the competitive analysis of a merger from those that are not (DOJ Merger Guidelines, Section 2.31, (CCH) ] 4,492 at 6,879-10-11). 107. A geographic market delineates a group of buyers and sellers within a geographic space whose interactions on supply and demand determine the price of the product (Kaserman JX 1, 281; Kaserman Dkt. 9159, 2234-35, 2237) A geographic market is OCCIDENTAL PETROLEUM CORPORATION, ETAL. —_1037 1010 Initial Decision defined to include producers of the merged firm's product who place4 1 3 1 2 0 538 683 1336 58 -1 5 1 3 1 2 1 538 707 20 24 96.815506 a5 1 3 1 2 2 571 695 204 46 95.830818 significant5 1 3 1 2 3 787 692 190 37 96.470596 constraints 1 3 1 2 4 990 702 47 25 96.981392 on5 1 3 1 2 5 1050 691 57 36 96.933182 thes 1 3 1 2 6 1120 689 121 45 96.964584 ability5 1 3 1 2 7 1255 689 42 35 96.974823 of5 1 3 1 2 8 1306 689 58 35 96.982201 thes 1 3 1 2 9 1376 687 144 44 96.398010 merged5 1 3 1 2 10 1533 686 82 35 96.663445 firms 1 3 1 2 11 1627 692 36 28 96.968719 to5 1 3 1 2 12 1675 684 91 36 96.911209 raises 1 3 1 2 13 1778 683 96 46 96.963387 price4 1 3 1 3 0 538 741 1337 56 -1 5 1 3 1 3 1 538 765 40 24 96.921349 or5 1 3 1 3 2 606 753 139 35 96.902191 restricts 1 3 1 3 3 774 751 142 46 94.168579 output (FTC Merger Statement, (CCH) 1 4,516 at 6,901-7).

108. As in the case of product market definition, a relevant geographic market is defined so as to include all firms whose participation in any collusive arrangement among the producers of a product to raise the price of that product would be necessary in order to make the price increase profitable to those producers (See Kaserman Dkt. 9159, 2235-37, 2241-42). Therefore, a geographic market delineates an area within which the producers of a product could profit by formation of a collusive arrangement (Kaserman DKt. 9159, 2240).

109. The Commission has determined that thes 1 3 3 1 8 1612 1384 159 35 92.611603 relevant5 1 3 3 1 9 1790 1392 84 35 92.611603 geo-4 1 3 3 2 0 541 1441 1335 55 -1 5 1 3 3 2 1 541 1450 142 46 96.453438 graphics 1 3 3 2 2 697 1449 135 36 96.990005 markets 1 3 3 2 3 844 1454 93 29 96.977341 must5 1 3 3 2 4 950 1448 44 35 96.955933 be5 1 3 3 2 5 1008 1446 109 36 96.651794 broad5 1 3 3 2 6 1130 1446 141 44 96.628235 enough5 1 3 3 2 7 1285 1445 71 34 96.435471 that5 1 3 3 2 8 1368 1444 127 45 96.991615 buyers5 1 3 3 2 9 1509 1442 119 36 96.995155 would5 1 3 3 2 10 1641 1443 44 34 97.013557 be5 1 3 3 2 11 1699 1441 129 35 97.004211 unable5 1 3 3 2 12 1840 1446 36 29 97.007362 to4 1 3 3 3 0 541 1499 1335 44 -1 5 1 3 3 3 1 541 1509 127 34 96.924866 switch5 1 3 3 3 2 696 1514 37 28 96.894547 to5 1 3 3 3 3 762 1506 206 36 96.491196 alternatives 1 3 3 3 4 997 1505 124 35 96.569817 sellers5 1 3 3 3 5 1150 1504 35 35 96.305809 in5 1 3 3 3 6 1215 1503 184 36 96.668259 sufficient5 1 3 3 3 7 1425 1501 167 35 96.700729 numbers5 1 3 3 3 8 1621 1506 36 30 96.889702 to5 1 3 3 3 9 1685 1499 120 36 96.208839 defeat5 1 3 3 3 10 1833 1509 43 25 96.208839 an4 1 3 3 4 0 541 1557 1336 52 -1 5 1 3 3 4 1 541 1566 160 36 96.627159 exercises 1 3 3 4 2 721 1565 41 35 96.473183 of5 1 3 3 4 3 778 1565 135 35 96.578766 markets 1 3 3 4 4 930 1574 123 35 96.559128 powers 1 3 3 4 5 1070 1563 47 45 96.559128 by5 1 3 3 4 6 1135 1562 101 35 96.961166 firms5 1 3 3 4 7 1255 1562 36 34 96.315018 in5 1 3 3 4 8 1309 1561 58 35 96.754601 thes 1 3 3 4 9 1385 1560 98 36 91.592514 area (HCA, 106 FTC at 466; See Goodrich, slip op. at 13; Kaserman JX 1, 281). 110. The responsiveness of import supply to changes in relative prices is a factor to be considered in determining whether the United States or another geographic area constitutes the relevant geographic market for a product (Kaserman Dkt. 9159, 2237-38, Kaserman JX 1, 283 In. 13-24 citing Elzinga & Hogarty, The Problem of Geographic Market Delineation in Antimerger Suits, 18 Antitrust Bull. 45 (1973); Elzinga & Hogarty, The Problem of Geographic Market Delineation Revisited: The Case of Coal, 23 Antitrust Bull. 1 (1978); and Horowitz, Market Definition in Antitrust Analysis: A Regression-Based Approach, 48 S. Econ. J. 1 (1981); See also Klass 5135).

111. The DOJ Merger Guidelines and FTC Merger Statement provide principles for defining the relevant geographic market. The DOJ Merger Guidelines test is similar to the product market test, asking whether a hypothetical monopolist for sales of the product in an area could impose a price increase that would not be undermined by firms outside the area shifting substantial quantities of product into the area. If the seller located in the area can profitably raise prices despite some additional sales into the area from firms outside the area, the area is an appropriate geographic market. DOJ Merger Initial Decision 115 F.T.C.

Guidelines, supra, J 4492.301 at 6879-10-11 (See Goodrich, slip op. at 13-14; Kaserman JX 1, 281- 282). The smallest area that satisfies this test, in most contexts on the basis of a five-percent increase in price lasting one year, would be defined under the DOJ Merger Guidelines as the relevant geographic market. (/d.) Imports5 1 3 1 5 9 1922 875 74 36 97.005600 that4 1 3 1 6 0 656 924 1339 54 -1 5 1 3 1 6 1 656 924 108 36 97.008545 could5 1 3 1 6 2 783 925 194 47 96.947037 profitably5 1 3 1 6 3 996 933 98 29 96.805145 enters 1 3 1 6 4 1112 927 58 36 96.794334 thes 1 3 1 6 5 1188 928 136 35 96.626579 markets 1 3 1 6 6 1343 928 122 36 97.005661 within5 1 3 1 6 7 1485 941 68 25 97.006310 ones 1 3 1 6 8 1572 941 84 35 97.001404 years 1 3 1 6 9 1673 931 36 35 96.931137 in5 1 3 1 6 10 1727 942 174 36 96.983086 responses 1 3 1 6 11 1919 939 37 30 96.874275 to5 1 3 1 6 12 1975 944 20 25 96.874275 a4 1 3 1 7 0 658 983 1335 49 -1 5 1 3 1 7 1 658 983 110 35 71.450417 ‘small5 1 3 1 7 2 781 983 62 35 96.988785 but5 1 3 1 7 3 856 983 205 46 96.561775 significant5 1 3 1 7 4 1074 986 68 34 93.255470 ands 1 3 1 7 5 1154 986 268 46 91.812225 nontransitory'5 1 3 1 7 6 1435 987 96 45 96.766838 prices 1 3 1 7 7 1544 988 158 36 97.001869 increases 1 3 1 7 8 1717 990 128 35 96.648407 should5 1 3 1 7 9 1859 992 77 34 96.883911 also5 1 3 1 7 10 1949 992 44 34 96.823997 be4 1 3 1 8 0 655 1039 1338 51 -1 5 1 3 1 8 1 655 1039 190 37 93.008293 included (Goodrich, slip op. at 14-15; See, e.g., HCA, 106 FTC at 466-467).

112. Although direct evidence of the effect of a price increase is sometimes available (i.e., the relationship between price and quantity shipped into the market, FTC Merger Statement, supra, J 4516 at 69,601-7), it is often necessary to rely on circumstantial evidence to delineate the geographic market (See Goodrich, slip op. at 14). Such forms of evidence are set out in the DOJ Merger Guidelines, the FTC Merger Statement, and the Commission's recent opinion in Goodrich. The evidence may include shipping patterns, DOJ Merger Guidelines, supra, | 4492.302 at 6879-11, differences in price movements not explained by common cost factors, /d.; costs of transportation or distribution, Jd.; excess capacity outside the area, /d.; or price discrimination, DOJ Merger Guidelines, supra, | 4492.303 at 6879-11; FTC Merger Statement, supra, { 451 at 9601-7 (See Kaserman JX 1, 283-284). As most recently outlined by the Commission: Surrogates4 1 3 2 15 0 647 1973 1335 48 -1 5 1 3 2 15 1 647 1973 88 35 96.701523 such5 1 3 2 15 2 751 1983 38 25 96.974876 as5 1 3 2 15 3 805 1973 190 45 96.736450 persistent5 1 3 2 15 4 1009 1974 98 45 96.689117 prices 1 3 2 15 5 1123 1974 229 41 96.641754 differences;5 1 3 2 15 6 1369 1975 97 45 96.506599 prices 1 3 2 15 7 1481 1976 138 45 96.745094 changes 1 3 2 15 8 1634 1976 231 42 93.089600 differences;5 1 3 2 15 9 1884 1977 98 36 92.520554 simi-4 1 3 2 16 0 646 2030 1336 49 -1 5 1 3 2 16 1 646 2030 129 36 93.195740 larities5 1 3 2 16 2 788 2042 40 25 96.916862 or5 1 3 2 16 3 840 2031 212 36 95.248337 differences5 1 3 2 16 4 1065 2032 35 35 96.884354 in5 1 3 2 16 5 1113 2032 95 45 96.356598 prices 1 3 2 16 6 1220 2040 233 34 96.147751 movements;5 1 3 2 16 7 1467 2033 246 46 96.312737 impediments5 1 3 2 16 8 1727 2041 35 30 96.312737 to5 1 3 2 16 9 1775 2036 106 40 96.566154 trade,5 1 3 2 16 10 1896 2037 86 34 96.615601 such4 1 3 2 17 0 646 2090 1335 48 -1 5 1 3 2 17 1 646 2099 37 25 95.623436 as5 1 3 2 17 2 714 2090 274 44 95.623436 transportation5 1 3 2 17 3 1018 2095 95 30 96.343575 costs5 1 3 2 17 4 1142 2091 73 34 96.291061 that5 1 3 2 17 5 1244 2101 57 24 96.861191 ares 1 3 2 17 6 1330 2091 85 45 96.729172 high5 1 3 2 17 7 1444 2091 146 36 96.065613 relatives 1 3 2 17 8 1618 2099 37 29 96.674713 to5 1 3 2 17 9 1683 2094 152 44 96.496147 products 1 3 2 17 10 1863 2094 118 41 95.373940 value;4 1 3 2 18 0 646 2146 1335 51 -1 5 1 3 2 18 1 646 2146 178 46 96.786919 shipments 1 3 2 18 2 835 2154 153 39 96.751106 patterns5 1 3 2 18 3 1002 2148 67 35 96.751106 ands 1 3 2 18 4 1083 2148 272 46 96.553574 transshipment5 1 3 2 18 5 1367 2149 123 40 96.838638 levels;5 1 3 2 18 6 1505 2150 68 35 96.838638 ands 1 3 2 18 7 1585 2150 159 45 96.700241 industry5 1 3 2 18 8 1756 2151 225 46 96.456451 perceptions4 1 3 2 19 0 645 2205 993 47 -1 5 1 3 2 19 1 645 2205 178 34 96.325081 therefore5 1 3 2 19 2 838 2215 82 36 96.889198 may5 1 3 2 19 3 934 2205 46 35 96.507668 be5 1 3 2 19 4 994 2205 106 35 95.718536 used (Goodrich, slip op. at 14).

113. The established shipping pattern is particularly probative evidence of a geographic market, Jd. Some scholars have suggested that an area is a geographic market if imports account for less than 25 percent of consumption in the area (and exports account for less than 25 percent of production in the area). The area is a strong5 1 3 3 5 13 1823 2501 154 35 96.470360 market if imports and exports are less than 10-percent. Elzinga & Hogarty, The Problem of Geographic Market Delineation Revisited: The Case of Coal, 23 Antitrust Bull. 1, 2 (1978); Elzinga & Hogarty, The Problem of Geographic Market Delineation in Antimerger Suits, 18 Antitrust Bull. 45, 75 (1973) (See Kaserman JX 1, 283). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1039 1010 Initial Decision 114. There is direct evidence in the instant case that the United States is the appropriate geographic market for each of the relevant PVC products in question. See Goodrich, slip op. at 15. Dr. Kaserman, the Commission's economic expert, analyzed the relationship between United States PVC prices and shipments into the market (imports). Dr. Kaserman found that United States producers would lose a relatively small share of their sales to imports of PVC resins as producers increased their price (Kaserman 296 In. 20-303 In. 19: See also JX 3, PX 141). Based on a regression analysis, Dr. Kaserman found that the long-run effect of a 10-percent increase in the domestic resin price would be a 20-percent increase in PVC resin imports. 115. Because imports, at the time of Dr. Kaserman's analysis, accounted for about 5 percent of the overall PVC sales in the United States, a 10 percent increase in domestic prices would indicate to him that the volume of imports would increase from about 5 to 6 percent of the market (See Kaserman 300 In. 5-18; 301 In. 12 - 302 In. 2; CX 172C). This means that, under his analysis, domestic producers would find it profitable to raise their price, as they would only lose about 1 percent of their overall sales if they raised prices by 10 percent (Kaserman 300 In. 11 - 301 In. 5, 301 In. 12-302 In. 2, 303 In. 1-11; Harris 860 In. 15-17; JX 3, PX 141; See JX 3, PX 6 at 152 In. 6-16).

116. [##] (See JX 4, DX 13 In Camera). Tenneco's December 1985 analysis was relied on by respondents’ economic expert in his district court injunction testimony (Harris JX 1, 846 In. 7 - 848 In. 3, 886 In. 21 - 892 In. 5). [##] (IX 4, DX 13 at 9 In Camera). [##] (IX 4, DX 13 at 2 In Camera). [##] (IX 4, DX 13 at 3 In Camera). The value of the dollar has in reality sharply declined since 1985 (CX 172B-D), leading to a decrease in imports of PVC resin as both the Tenneco study and Dr. Kaserman's analyses would predict. 117. During the 12-month period December 1986 through November 1987, imported PVC resin accounted for 1.5 percent of overall United States PVC supply (CX 158D; CX 212C; CX 147R-Z5; CX 211A-D; Sherman CX 171D J 8; CX 173C). Thus, applying Dr. Kaserman's analysis to the PVC industry today, a 20-percent increase in imports, associated with a 10-percent increase in PVC prices, would increase imports from about 1.5 percent to 1.8 percent of overall United States sales. This means that domestic Initial Decision 115 F.T.C, producers would find, and indeed have found, it profitable to raise the prices of each of the relevant PVC products, as they would lose only 0.3 percent of their overall sales if they raise prices by 10-percent. Domestic PVC producers would find, and have found, it profitable to raise PVC prices because the low market share of imports in combination with the low responsiveness of imports would not be sufficient to undermine a domestic price increase (Kaserman JX 1, 300 In. 19-301 In. 5). Thus, as the Commission found in Goodrich, imports of PVC resin do not, absent extraordinary circumstances, constrain domestic prices (Goodrich, slip op. at 38). A. Mass and Suspension PVC 118. In Goodrich, the Commission found that the United States as a whole is the relevant geographic market for mass and suspension PVC. The Commission's finding is consistent with the record evidence and confirms the stipulation made by the parties (Goodrich, slip op. at 15; See Kaserman JX 1, 291-292). 119. Prices of mass and suspension PVC have increased significantly since the time of the acquisition. Mr. Schaefer, a Vice-President of Occidental, testified that mass and suspension PVC prices were about 23 cents per pound in November 1984 (Schaefer JX 1, 579 In. 5-17), and that prices had risen to the 28-cent to 30-cent range by the time of the acquisition (Schaefer JX 1, 579 In. 18-20). [##] (Donnelly CX 176A-B J 2 Jn Camera; Heath CX 178D-E] 7 In Camera; Alberti CX 199B { 3 In Camera; Wilhite CX 179B ¥ 2 In Camera; Pflugrath CX 177D 7 In Camera; Clark CX 193B-C { 3 In Camera). Despite the strong price increases sustained in the industry, the level of imports has declined from the four to fivepercent range of 1984-1985 (Schaefer JX 1, 580 In. 4-9, 582 In. 14-15), to a market share of 1.5 percent during the most recent 12-month period in the evidentiary record (CX 158D; CX 212C; CX 147R-Z5; CX 211A-D; Sherman CX 171C-D 7; See CX 173A-D). 120. Mass and suspension PVC imports have been, and continue to be, only a minor factor in the marketplace. This fact is recognized by Occidental management. Steven Schaefer, Senior Vice President, PVC Products, Occidental Chemical Corporation, observed, in OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1041 1010 Initial Decision December 1984, when the level of PVC imports was substantially higher than it is today:

They are there. They exist. They will probably continue to exist but they are not a dominant force in the marketplace by any stretch in my view. (JX 3, PX 10 at 1129 In. 24 - 1130 In. 4; Schaefer JX 1, 575 In. 20-576 In. 5; See JX 3, PX 52; JX 3, PX 131 at 1335-1336; Beveridge JX 1, 89 In. 11-12; Goodrich, slip op. at 38). 121. Other witnesses testified in the Goodrich proceeding that imports of mass and suspension PVC do not, and are not likely to, operate as a significant constraint on prices for mass and suspension PVC in the United States (Taylor Dkt. 9159, 1591-92; Arp Dkt. 9159, 3557; Schaefer Dkt. 9159, 1131; McMath Dkt. 9159, 1924). Accordingly, the Commission concluded in that case that mass and suspension PVC imports do not significantly constrain the pricing discretion of producers in the United States (Goodrich, slip op. at 38). Moreover, as discussed, infra, imports are even less of a factor today than they were at the close of the record in Goodrich. 122. [##] (Lewis CX 204B { 4 In Camera; Pflugrath CX 177C J 5 In Camera; Wilhite CX 179D J 4 In Camera; Goldstein CX 180C q 4 In Camera; Clark CX 193D-E J 6 In Camera; Bendavid CX 194C-D J 5 In Camera; Gmach CX 200D { 4 In Camera). [##) (Rutland CX 196B J 5 Jn Camera). [##] (Donnelly CX 176F-G {6 In Camera). [##] (CX 137B In Camera; See also RX 198 In Camera). It is thus expected that the United States will be, for the remainder of the decade, a net exporter of PVC (CX 43L). 123. The evidence regarding shipping patterns also shows that the United States mass and suspension PVC market is a strong geographic market. Imports accounted for about five percent of mass and suspension supply in 1985 (Schaefer JX 1, 580 In. 4-9; JX 3, PX 141: Kaserman JX 1, 294 In. 6-12; Schaefer JX 1, 576 In. 8-16; See Harris JX 1, 860 In. 15-17), and exports were less than imports (Schaefer JX 1, 577 In. 7-11; JX 3, PX 9 at 66 In. 4-16). Imports of PVC resin today account for only 1.5 percent of overall PVC resin consumption (CX 158D; CX 212C; CX 147R-Z5; CX 211A-D; Sherman CX 171C-D { 7).

Initial Decision 115 F.T.C.

124. [##] (See McMath Dkt. 9159, 1924; Taylor Dkt. 9159, 1590; Arp Dkt. 9159, 3557; Dkt. 9159 CX 66C, F, I, L, O, R, U, X, Zl, Z4, Z13, Z16, Z25, Z28, Z31, Z41, Z44, Z47, Z56 In Camera). The Commission stated in that case that imports are only a small4 1 3 1 5 0 625 859 1341 52 -1 5 1 3 1 5 1 625 863 210 48 96.600197 proportions 1 3 1 5 2 850 863 43 35 96.619194 of5 1 3 1 5 3 904 862 176 36 96.206268 domestic5 1 3 1 5 4 1095 861 94 36 96.582619 PVC5 1 3 1 5 5 1204 860 309 46 94.135948 consumption... (Goodrich, slip op. at 37-38). Published import statistics do not disaggregate PVC resin imports by type (See CX 147A-Z5). It is clear, however, that since 1985, total PVC imports have declined steadily (CX 173A). In 1986, PVC imports of all types accounted for 2.7 percent of total PVC supply in the United States (CX 172C). In the period December 1986 through November 1987, imports of all types of PVC accounted for 1.5 percent of total United States PVC supply (CX 158D; CX 212C; CX 147R-Z5; CX 211D). Moreover, imports in the second half of 1987 were less than one-half the level in the first six months of the year. In the first six months of 1987, PVC imports of all types accounted for 2.1 percent of total PVC supply (CX 147Z1; CX 152C; CX 172C; CX 173A). In the second half of 1987, based upon the five months for which data are in the record, total PVC imports accounted for under one percent of total United States PVC supply (compare CX 211D and CX 212C with CX 147Z] and CX 152C; See CX 172C; CX 173A).

125. The graphs below, prepared by the Commission's Dr. Sherman from published trade and production statistics, depict, by calendar quarter for the period extending from the first quarter of 1982 through the third quarter of 1987, respectively: (1) the level of PVC imports in relation to the level of United States production of PVC (CX 172A); and (2) the level of PVC imports as a percent of the total United States supply (i.e., production plus imports) of PVC (CX 173A). [##] 126. The sharply lower level of PVC imports since mid 1987 may be attributable to a change in applicable United States tariffs and is not likely to be reversed by normal market forces (CX 141A- B). Duty-free imports of PVC from Mexico accounted for 45.1 percent of total United States PVC imports in 1986, and 59.5 percent of total United States PVC imports in the period January through July 1987 (CX 147R; CX 147Z2). Elimination of duty-free status for Mexican PVC imports in August 1987 (CX 141A-B), has terminated this former low-cost source of PVC supply, and has reduced total PVC OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1043 1010 Initial Decision imports from Mexico to a small amount (CX 147Z3-Z5; CX 211A-D).

127. In 1985, forty-five percent of United States PVC imports were from Canada (JX 3, PX 5; See Kaserman JX 1, 244-245). [##] (Goodrich, slip op. at 38; Kaserman JX 1, 294 In. 20-295 In. 13; Kaserman Dkt. 9159, 2248-49; JX 3, PX 140 In Camera; Dkt. 9159 CX 2990-P In Camera; Dkt. 9159 CX 92K; Dkt. 9159 RX 190D Jn Camera). These countries are the principal sources of imports of mass and suspension PVC into the United States (Goodrich, slip op. at 38; Kaserman Dkt. 9159, 2248; Taylor Dkt. 9159, 1687; CX 43L-M; Dkt. 9159 CX 601AZ8). [##] (Goodrich, slip op. at 38; Kaserman JX 1, 294 In. 20-295 In. 13; DiLiddo Dkt. 9159, 3381; Dkt. 9159 CX 1850 In Camera). [##] (JX 3, PX 140, Tables 1 through 10 In Camera).

128. [##] (See Pflugrath CX 177C-D, { 6 Jn Camera). 129. It is Occidental's position that, although PVC imports have declined, world-wide excess capacity presents a competitive threat to United States PVC producers (See RPF 95, 100). [##] (Stuart RX 245C J 8 In Camera; Marcus RX 242D J 8 In Camera). Foreign mass and suspension PVC production capacity does not have a significant impact on the United States marketplace. Mr. Steven Schaefer, Senior Vice President, PVC Products, Occidental Chemicals has testified: I5 1 3 4 8 5 988 1890 94 35 94.461746 don't5 1 3 4 8 6 1094 1890 140 35 96.807663 believes 1 3 4 8 7 1246 1890 27 35 95.626884 it5 1 3 4 8 8 1288 1890 71 42 95.626884 [thes 1 3 4 8 9 1372 1890 248 46 96.681076 overcapacity5 1 3 4 8 10 1635 1890 180 43 96.547905 situation]5 1 3 4 8 11 1831 1891 63 35 96.996826 has4 1 3 4 9 0 559 1948 1335 46 -1 5 1 3 4 9 1 559 1959 19 25 90.472710 a5 1 3 4 9 2 592 1959 85 35 90.472710 very5 1 3 4 9 3 693 1948 205 46 96.109673 significant5 1 3 4 9 4 910 1948 93 36 94.294975 role (JX 3, PX 10 at 1208 In. 4-8; Schaefer JX 1, 576 In. 17-577 In. 6). [##] (CX 137B In Camera; RX 198E In Camera; RX 212; Lull RX 1 EY 12 Jn Camera). 130. Another indication that foreign capacity utilization and PVC production is of small importance to competition in the U.S. market is the fact that Occidental does not track PVC output outside the United States (Schaefer JX 1,577 In. 12-578 In. 25). And, it appears that the reason Occidental does not track output outside the United States is because it is not relevant to its business (Schaefer JX 1, 578 In. 19-579 In. 4). Indeed, in 1986, Occidental's PVC management canceled Occidental's subscription to Tecnon Reports, a British-based trade publication which monitors world PVC developments (CX 218 [March 4, 1988 letter from Henry L. Huser to Rhett R. Krulla, cc: The Honorable Thomas F. Howder]; See RX 288-RX 310). Occidental's Chlor-Alkali and Chlorine Group continues to subscribe to Initial Decision 115 F.T.C.

Tecnon Reports and to Harriman Reports, another British-based trade publication which tracks world PVC activities (See CX 217A-H), but, according to Occidental counsel, Occidental only uses these publications for their chlor-alkali and chlorine sections and the publications are not used by or transmitted to Occidental's PVC personnel (CX 218).

131. [##] (Stuart RX 245C J 8 In Camera; Marcus RX 242D J 8 In Camera). |##] (RX 1Q In Camera; See CX 7; CX 169C). [##] (CX 7; CX 169C; RX 198 In Camera). [##] (RX 198F In Camera). [##] (CX 137C In Camera). Given these factors, it appears that PVC capacity outside of the United States does not act as a constraint on the exercise of market power in the United States. 132. [##] (Schaefer JX 1, 587 In. 21-589 In. 14; JX 3, PX 10 at 1208 In. 4-24; JX 3, PX 136 at 147 In. 11-21; 148 In. 7-149 In. 9; CX 132; CX 10 In Camera; CX 11 In Camera; See Kaserman JX 1, 245-246). The graph below tracks domestic and export prices for suspension PVC homopolymer, as reported in RX 288 through RX 310. [##] 133. Until July 1987, United States PVC producers continued their practice, recognized in the prior Goodrich proceeding, of exporting mass and suspension PVC resin at prices substantially below the prevailing domestic price level (RX 288-RX 310). As the dollar has declined in value relative to foreign currencies, U.S. export prices have been rising relative to domestic prices, but remained below domestic prices through June 1987. By September 1987, the continuing decline in the value of the dollar enabled United States PVC producers to charge a premium for export sales. In this climate, United States PVC producers no longer need to accept a lower price in order to divert PVC supplies from the domestic market. United States PVC producers continue to discriminate in price between the United States market and export markets, however, now charging foreign purchasers more than domestic purchasers. The fact that domestic prices are distinct from, and move independently of, export prices, is further evidence that the United States is a relevant geographic market (See Goodrich, slip op. at 14; Kaserman JX 1, 295-296).

134. The fact that United States producers of mass and suspension PVC resin are able to discriminate in price between OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1045 1010 Initial Decision United States buyers and foreign buyers of the resin is evidence that the appropriate geographic market is the United States, and not a world market (Kaserman JX 1, 295 In. 14-296 In. 4; See also Harris JX 1,915 In. 14-917 In. 12). Price discrimination across geographic areas means that producers are charging a different price for the same product in different markets. Such price differences cannot be sustained if these different geographic areas are, in fact, in the same market. Thus, in order to practice price discrimination geographically, it is necessary to have separate geographic markets (Kaserman JX 1, 295 In. 14-296 In. 4; DOJ Merger Guidelines, supra, J 4492.303 at 6879-11).

135. [##] (Lewis CX 204B J 4 In Camera). [##] (CX 112C In Camera; CX 113A In Camera; JX 3, PX 94; Cf. RX 206A In Camera). These facts also suggest that producers of mass and suspension PVC homopolymer resin do not consider imported resin to be a significant factor in the United States market. 136. Changes in exchange rates may cause historic import sales and shipment data to overstate the future competitive significance of foreign firms (DOJ Merger Guidelines, Section 3.23, (CCH) J 4,493 at 6,879-15; See also Klass Dkt. 9159, 5203). [##] (Stevens JX 3, PX 9 at 66 In. 25 - 67 In. 7; Donnelly CX 176F { 6 Jn Camera; Goldstein CX 180B J 4 In Camera; Dellevigne CX 188D J 11 In Camera; Rutland CX 196B J 5 Jn Camera; See Klass Dkt. 9159, 5201, 5202). 137. As observed by Dr. Klass in the Goodrich case, the strength of the dollar has had a significant effect on the level of imports (Klass Dkt. 9159, 4222). In order to corroborate witness testimony on this issue, Dr. Klass quantified the changes in the value of the dollar in the years preceding 1985 by tabulating the index of weighted average exchange values of the U.S. dollar on the basis of data reported in the Federal Reserve Bulletin (Klass Dkt. 9159, 5175-76, 5179-80; See Dkt. 9159 CX 250; See Klass Dkt. 9159, 5641, 5645-46). Federal Reserve System data show that, from the third quarter of 1980 to the third quarter of 1984, the United States dollar increased in value by 66 percent, as measured by the Federal Reserve's index of weighted average exchange value (compare DKt. 9159 CX 776E and Dkt. 9159 CX 777E (Tables 3.28, Foreign Exchange Rates, July-Sept.); See Dkt. 9159 CX 250; Klass Dkt. 9159, 5192-94; See Klass Dkt. 9159, 5653-55, 5659-60). All else Initial Decision 115 F.T.C.

being equal, this represents a 66 percent increase in the price of mass and suspension PVC in the United States relative to foreign PVC resin prices over this time period (Goodrich, slip op. at 37; Klass Dkt. 9159, 5195). [##] (Goodrich, slip op. at 37; Klass Dkt. 9159, 5200-01; See Dkt. 9159 RX 1174A (PVC import volumes); CX 664U In Camera; CX 778C (PVC production); Klass Dkt. 9159, 5196-97). 138. As explained by Dr. Klass, these data indicate the supply response of imports to changes in United States mass and suspension PVC resin prices (Klass Dkt. 9159, 4229). In effect, a 66 percent increase in the relative price of mass and suspension PVC in the United States was associated with a 2.9 percent loss of market position by domestic producers to foreign competition through imports (See Klass Dkt. 9159, 4150). Had this price increase resulted from concerted action by United States producers of mass and suspension PVC, rather than changes in foreign exchange rates, the price increase clearly would have been profitable to the colluding producers, in light of the observed magnitude of the import response. A 66-percent increase in price accompanied by a 2.9-percent loss of volume sold would yield a net increase in revenues of 61 percent. Price increases in mass and suspension PVC result in little loss of volume by domestic producers to imports, even though, when viewed in comparison to the minuscule level of imports, the threefold increase in imports may appear large. This is because, as acknowledged by Dr. Klass, when the fraction of total consumption accounted for by imports is small, the elasticity of demand faced by collusive firms in the market may be low, notwithstanding a high elasticity of imports (Klass Dkt. 9159, 5156; See Klass Dkt. 9159, 5136-43).

139. This evidence demonstrates that, if United States producers of mass and suspension PVC were able to coordinate their actions so as to increase mass and suspension PVC resin prices, the resulting loss of market share by the collusive group to import competition would have little effect on the profitability of the price increase. This conclusion is further supported by the more recent analyses of PVC imports conducted by Dr. Kaserman and by Dr. Sherman (Kaserman JX 1, 282, 300-302; Kaserman Dkt. 9159, 300 In. 5 - 302 In. 12; See JX 3, PX 141; Sherman CX 171B-E ff 4-11; CX 174A-D). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1047 1010 Initial Decision 140. The record regarding the responsiveness of imports confirms that imports are not sufficiently responsive to changes in mass and suspension PVC resin prices to defeat collusive action by United States producers. Whether imports are likely to constrain pricing actions by United States producers of mass and suspension PVC is dependent upon the responsiveness of imports to changes in United States prices relative to foreign price levels. As explained by Dr. Klass, the evidence of what has happened to imports in relation to changes in the value of the dollar is relevant to assessing the likely effect of a long term sustained increase in mass and suspension PVC prices (Klass Dkt. 9159, 4150). An increase in the value of the dollar relative to foreign currencies is equivalent in effect to a corresponding increase in United States prices for mass and suspension PVC in relation to foreign mass and suspension PVC (Klass Dkt. 9159, 4222-23, 5179; See Dkt. 9159 Klass 5169-70). 141. The strong relationship between the level of PVC imports (both in pounds and as a percent of total United States supply) and the value of the dollar can be charted in the graph below (CX 174A). The volume of imports has closely tracked the exchange value of the dollar from 1982 through 1987. Imports attained their peak penetration (6.7 percent - See CX 174D) into the domestic market in early 1985, a time at which the U.S. dollar had appreciated nearly 50 percent against other currencies.” Since that time, PVC imports have fallen to less than one percent of U.S. supply, as the dollar has attained values beneath its 1982 levels (CX 174D). [##] 142. As discussed below, reliance by customers on imported mass and suspension PVC resin is limited by several factors, including import duties, high handling costs, and logistical and quality problems associated with imported resin. 143. Imported PVC resin faces substantial duties in the United States, pursuant to The Tariff Act of 1930, 19 U.S.C. 1202, Part 4. The current duty on imported PVC resin of 10.1 percent (See CX 147A-Z5) significantly increases the price of imported PVC resins. For example, resin priced at 40 cents per pound overseas would have , Imports earlier reached a peak of 6 percent of U.S. supply in early 1984 after domestic PVC prices rose sharply following freezing weather conditions that forced the shutdown of several domestic PVC plants (Goodrich, slip op. at 37). Initial Decision 115 F.T.C.

an added duty in the United States of 4 cents. Mexico has recently lost its designation as a beneficiary5 1 3 1 2 7 1330 699 213 46 96.442886 developing5 1 3 1 2 8 1555 699 176 45 93.462685 country, terminating the duty-free status of imports, including PVC resins, from Mexico (CX 141A-B): With this change, customers have found that the price of Mexican resin, before handling and other costs are added, is higher than the price of resin in the United States (See CX 14). [##] (Pflugrath CX 177C J 5 In Camera; Underwood CX 203C {5 Jn Camera).

144. The high handling costs associated with shipments of mass and suspension PVC from overseas also represent a barrier to trade flows into the United States. Imports from overseas must be shipped in bags while domestic mass and suspension resin is transported in bulk by rail tank car. The costs to users of handling bag shipments are substantial and are estimated to amount to between three and seven cents per pound (Goodrich, slip op. at 38; See Kaserman JX 1, 293). [##] (Pflugrath CX 177C 7 5 Jn Camera; Wilhite CX 179D 7 4 In Camera; Clark CX 193D-E J 6 In Camera; Alberti CX 199E J 7 In Camera; Weimar RX 249A-B { 3 In Camera; Kaserman DKt. 9159, 2248; H. Wheeler Dkt. 9159, 1776-77; Taylor Dkt. 9159, 1592; Yu Dkt. 9159, 2158-59).

145. [##] (Pflugrath CX 177C Q5 In Camera; Wilhite CX 179D q 4 In Camera; Goldstein CX 180C-D J 4 Jn Camera; Clark CX 193D-E { 6 In Camera; Bendavid CX 194C-D J 5 In Camera; Alberti CX 199E J 7 In Camera; Gmach CX 200D 4 In Camera; Lewis CX 204B J 4 In Camera; Dellevigne CX 188D § 11 In Camera; Weimar CX 192F J 14 In Camera; Weimar RX 249A-B { 3 In Camera; Kaserman JX 1, 293 In. 6-17; Friedman JX 1, 134 In. 9 - 135 In. 18). [##] (CX 15 In Camera; See also Alberti CX 199E {7 In Camera, Clark CX 193E J 6 In Camera; Bendavid CX 194C-D {5 In Camera, Weimar RX 249A-B J 3 In Camera). [##] (Goldstein CX 180C ] 4 In Camera; Gmach CX 200D { 4 In Camera; Lewis CX 204B { 4 In Camera). [##] (Lewis CX 204B J 4 Jn Camera). The high handling cost and logistical and quality problems associated with bag shipments of mass and suspension PVC limits the feasibility of imports as a practicable source of supply for the major users of mass and suspension PVC in the United States and represents a barrier to trade flows (Yu Dkt. 9159, 2158-59; See FTC Merger Statement, (CCH) J 4,516 at 6901-7).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1049 1010 Initial Decision 146. [##] (Pflugrath CX 177C J 5 In Camera; Heath CX 178C 5 In Camera; Wilhite CX 179D J 4 In Camera; Clark CX 193D-E 6 In Camera; Bendavid CX 194C J 5 In Camera; Alberti CX 199E { 7 In Camera; Gmach CX 200D J 4 In Camera; Underwood CX 203C J 5 In Camera; Goldstein CX 180C J 4 In Camera). 147. Thus, it is found that the United States is an appropriate geographic market for mass and suspension PVC (Complaint ¥ 14; Goodrich, slip op. at 15, 37-38; Kaserman JX 1, 303 In. 12-19; CPF 122).

B. Suspension PVC Copolymer 148. [##] (Kaserman JX 1, 284 In. 5-21; Harris JX 1, 863 In. 6-13; Beveridge JX 1, 85 In. 11-18; JX 3, PX 8 at 91 In. 14-25; JX 3, PX 9 at 28 In. 6-23; Hill CX 183D { 9 In Camera; Boyer CX 185F J 14; Dellevigne CX 188D 11 Jn Camera; Silver CX 190D In Camera; Weimar CX 192F J 14 In Camera; Weimar RX 249A-B J 3 In Camera; Marcus CX 209D 8 In Camera; Mercer CX 119I-J). [##] (Marcus CX 209D J 8 In Camera). Accordingly, the Commission has earlier concluded in Goodrich that, absent extraordinary circumstances, imports do not constrain domestic prices (Goodrich, slip op. at 38).

149. [##] (Weimar JX 1, 34 In. 21-35 In. 2; Weimar CX 192F ] 14 In Camera; Weimar RX 249A-B J 3 In Camera; Beveridge JX 1, 87 In. 1-4). [##] (Weimar CX 192F J 14 In Camera; Weimar RX 249B ¥ 3 In Camera).

150. [##] (Silver CX 190D In Camera). [##] (Weimar RX 249A-BJ 3 In Camera), [##] (Weimar CX 192E] 9 In Camera) [##] 151. [##] (Weimar CX 192F J 14 In Camera). [##] (Weimar CX 192F J 14 In Camera)" [##] (Weimar CX 192E J 9 In Camera), [##] (Weimar RX 249B 3 Jn Camera). [##] (CX 119I-J In Camera; JX 3, PX 9 at 28 In. 15-23). [##] (CX 136 In Camera; See JX 3, PX 140, Table 20 In Camera). [##] (Marcus CX 209D { 8 In Camera). '© The record does not reveal whether the purchases of resin from Mexico, referred to in Mr. Weimar's cross-examination affidavit (Weimar RX 249A-B 3), were made prior or subsequent to the imposition of these duties. Initial Decision 115 F.T.C.

152. As aresult of these factors, it is unlikely that a significant increase in the price of copolymer resin by United States producers would lead to significant increases in the amount of imported copolymer resin (Kaserman JX 1, 287 In. 22-288 In. 14 Beveridge JX 1, 87 In. 19-24).

153. Because it is unlikely that purchasers could easily turn to imported copolymer resin as a regular source of supply, and because it is unlikely that an increase in the price of suspension VC copolymer would lead to significant increases in the amount of imported fabricated products (discussed infra), it is likely that copolymer producers could profitably implement an increase in the price of copolymer resin of some 5 percent without being undermined by imports (Kaserman JX 1, 287 In. 5-13; JX 3, PX 136 at 60 In. 21-61 In. 10).

154. Thus, it is found that the United States is an appropriate geographic market for suspension PVC copolymer (Kaserman JX 1, 303 In. 12-19).

C. Dispersion PVC 155. [##] (IX 3, PX 140, Table 24 Jn Camera ). [##] (JX 3, PX 76 at 351556), [##] (See JX 3, PX 140, Table 24 In Camera). Based on these estimates, the United States constitutes a strong geographic market for dispersion PVC (JX 3, PX 7 at 119 In. 23-120 In. 2; Kaserman JX 1, 289 In. 12-25; Harris JX 1, 864 In. 5-17). 156. [##] (IX 3, PX 140, Table 15, Table 24 In Camera). Asa leading participant in the both the United States and the North American markets for dispersion PVC, it is unlikely that Goodrich would disrupt a collusive agreement among dispersion PVC producers (See Goodrich, slip op. at 38). 157. The share of total United States consumption accounted for by dispersion PVC imports is likely significantly lower today than 8 percent. Occidental's own analysis shows a decline in the level of imports of dispersion PVC in each year since 1984, and projected that 1986 imports would be 13.6 percent below the level in 1985 (JX 3, PX 76 at 351556). The continuing decline in the value of the dollar since the beginning of 1985 has made foreign dispersion PVC significantly more expensive for United States purchasers and has OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1051 1010 Initial Decision caused import levels to decline more rapidly than had been projected (See CX 174A; JX 3, PX 9 at 58-59). Because dispersion PVC is priced higher than most types of PVC, the decline in the value of the dollar would impact the cost of dispersion PVC resin imports, on a cent-per-pound basis, more severely than other types of PVC resin. PVC imports of all types in the period December 1986 through November 1987 totaled 121.6 million pounds, reflecting a 68-percent decline from the level experienced in the peak year 1985 (CX 172C; CX 147R; CX 211D). Tenneco's PVC sales manager observed, in early 1986, that overs 1 3 1 10 5 1012 1160 59 34 96.999374 thes 1 3 1 10 6 1084 1164 79 40 96.772018 past5 1 3 1 10 7 1178 1157 54 36 96.772018 six5 1 3 1 10 8 1248 1157 142 34 96.996422 months5 1 3 1 10 9 1405 1166 56 24 97.005356 we5 1 3 1 10 10 1476 1155 92 35 96.084152 have5 1 3 1 10 11 1583 1164 84 25 96.834091 seen5 1 3 1 10 12 1684 1163 19 25 95.972122 a5 1 3 1 10 13 1717 1152 129 45 95.972122 drying5 1 3 1 10 14 1861 1162 47 34 96.960632 up4 1 3 1 11 0 571 1209 1335 57 -1 5 1 3 1 11 1 571 1222 41 35 96.989578 of5 1 3 1 11 2 640 1220 216 46 96.416710 [dispersion5 1 3 1 11 3 884 1218 108 42 96.662125 PVC]5 1 3 1 11 4 1023 1217 148 46 96.994049 imports5 1 3 1 11 5 1201 1226 37 25 96.994049 as5 1 3 1 11 6 1267 1215 58 36 96.999588 thes 1 3 1 11 7 1354 1214 115 35 96.376488 dollars 1 3 1 11 8 1495 1213 105 35 96.594116 values 1 3 1 11 9 1627 1211 64 36 96.624596 has5 1 3 1 11 10 1720 1209 186 37 95.936195 declined (Stevens JX 3, PX 9 at 59). [##] (See CX 172C; CX 147R; CX 211D; JX 3, PX 140, Table 24 In Camera).

158. [##] (JX 3, PX 140, Table 12 Jn Camera). [##] (JX 3, PX 140, Table 13, Table 14 Jn Camera). [##] (See Baker, RX 251C J 6; Russ, RX 316B § 4 In Camera). Total PVC industry production in 1987 was 17.7 percent higher than industry production in 1985 (compare CX 213C (7,971 million pounds in 1987) and CX 172C (6,771 million pounds in 1985)). If dispersion PVC production increased between 1985 and 1987 in proportion to the increase in production for the PVC industry as a whole, 1987 dispersion PVC production would be approximately 490.1 million pounds (416.4 * 117.7%). Based on this estimate, the dispersion PVC imports of approximately 11.6 million pounds, accounted for approximately 2.3 percent of total dispersion PVC supply (11.6 (490.1 + 11.6)). This estimate suggests that total market demand for dispersion PVC grew at an annual rate of 5.3 percent (501.7 million pounds in 1987 vs. 452.5 million pounds in 1985). If market demand, in fact, remained unchanged between 1985 and 1987, domestic production would have only increased to 440.9 million pounds, with the increase in domestic production just offsetting the decline in dispersion PVC imports. In this event, 1987 dispersion PVC imports may account for as much as 2.6 percent of total dispersion PVC market supply (11.6 / 452.5). In any event, imports account for an insignificant share of the United States dispersion PVC market.

159. Imported dispersion PVC resin does not significantly affect the price of dispersion PVC resin sourced in the United States (JX 3, PX 136 at 145 In. 12-15; Kaserman JX 1, 290 In. 2-291 In. 12; Initial Decision 115 F.T.C.

Schaefer JX 1, 583 In. 10-584 In. 11). Mr. Schaefer testified that he believed dispersion PVC resin imports have had little effect on the price of dispersion resin in the United States (JX 3, PX 136 145 In. 12-15). Mr. Disch identified only United States producers as his competitors in dispersion PVC in the United States market (JX 3, PX 8 In. 6-10). Mr. Stevens noted that competition among United States suppliers of dispersion PVC resin is the principal determinant of dispersion PVC prices in the United States (JX 3, PX 9 at 63 In. 13-17). Similarly, Mr. Boyer of Formosa testified that imported dispersion PVC resin is not5 1 3 1 10 6 1196 1156 174 45 96.725319 currently5 1 3 1 10 7 1386 1166 19 25 96.479057 a5 1 3 1 10 8 1420 1154 204 47 96.479057 significant5 1 3 1 10 9 1639 1165 125 25 97.012299 sources 1 3 1 10 10 1780 1154 43 35 97.008751 of5 1 3 1 10 11 1834 1154 129 46 96.951126 supply4 1 3 1 11 0 627 1213 1336 49 -1 5 1 3 1 11 1 627 1218 35 36 96.238396 in5 1 3 1 11 2 683 1218 59 36 96.826790 thes 1 3 1 11 3 761 1217 176 37 96.537346 domestic5 1 3 1 11 4 957 1216 136 36 96.749718 markets 1 3 1 11 5 1111 1215 58 36 96.269020 for5 1 3 1 11 6 1187 1215 201 47 96.490356 dispersion5 1 3 1 11 7 1408 1214 93 37 96.429222 PVC5 1 3 1 11 8 1520 1214 94 36 89.520340 resins 1 3 1 11 9 1636 1244 5 6 89.433800 .5 1 3 1 11 10 1665 1244 5 6 89.433800 .5 1 3 1 11 11 1694 1214 26 36 88.966599 . (Boyer CX 185F { 13). [##] (See RX 206 In Camera; RX 163 In Camera). 160. [##] (See Van Haaren CX 187D J 11 Jn Camera; Baker CX 205B { 3; Beveridge JX 1, 89 In. 11-14). Sheet flooring accounts for the largest percentage, approximately 40 percent, of total dispersion PVC resin demand (JX 3, PX 8 at 43 In. 16-21). [##] (See Lore JX 1, 182 In. 11 - 23), [##] (Boulay CX 189C-D ¥ 8 In Camera; JX 3, PX 8 at 44 In. 14-18). Mr. Disch estimated that approximately 40-50 percent of the dispersion resin customers in the United States, primarily in the coating and the flooring industries, would find it very difficult to use imported resin (JX 3, PX 8 at 44 In. 3-13; See JX 3, PX 9 at 56-57). Mr. Stevens similarly testified that imported resin has been used primarily in low-end dispersion PVC markets, such as traffic cones, in which there5 1 3 2 12 6 1204 1973 30 35 96.975037 is5 1 3 2 12 7 1249 1983 85 34 96.831360 very5 1 3 2 12 8 1348 1972 87 35 96.698418 little5 1 3 2 12 9 1449 1971 215 45 96.295975 technology5 1 3 2 12 10 1678 1970 188 35 87.002235 involved (JX 3, PX 9 at 55 In. 20-23, 56 In.14-18).

161. Imported dispersion PVC resin is used primarily in low-end, or non-critical applications. These applications include applications such as slush-molding of products such as toys or balls (JX 3, PX 8 at 14-20). In these applications, the quality of the dispersion resin used is lower than the quality of the dispersion resin used in more critical applications such as flooring (JX 3, PX 8 at 44 In. 21 - 45 In.8; JX 3, PX 9 at 56-57). PVC producers price dispersion resins sold for more critical applications higher than dispersion resins sold for low-end applications (JX 3, PX 8 at 45 In. 9-14). Mr. Disch testified that, with increases of 5-10 percent in the price of dispersion PVC resin in the United States, there would be some substitution of imported for domestic dispersion PVC resin in these applications (JX 3, PX 8 at 43 In. 1-15). [##] (See CX 39 In Camera, CX 40 In OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1053 1010 Initial Decision Camera; CX 41 In Camera; CX 42 In Camera). [##] (Id.) [##] (Baker CX 205C J 4; Baker RX 251B J 4 In Camera). Dispersion PVC imports failed to constrain these price increases. The successful implementation of these increases, as indicated by the overall increase that has occurred in the price of dispersion PVC resin, demonstrates that imported dispersion PVC resin has little influence on the United States price level, even with respect to the low-end applications.

162. [##] (Beveridge JX 1, 89 In. 24 - 90 In. 6; Mason JX 1, 196 In. 12 - 197 In. 5; Boulay CX 189C { 8 In Camera). [##] (Beveridge JX 1, 89 In. 11-12, 89 In. 24-90 In. 6; Lore JX 1, 182 In. 11-13; Mason JX 1, 196 In. 14-15; Boulay CX 189C J 8 In Camera; Baker CX 205C-D J 3).

163. [##] IX 3, PX 9 at 56 In. 19-57 In. 3; Beveridge JX 1, 89 In. 4-10; van Haaren CX 187D J 13-14 In Camera). 164. [##] (Kaserman JX 1, 290 In. 1 - 291 In. 12; Boulay CX 189C { 8 In Camera; Baker CX 205B 1 3; Mason JX 1, 196 In. 14 - 197 In. 17; van Haaren CX 187F J 15 Jn Camera).

165. Accordingly, it is found that the United States is an appropriate geographic market for dispersion PVC (Kaserman JX ], 303 In. 12-19), D. Fabricated Product Imports 166. As discussed below, imports of fabricated products do not constrain prices in the relevant markets. 167. One element to be considered regarding the likely response of fabricated good imports in response to increased PVC prices in the United States is the cost share of PVC in the final product (i.e., the percentage of the product manufacturing cost accounted for by PVC). If the cost share is low, increased resin prices have a very small effect on the ultimate price of the final product, and therefore are not likely to result in increased imports of fabricated products (Kaserman JX 1, 287 In. 7-13).

168. The cost share of PVC in fabricated products in each of the relevant product markets is low (Goodrich F 96; Kaserman JX 1, 287 In. 14-18, 291 In. 13-24; Goodrich, slip op. at 73-75). As a result, increased PVC resin prices in the United States would be unlikely to Initial Decision 115 F.T.C.

result in a substantial increase in the level of fabricated product imports into the United States (Kaserman JX 1, 291 In. 13-24). 169. Respondents argued in Goodrich that mass and suspension PVC pricing is constrained by the level of fabricated products containing mass and suspension PVC (Dkt. 9159 RPF 270-271). Evidence in that case, however, established that fabricated product imports were limited primarily to calendered products (See Dkt. 9159 RX 1178A-B), an application which constituted only a very small portion of total United States consumption of mass and suspension PVC (Goodrich, slip op. at 75). Even in this application, however, the level of fabricated product imports is not responsive to the price of mass and suspension PVC resin, because PVC accounts for only a small portion of the cost of finished PVC calendered goods (i.e., less than 10 percent, See Becker Dkt. 9159, 1308-09). Producers of calendered PVC products overseas, at that time, were utilizing more efficient plants than the plants in the United States, which were considered outdated (Dkt. 9159 RX 1320C). Moreover, it was shown that many imported calendered products consisted of non-4 1 3 2 17 0 616 1682 1338 48 -1 5 1 3 2 17 1 616 1685 135 34 96.414978 critical5 1 3 2 17 2 766 1684 169 46 96.707710 products5 1 3 2 17 3 950 1683 86 35 96.921265 with5 1 3 2 17 4 1051 1683 105 45 96.616714 fairly5 1 3 2 17 5 1171 1683 165 35 96.724640 standards 1 3 2 17 6 1351 1683 118 34 96.660172 colors5 1 3 2 17 7 1485 1683 68 34 96.642700 ands 1 3 2 17 8 1568 1682 85 34 96.657509 with5 1 3 2 17 9 1669 1682 88 34 96.924835 little5 1 3 2 17 10 1773 1688 181 28 95.846367 customer4 1 3 2 18 0 616 1740 1336 45 -1 5 1 3 2 18 1 616 1743 156 34 96.416458 reliance5 1 3 2 18 2 791 1753 47 23 96.474289 on5 1 3 2 18 3 857 1741 177 35 96.728760 technical5 1 3 2 18 4 1054 1741 155 35 89.265518 service (Dkt. 9159 RX 1320C). Thus, producers of calendered products in the United States maintained their competitiveness with overseas imports by providing greater customer and technical service, and by providing better delivery schedules (Dkt. 9159 RX 1320C).

170. [##] (Marcus CX 209C J 5 In Camera). 1. Mass and suspension PVC 171. As shown, imports of mass and suspension PVC fabricated products do not significantly affect the price of mass and suspension PVC homopolymer in the United States.

172. Mr. Disch testified that, across a wide range of fabricated products, the price of mass and suspension PVC homopolymer PVC does not significantly affect the level of fabricated product imports (IX 3, PX 8 at 93 In. 25 - 94 In. 16, 94 In. 17-20, 95 In. 8-21, 29 In. 15-20). Mr. Disch testified that, in general, the price of mass and suspension PVC does not affect the level of imports of fabricated products, given that the PVC resin accounts for such a small portion OCCIDENTAL PETROLEUM CORPORATION, ETAL. —_ 1055 1010 Initial Decision of the price of the product (JX 3, PX 8 at 93 In. 25 - 94 In. 13, 95 In. 14-21, 29 In. 15 - 25).

173. [##] (Pflugrath CX 177B J 4 In Camera; Heath CX 178C { 4 In Camera; Wilhite CX 179E {5 Jn Camera; Underwood CX 203B q 4 In Camera). [##] (Wilhite CX 179E J 5 In Camera; Pflugrath CX 177B { 4 In Camera; Underwood CX 203B J 4 In Camera). 174. Thus, the level of imports of PVC pipe does not substantially change as the price of mass and suspension PVC homopolymer resin changes. The very low level of PVC pipe imports and the apparent lack of any supply response as the price of mass and suspension PVC homopolymer resin in the United States changes show that the level of PVC pipe imports into the United States is not sensitive to the price of mass and suspension PVC homopolymer resin in the United States. Therefore, PVC pipe imports have little, if any, effect on the price of mass and suspension PVC homopolymer resin in the United States. 175. [##] (Donnelly CX 176E { 6 Jn Camera; Goldstein CX 180B {4 In Camera).

2. Suspension PVC copolymer 176. Similarly, the level imports of suspension PVC copolymer fabricated products is not sensitive to the price of resin in the United States.

177. [##] (JX 3, PX 11 at 678 In. 10-16; Hill CX 183E-F J 15 Jn Camera). Mr. Disch noted that a record could sell for as much as 40 times the cost of the PVC compound that was used in the record (JX 3, PX 8 at 29 In. 1-6). [##] (IX 3, PX 8 at 94 In. 17-20; JX 3, PX 11 at 679 In. 2-5; Hill CX 183E-F J 15 Jn Camera). 178. [##] (JX 3, PX 8 at 94 In. 14-17; Weimar CX 192H J 18 In Camera; Marcus CX 209B-C J 5 In Camera). [##] (JX 3, PX 6 at 87 In. 1-87 In. 1-88 In. 3; JX 3, PX 8 at 93 In. 25-94 In. 13; JX 3, PX 11 at 673 In. 21-674 In. 2; Barlet JX 1, 60 In. 7-23; Weimar JX 1, 35 In. 3-16; Marcus CX 209C J 6 In Camera). Mr. Disch testified that PVC resin accounts for approximately 15-20 percent of the cost of the finished tile (JX 3, PX 11 at 673 In. 21-24; JX 3, PX 8 at 27). Armstrong has estimated that the resin accounts for close to 10 percent of the cost of one of its typical tile products (Barlet JX 1, 60 Initial Decision 115 F.T.C.

In. 7-23). [##] (TX 3, PX 8 at 93 In. 25-95 In. 13; Weimar CX 192H 18 In Camera; Marcus CX 209C ] 6 Jn Camera). 3. Dispersion PVC 179. The price level of dispersion PVC fabricated products is also relatively insensitive to the price of dispersion PVC resin in the United States.

180. Mr. Disch testified that the price of dispersion PVC does not significantly affect the level of fabricated product imports (JX 3, PX 8 at 39 In. 16-19, 95 In. 8-21, 29 In. 15-20, 39 In. 16 - 40 In. 7). Mr. Disch pointed out, for example, that the reduction in American production of coated fabrics, a dispersion PVC end-use application which has been particularly subject to import competition, has not been affected by dispersion PVC prices in the United States (JX 3, PX 8 at 95 In. 14-21).

181. Dispersion PVC accounts for only a small portion of the cost of vinyl sheet flooring, a major end-use application of the resin (Barlet JX 1, 66 In. 15 - 67 In. 11; JX 3, PX 8 at 11-21). Mr. Barlet also estimated that the dispersion resin accounts for 10 percent, and possibly less, of the cost of sheet flooring products (Barlet JX 1, 66 In. 15 - 67 In. 11). Thus, significant increases in the price of dispersion PVC resin would not likely result in any significant increase in the percentage of imported viny] resilient sheet floors purchased in the United States (JX 3, PX 8 at 39 In. 16-19; See Kaserman JX 1, 291 In. 13-24).

182. Imports of the other dispersion PVC fabricated products are also insensitive to the price of dispersion PVC resin in the United States. Mr. Disch testified that the effect of imports of coated fabrics on the use of dispersion PVC resin in that application has been disasterville, yet noted that the price of PVC has had no effect on the level of coated fabric imports (JX 3, PX 8 at 95 In. 8-21). The level of imports of dispersion PVC in various molding and coating applications is similarly insensitive to the price of dispersion PVC resin in the United States. In general, the price of PVC is a relatively insignificant portion of the cost of the final product (JX 3, PX 8 at 39 In. 12-15; Lore JX 1, 83 In. 16 - 184 In. 4; Mason JX 1, 195 In. 23 - 196 In. 3; Kaserman 291 In. 13-24). Thus, significant increases in the OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1057 1010 Initial Decision price of dispersion PVC would not likely have a significant effect on the level of imports of these products (Jd.). 183. Thus, the level of imports of each of the relevant products, in resin and in fabricated products, is relatively insensitive to the price of these products in the United States. Imports are a small factor in the United States PVC markets and do not constrain United States prices for the relevant products (See Goodrich, slip op. at 38). Mr. Schaefer testified generally as to the effect of significant PVC price increases on the level of demand for PVC resin in the domestic market in each of the relevant product markets. He testified that he did not believe such increases would have much effect on demand (JX 3, PX 136 at 71 In. 22 - 72 In. 2, 60 In. 21 - 61 In. 10, 67 In. 2 - 11, 75 In. 23 - 76 In. 3).

VI. PVC QUANTITATIVE ANALYSIS A. Competitors in the Mass and Suspension PVC 184. [##] (IX 3, PX 140 Tables 1 6 1 1 8 1307 1626 36 35 95.768417 1 In Camera ). [##] (JX 3, PX 140 Tables 1 6 1 2 3 836 1677 41 34 85.659790 7 Jn Camera). [##] (IX 3, PX 140 Tables 1 6 1 2 12 1785 1686 66 35 96.765961 23 Jn Camera).

185. [##] (IX 3, PX 140 Tables 1 6 2 1 8 1305 1791 40 34 96.601776 2 In Camera). [##] (JX 3, PX 140 Tables 1 6 2 2 3 812 1842 41 34 96.771553 7 In Camera). 186. [##] (IX 3, PX 140 Tables 1 6 3 1 8 1297 1901 40 34 90.616394 2 In Camera ). [##] (IX 3, PX 140 Tables 1 6 3 2 3 811 1952 40 35 96.670761 7 In Camera). 187. [##] (IX 3, PX 140 Tables 1 6 4 1 8 1288 2011 53 41 74.414757 2, Tables 1 6 4 1 10 1504 2013 40 35 95.482483 7 In Camera). 188. [##] (IX 3, PX 140 Tables 1 6 5 1 8 1288 2067 52 40 90.267883 2, Tables 1 6 5 1 10 1504 2068 39 36 95.638412 7 In Camera). 189. [##] (IX 3, PX 140 Tables 1 6 6 1 8 1288 2121 52 42 92.690735 2, “Table 7" In Camera). 190. [##] JX 3, PX 140 Tables 1 6 7 1 8 1287 2177 53 40 94.167992 2, Tables 1 6 7 1 10 1502 2178 40 35 95.794724 7 In Camera). 191. [##] (IX 3, PX 140 Tables 1 6 8 1 8 1286 2232 53 40 74.658096 2, Tables 1 6 8 1 10 1501 2233 40 36 96.438972 7 In Camera). 192. [##] (IX 3, PX 140 Tables 1 6 9 1 8 1286 2287 53 41 88.846115 2,”5 1 6 9 1 9 1358 2288 128 35 93.398483 Table 1" Jn Camera). 193. [##] (IX 3, PX 140 Tables 1 6 10 1 8 1285 2343 52 40 95.253883 2, Tables 1 6 10 1 10 1501 2344 39 35 87.168312 7 In Camera). 194. [##] (JX 3, PX 140 Tables 1 6 11 1 8 1285 2399 52 40 72.882072 2, Tables 1 6 11 1 10 1500 2400 40 35 96.488129 7 In Camera). 195. [##] (JX 3, PX 140 Tables 1 6 12 1 8 1285 2453 52 40 93.144135 2, Tables 1 6 12 1 10 1500 2455 40 34 96.807472 7 In Camera). 196. [##] (JX 3, PX 140 Tables 1 6 13 1 8 1284 2509 53 40 87.824356 2, Tables 1 6 13 1 10 1498 2510 41 35 91.669342 7 Jn Camera). Initial Decision B. Effect of the Acquisition on Concentration in The Mass and Suspension PVC Market 197. [##] (See JX 3, PX 140 In Camera; Kaserman JX 1, 306 In. 20-314 In. 4).

United States Mass and Suspension PVC Market Shares and Rank 1986 1985 Operating Homopolymer Company — Capacity" Production”

Share Rank Share Rank Goodrich Shintech Formosa Tenneco Georgia Gulf Vista Borden Occidental Air Products Certain-Teed Vygen Keysor-Century Total 1 JX 3, PX 140 Tables 1 13 1 1 7 1114 2654 34 29 90.698387 2 In Camera. 2 3X 3, PX 140 Tables 1 13 1 2 7 1114 2729 34 29 91.885544 7 In Camera. 13° 4X 3, PX 140 Tables 1 13 1 3 7 1119 2805 29 29 93.491707 1 In Camera. Mass and Suspension PVC Production!? Share Rank OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1059 1010 Initial Decision Operating Homopolymer Mass and Suspension Capacity Production PVC Production Pre-Acquisition HHI:

Post-Acquisition HHI:

Increase in HHI:

Occidental/Tenneco Combined Share:

Combined Rank:

Pre-Acquisition CR2:

Post-Acquisition CR2:

Increase in CR2:

Pre-Acquisition CR4:

Post-Acquisition CR4:

Increase in CR4:

Pre-Acquisition CR8:

Post Acquisition CR8:

Increase in CR8:

198. The acquisition reduced from twelve to eleven the number of competitors in the market and eliminated Tenneco as a competitor in the mass and suspension PVC market and as an independent producer of suspension PVC homopolymer. As a result of the acquisition, Occidental and B.F. Goodrich are essentially tied as the leading firms in the market.

199. The acquisition resulted in a substantial increase in concentration in the mass and suspension PVC market by all measurements. HHI concentration in mass and suspension PVC homopolymer production increased by 131 to a level of 1281 and, measured on the basis of total mass and suspension PVC production, increased by 156 to a level of 1278. Significantly, the operating capacity HHI increased by 158 to a level of 1305. Initial Decision 115 F.T.C.

200. Corresponding increases are reflected in two-firm, four-firm and eight-firm concentration ratios. Two-firm concentration in mass and suspension PVC operating capacity increased by 4.83 percent to 37.08 percent; four-firm concentration increased by 7.1 percent to 62.7 percent; and eight-firm concentration increased by 5.05 percent to 95.04 percent. Similar increases are recorded for concentration in homopolymer production and in overall mass and suspension PVC production.

C. Competitors in The Suspension PVC Copolymer 201. [##] IX 3, PX 140 Tables 1 5 1 1 8 1398 1260 60 36 96.365707 18 In Camera). [##] (JX 3, PX 140 Tables 1 5 1 2 3 933 1319 60 34 94.250488 17 In Camera). [##] (Hill CX 183D J 9 In Camera; Boyer CX 185F { 14; Dellevigne CX 188D J 11 Jn Camera; Weimar CX 192F { 14 In Camera).

202. [##] (IX 3, PX 140 Tables 1 5 2 1 8 1396 1494 73 40 94.485817 18, Tables 1 5 2 1 10 1636 1494 60 35 95.873184 17 In Camera). 203. [##] (JX 3, PX 140 Tables 1 5 3 1 8 1395 1552 61 35 94.407379 18 In Camera). [##] (JX 3, PX 140 Tables 1 5 3 2 3 917 1609 61 36 95.541306 17 In Camera). 204. [##] (JX 3, PX 140 Tables 1 5 4 1 8 1395 1669 72 41 74.862617 18, Tables 1 5 4 1 10 1634 1670 60 35 96.314064 17 In Camera). 205. [##] (JX 3, PX 140 Tables 1 5 5 1 8 1394 1727 73 42 94.633247 18, Tables 1 5 5 1 10 1634 1728 60 35 95.040794 17 In Camera). 206. [##] (JX 3, PX 140 Tables 1 5 6 1 8 1385 1786 72 41 95.875389 18, Jn Camera). [##] (IX 3, PX 140 Tables 1 5 6 2 3 916 1843 61 35 96.093582 17 In Camera). D. Effect of the Acquisition on Concentration in the Suspension PVC Copolymer Market 207. The Table below depicts the effect of the acquisition on concentration in the United States suspension PVC copolymer market, based on suspension PVC copolymer operating capacity at the time of the acquisition and 1985 suspension PVC copolymer production.

OCCIDENTAL PETROLEUM CORPORATION, ET AL.

1010 Initial Decision United States Suspension PVC Copolymer Market Shares and Rank Operating Company Capacity"

Share Rank Tenneco Occidental Borden Keysor-Century Vygen Total Pre-Acquisition HHI:

Post-Acquisition HHI: .

Increase in HHI:

Occidental/Tenneco Combined Share:

Pre-Acquisition CR2:

Post-Acquisition CR2:

Increase in CR2:

Pre-Acquisition CR4:

Post-Acquisition CR4:

Increase in CR4:

Production® 208. The acquisition reduced from five to four the number of competitors in the market. By combining the two leading firms in the market, the acquisition established Occidental as the dominant firm in suspension PVC copolymer, with a market share over twice that of the next largest firm.

14 JX 3, PX 140 Tables 1 14 1 1 7 1009 2710 50 29 92.383026 18 In Camera. 1S JX 3, PX 140 Tables 1 14 1 2 7 1009 2786 49 28 95.477493 17 in camera. Initial Decision 115 F.T.C.

209. The acquisition resulted in a substantial increase in concentration in the already highly concentrated suspension PVC copolymer market. HHI concentration in suspension PVC copolymer production increased by 1577 to a level of 4368 and operating capacity HHI increased by 1360 to a level of 3504. 210. Corresponding increases are reflected in two-firm and fourfirm concentration ratios. Two-firm concentration in suspension PVC copolymer production and operating capacity increased by 20.27 percent to 83.65 percent and by 19.13 percent to 71.3 percent, respectively. Four-firm concentration in suspension PVC copolymer Operating capacity increased by 12.75 percent to a level of 100 percent.

E. Competitors in the Dispersion PVC Market 211. [##] JX 3, PX 140 Tables 1 5 1 1 8 1400 1485 60 35 96.855522 13 In Camera). [##] (JX 3, PX 140 Tables 1 5 1 2 3 942 1544 61 34 70.892906 12”5 1 5 1 2 4 1027 1544 40 34 95.130157 In5 1 5 1 2 5 1093 1543 183 43 93.275436 Camera).5 1 5 1 2 6 1304 1544 74 42 78.582809 {##]5 1 5 1 2 7 1405 1544 69 42 54.317070 (IX5 1 5 1 2 8 1498 1544 32 40 96.674973 3,5 1 5 1 2 9 1555 1544 61 35 96.379211 PX5 1 5 1 2 10 1644 1544 68 35 96.506264 1405 1 5 1 2 11 1738 1544 129 36 96.506264 Table 24" In Camera).

212. [##] (IX 3, PX 140 Tables 1 5 2 1 8 1392 1661 60 34 96.226311 12 In Camera). [##] (JX 3, PX 140 Tables 1 5 2 2 3 921 1719 61 35 95.300552 13 In Camera). 213. [##] (IX 3, PX 140 Tables 1 5 3 1 8 1398 1776 73 41 93.433449 13, Tables 1 5 3 1 10 1639 1776 59 36 95.593605 12 In Camera). 214. [##] (IX 3, PX 140 Tables 1 5 4 1 8 1399 1834 72 41 94.698441 13, Tables 1 5 4 1 10 1638 1834 60 35 96.275360 12 Jn Camera). 215. [##] (IX 3, PX 140 Tables 1 5 5 1 8 1398 1892 73 40 95.320518 13, Tables 1 5 5 1 10 1638 1892 60 34 95.567787 12 Jn Camera). 216. [##] (IX 3, PX 140 Tables 1 5 6 1 8 1398 1950 73 40 95.197350 13, Tables 1 5 6 1 10 1639 1950 59 34 95.599228 12 In Camera). 217. [##] (IX 3, PX 140 Tables 1 5 7 1 8 1398 2008 73 40 95.216751 13, Tables 1 5 7 1 10 1638 2008 60 35 96.727341 12 In Camera). 218. [##] JX 3, PX 140 Tables 1 5 8 1 8 1398 2065 73 41 91.950523 13, Tables 1 5 8 1 10 1637 2065 61 35 94.222389 12 In Camera). F. Effect of the Acquisition on Concentration in The Dispersion PVC Market 219. The Table below depicts the effects of the acquisition on concentration in the United States dispersion PVC market, based on operating capacity and production. In addition, concentration in dispersion PVC supply, including both domestic production and imports, is presented.

OCCIDENTAL PETROLEUM CORPORATION, ET AL.

1010 Initial Decision United States Dispersion PVC Market Shares and Rank 1986 1985 Operating 1985 Production Company Capacity’® Production” & Imports"® Share Rank Share Rank Share Rank Occidental Goodrich Formosa Goodyear Tenneco Borden Georgia Gulf Total Pre-Acquisition HHI:

Post-Acquisition HHI:

Increase in HHI:

Occidental/Tenneco Combined Share:

Combined Rank:

Pre-Acquisition CR2:

Post-Acquisition CR2:

Increase in CR2:

Pre-Acquisition CR4:

Post-Acquisition CR4:

Increase in CR4:

Pre-Acquisition CR8:

16 JX 3, PX 140 Tables 1 14 1 1 7 1018 2629 51 30 90.434341 13 In Camera. 17 JX 3, PX 140 Tables 1 14 1 2 7 1019 2704 50 30 93.884804 12 In Camera. 18 JX 3, PX 140 Tables 1 14 1 3 7 1015 2781 55 28 83.547462 24 In Camera. Initial Decision 115 F.T.C.

220. The acquisition reduced from seven to six the number of competitors in the dispersion PVC market, and established Occidental as the market leader by a wide margin. 221. The acquisition resulted in a substantial increase in concentration in the dispersion PVC market, moving the market from the upper reaches of the moderately concentrated range well into the highly concentrated range. HHI concentration in dispersion PVC operating capacity increased by 331 to a level of 2051, while the HHI for dispersion PVC production increased by 448 to a level of 2201. Adjusting the production concentration level to account for dispersion PVC imports, which peaked in 1984-1985, HHI concentration in total dispersion PVC supply increases by 330 to a level of 1938.

222. Two-firm and four-firm concentration in dispersion PVC operating capacity increased by 6.58 percent to a level of 49.5, and by 8.52 percent to a level of 87.05 percent, respectively. Corresponding increases for dispersion PVC production are 8.68 percent, to a level of 55.14 percent, and 8.67 percent, to a level of 85.18 percent, respectively. Adjusted for 1985 dispersion PVC imports, the increase in two-firm concentration is 8.01 percent, to a level of 52.61 percent, and 7.98 percent, to a level of 80.25 percent, respectively. G. There Is a Trend Toward Concentration in the Relevant Markets 223. In assessing whether the increased concentration resulting from Occidental's acquisition of Tenneco's PVC assets and business contributes substantially to an increased likelihood of anticompetitive behavior in the relevant markets, it is important to consider the trend in concentration in the industry (Kaserman Dkt. 9159, 2297-98). If the concentration trend indicates that industry concentration is decreasing in the long term despite the acquisition, concern over the effects of the acquisition may be somewhat less (Kaserman Dkt. 9159, 2298-99). If the concentration trend reveals that concentration in the industry is increasing, however, concern over the effects of the acquisition on likely industry behavior and performance is increased (Id.).

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1065 1010 Initial Decision 1. Mass and suspension PVC 224. Since the mid-1970's, there has been a significant trend toward higher concentration in the mass and suspension PVC market (Goodrich F 54, 56-58; Goodrich, slip op. at 56 Tables 1 4 1 3 11 1579 852 64 35 87.570267 III Kaserman Dkt. 9159, 2301 [##] (Goodrich F 55, F 58; JX 3, PX 140, Table 2 Jn Camera).

225. [##] (Goodrich F 54; JX 3, PX 140, Table 2 Jn Camera). [##] (Goodrich F 54; JX 3, PX 140, Table 2 In Camera). [##] (Goodrich F 54; JX 3, PX 140, Table 2 In Camera). 226. A series of acquisitions in the market has contributed to the increased concentration in mass and suspension PVC (Goodrich FF 54, 56). In addition, several smaller firms have closed their operations and exited the industry (Goodrich F 55; Dkt. 9159 CX 442B- C). In 1970, Airco, Inc. sold its Chemical and Plastics Division to Air Products & Chemicals, Inc. (Goodrich F 55; Dkt. 9159 CX 323A). Allied Chemical Corporation sold its polyvinyl chloride manufacturing facility at Painesville, Ohio, to Robintech Incorporated in 1973 (Goodrich F 55; Dkt. 9159 CX 325A). [##] (Goodrich F 55; Dkt. 9159 CX 321B In Camera; Dkt. 9159 CX 357A In Camera, Dkt. 9159 CX 359F). These exits were offset by three new entries into the industry between 1974 and 1975, (Georgia Pacific Corporation, Formosa Plastics Corporation, and Certain Teed Corporation), and the establishment of Shintech, a joint venture between Shin-Etsu of Japan and Robintech, who had acquired Allied Chemicals suspension PVC plant the previous year (Goodrich F 56; Dkt. 9159 CX 344B). By 1975, there were twenty-two firms in the mass and suspension PVC market, up from 19 in 1971 (Goodrich F 55; CPF 239).

227. De novo entry has not occurred in PVC production since 1975 (Goodrich, slip op. at 36; Goodrich F 56). From 1975 to the present, new firms have entered the PVC markets only through acquisition (Goodrich F 56). The history of mass and suspension consolidations, acquisitions, and exits is chronicled in the Goodrich case (See Goodrich F 56). [##] (Goodrich F 56; Dkt. 9159 CX 317C In Camera). In 1977, Union Carbide exited the market after its plant was destroyed by explosion (Goodrich F 57; Dkt. 9159 CX 43B; Dkt. 9159 CX 108Q). [##] (Goodrich F 56; Kaserman Dkt. 9159, Initial Decision 115 F.T.C.

2304; Dkt. 9159 CX 41A In Camera; Dkt. 9159 CX 53W; Dkt. 9159 CX 337C In Camera; Dkt. 9159 CX 664C,J In Camera). Firestone's mass and suspension PVC business was acquired by Occidental Petroleum Corporation in 1980 (Goodrich F 56; Dkt. 9159 CX 307B). [##] (Dkt. 9159 CX 322A, C In Camera). [##] (Boyer CX 185A-B { 1-2; Dkt. 9159 CX 318A, D In Camera). [##] (Dkt. 9159 CX 300Z6 In Camera; See 306B In Camera). [##] (See Dkt. 9159 CX 116; Dkt. 9159 CX 561 In Camera). In 1984, Pantasote, Inc. closed its suspension - PVC homopolymer plant and exited the market (Dkt. 9159 CX 388 H. Wheeler Dkt. 9159, 1720-21, 1725; See H. Wheeler Dkt. 9159, 1774).

228. These acquisitions and exits have led to a continuous decline in the number of mass and suspension PVC producers since 1977 (Goodrich F 56-57; Kaserman Dkt. 9159, 2301; CPF 239-242). At the time of the Goodrich acquisition, there were seventeen firms in the market (Goodrich F 58). [##] (JX 3, PX 140 Tables 1 3 2 5 13 1921 1497 40 36 96.323044 2 Jn Camera).

229. The strong trend toward concentration in the mass and suspension PVC market heightens the probability that Occidental's acquisition of Tenneco's PVC assets and business may have the effect of substantially lessening competition in the market (Kaserman Dkt. 9159, 2304-05). The concentration trend in the mass and suspension PVC market indicates that concentration measurements at the time of the acquisition may in fact understate the current and future potential for exercise of market power by mass and suspension PVC firms. 2. Suspension PVC copolymer 230. Since the mid 1970's there has been a significant trend towards higher concentration in the suspension PVC copolymer market. [##] (Dkt. 9159 CX 323, CK 325, CX 330, CX 333-CX 334, CX 342, CX 347; CX 324, CX 326-CX 329, CX 331-CX 332, CX 335-CX 341, CX 343-CX 346, CX 349-CX 350 In Camera). [##] (IX 3, PX 140 Tables 1 5 1 6 5 1045 2536 61 36 96.601372 17 In Camera). 231. [##] (CX 5E In Camera).

232. [##] (Dkt. 9159 CX 330G Jn Camera). [##] (Goodrich F 57; Dkt. 9159 CX 336G In Camera). [##] (Dkt. 9159 CX 343G In Camera; Dkt. 9159 CX 349Q In Camera). [##] (Dkt. 9159 CX 318A OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1067 1010 Initial Decision In Camera; Boyer CX 185A-B { 1-2). Formosa is now in the process of dismantling the plant (CX 165A Table n.3). Air Products ceased copolymer production in 1983, after reportedly encountering significant production problems in its attempts to produce copolymer resin at its Calvert City, Kentucky, plant (Fisher, CX 208B J 2; See Lull JX 1, 534-535).

233. The strong trend toward concentration in the suspension PVC copolymer market heightens the probability that Occidental’s acquisition of Tenneco’s suspension PVC copolymer assets and business may have the effect of substantially lessening competition in the market (See Kaserman Dkt. 9159, 2304-05). 3. Dispersion PVC 234. [##] (Dkt. 9159 CX 323, CX 325, CX 330, CX 333-CX 334, CX 342, CX 347; CX 324, CX 326-CX 329, CX 331-CX 332, CX 335-CX341, CX 343-CX 346, CX 349-CX 350 In Camera; CX 358C-D In Camera). [##] (TX 3, PX 140 “Table 12” In Camera). 235. [##] (Goodrich F 14; Dkt. 9159 CX 300Z6 In Camera; PX 10 at 1183). [##] (Goodrich F 56) (Dkt. 9159, 300Z6 In Camera; See Dkt. 9159 CX 306B In Camera; Dkt. 9159 CX 310D In Camera; RX 175A). [##] (Dkt. 9159 CX 340E In Camera; Dkt. 9159 CX 349C In Camera; Dkt. 9159 CX 350F In Camera). [##] (Dkt. 9159 CX 318A In Camera; Boyer CX 185A-B { 11-12).

236. The trend toward concentration in the dispersion PVC market heightens the probability that Occidental's acquisition of Tenneco's dispersion PVC assets and business may have the effect of substantially lessening competition in the market (See Kaserman Dkt. 9159, 2304-05).

VII. ENTRY INTO PVC PRODUCTION IS A DIFFICULT AND TIME-CONSUMING PROCESS 237. Entry conditions are those aspects of an industry that (1) delay entry in response to the existence of supracompetitive profits; (2) reduce the magnitude of the entry response; or (3) reduce the probability of entry (Goodrich F 59; Kaserman JX 1, 321 In. 24 - 322 In. 10; Kaserman Dkt. 9159, 2311, 2314-15). Conditions of entry Initial Decision 115 F.T.C.

influence the competitive significance of a merger in several ways. If entry is difficult to accomplish, incumbent firms have a greater incentive to collude because they have less concern over with attracting new firms into the industry in response to supracompetitive profits (Kaserman JX 1, 322 In. 20 - 323 In. 10; Kaserman DKt. 9159, 2313-2314). If there is a time lag for an entry response, it provides the incumbent firms with an opportunity to engage in some type of strategic behavior regarding threat of new entry (Goodrich, slip op. at 30 & n. 70; Kaserman JX 1, 324 In. 25 - 325 In. 14; Kaserman Dkt. 9159, 2313). Finally, to the extent that conditions of entry delay the entry response, they permit anticompetitive behavior to persist for a longer period of time (Kaserman JX 1, 324 In. 25 - 325 In. 14; Kaserman Dkt. 9159, 2313-14).

238. In Goodrich, the Commission found that the mass and suspension PVC market was characterized5 1 3 2 2 6 1581 1442 46 45 96.949005 by5 1 3 2 2 7 1647 1441 209 35 96.889648 substantial5 1 3 2 2 8 1874 1441 150 35 96.936592 barriers4 1 3 2 3 0 688 1499 1336 46 -1 5 1 3 2 3 1 688 1500 69 35 95.922211 ands 1 3 2 3 2 774 1500 253 45 95.973434 impediments5 1 3 2 3 3 1045 1505 36 29 96.084625 to5 1 3 2 3 4 1098 1509 79 24 95.991730 news 1 3 2 3 5 1195 1500 117 44 95.279823 entry (Goodrich, slip op. at 31). Further, the Commission adopted the ALJ's conclusion that new entry into PVC production is difficult5 1 3 2 5 5 1255 1616 67 35 96.927490 ands 1 3 2 5 6 1336 1615 98 36 96.546196 takes5 1 3 2 5 7 1450 1626 19 25 96.372795 a5 1 3 2 5 8 1483 1615 84 47 96.372795 long5 1 3 2 5 9 1582 1615 102 36 91.022232 time (Goodrich ID at 92). The Commission noted the substantial lead time for construction of a PVC plant, and the significant minimum efficient scale and sunk costs that would be associated with construction of a new plant (Goodrich, slip op. at 31-36). It stated that the lack of new entry into PVC production confirmed the assessment that entry into PVC production is difficult (Goodrich, slip op. at 36) . 239. New entry into production of dispersion PVC or into production of suspension PVC copolymer is at least, or even more difficult, than entry into production of mass or suspension PVC homopolymer (Flammer CX 184D J 6). Even a firm experienced in suspension PVC homopolymer production would have little advantage, relative to a firm not in the PVC industry, in attempting to enter the suspension PVC copolymer market or the dispersion PVC market (Flammer CX 184D {J 6, 7; See Disch JX 3, PX 8 at 86 In. 5-23). 240. There are five factors that significantly affect the conditions of entry into production of PVC: (1) the size of a minimum efficient scale plant in relation to total industry demand; (2) the magnitude of sunk costs; (3) the lead time required for planning, obtaining, permits, and construction of new plants; (4) the presence or absence of excess capacity in the industry; and (5) the extent of vertical OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1069 1010 Initial Decision integration existing in the industry (Gobdrich F 59; Goodrich ID at 92: Kaserman JX 1, 324 In. 5-18; Kaserman Dkt. 9159, 2314-15). A. Minimum Efficient Scale of PVC Plants is Large Relative to the Size of the Relevant Markets 241. As the Commission found in Goodrich, entry into each of the relevant PVC markets is made more difficult because the size of a minimum efficient scale PVC plant is large in relation to the size of the market (Goodrich, slip op. at 36, n.85; Goodrich F 60- 62; Kaserman JX 1, 326 In. 23 - 326 In. 2; Kaserman Dkt. 9159, 2319- 21; Schaefer Dkt. 9159, 1132; Schaefer JX 1, 587 In. 7-17). 242. Minimum efficient scale refers to the size that a new firm would need to achieve in order not to suffer a significant cost disadvantage vis-a-vis the other firms in the industry (Kaserman JX 1, 326 In. 5-22; Kaserman Dkt. 9159, 2315). It is a manifestation of economies of scale in the industry: whether and to what point the costs of production fall as firm size increases (Kaserman JX 1, 326 In. 5-22; Kaserman Dkt. 9159, 2315). If the minimum efficient scale is large relative to the size of the market and to market growth, then the act of entry at minimum efficient scale is likely to depress industry prices significantly (Kaserman JX 1, 326 In. 23 - 327 In. 2; Kaserman Dkt. 9159, 2317-18). This is particularly true when the demand for the product is inelastic (Kaserman Dkt. 9159, 2317-18). Thus, the very act of entry is likely to dissipate the profits that were the basis for the decision to enter in the first place. Ifa firm enters at a size below minimum efficient scale, in order to avoid disrupting industry prices significantly, it will have a cost disadvantage compared to existing firms, thereby making the entry less profitable or even unprofitable. Potential entrants recognizing the implications of minimum efficient scale are unlikely to attempt entry (Goodrich, slip op. at 39-40; Kaserman JX 1, 328 In. 9-18). Thus, where the minimum efficient scale is large relative to the size of the market, it may make entry more difficult (Goodrich, slip op. at 39-40; Klass Dkt. 9159, 4446-47, 4635, 4637; Kaserman JX 1, 324 In. 5-12, 326 In. 5-22; Kaserman Dkt. 9159, 2314-20).

Initial Decision 1iSF.T.C.

1. Mass and suspension PVC homopolymer 243. The Commission concluded in Goodrich that an optimum scale PVC plant required at least 300 million pounds of annual production capacity (Goodrich, slip op. at 36; Goodrich F 60). The minimum efficient scale today for a mass or suspension PVC homopolymer plant is more likely to be in the over 500 million pounds per year range (JX 3, PX 6 at 74 In. 20-75 In. 11; JX 3, PX 15 at 80-81 (optimum scale 600 million pounds); JX 3, PX 18 at 47 (optimum scale is 2-3 times the size of a 300-400 million pound capacity plant); See JX 3, PX 10 at 1132 In. 4-12; See also JX 3, PX 11 at 643 In. 22-644 In. 7; JX 3, PX 8 at 64 In. 24-65 In. 6 (optimal scale plant is 800 to 900 million pounds)). This minimum efficient scale is substantial, with respect to the overall mass and suspension market, so that the construction of a new plant would have a depressing effect on price (Goodrich, slip op. at 36, n.85; Kaserman JX 1, 327 In. 25-328 In. 8; Kaserman Dkt. 9159, 2317-18). 244. Industry witnesses in Goodrich, Dkt. 9159, estimated that the minimum efficient scale, at that time, was in the 300-600 million pound per-year range. Mr. Disch estimated the minimum efficient scale to be at least 300 million pounds but noted there were further scale economies in plants larger than 300 million pounds capacity (Disch Dkt. 9159, 644; See Disch JX 3, PX 8 at 64-65 (economies of scale persist up to 800 or 900 million pounds of capacity)). In 1981, Diamond Shamrock Chemical Company also estimated a minimum size of 300 million pounds (Goodrich F 60, n. 12; Dkt. 9159 CX 445). Mr. Schaefer concluded that the minimum size was 300 million pounds per year with expansion potential to 500-600 million pounds per year (Schaefer Dkt. 9159, 1132; Goodrich F 60). Dr. DiLiddo stated that there were scale economies in a 550 million pound-peryear plant beyond those in a 300 million pound-per-year plant (Goodrich F 60; DiLiddo Dkt. 9159, 3345). Dr. Eades’ estimate was 500 million pounds (Goodrich F 60; Eades DKt. 9159, 1462-63). Mr. Howard Wheeler concluded that the minimum efficient scale for a mass or suspension PVC plant was 600 million pounds per year but that 750 to 900 million pounds per year was preferable. He viewed a plant of even 300 million pounds per year as being too small (Goodrich F 60; H. Wheeler 1734-35).

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1071 1010 Initial Decision 245. Dr. DiLiddo's estimate of 200-300 million pounds per year (DiLiddo 3290) incorporated considerations of risk, such as the risk of loading a plant of large size (DiLiddo Dkt. 9159, 3345-47). Because the economic definition of minimum efficient scale is properly a technological concept, rather than one incorporating demand side considerations (Kaserman Dkt. 9159, 2315-16, 2320), this estimate does not correctly apply the definition. Rather, Dr. DiLiddo's estimate is simply a recognition of the fact that entry at a larger scale is difficult and risky, given the conditions of entry in mass and suspension PVC. Furthermore, Dr. DiLiddo stated that a plant of 550 million pounds per year would have scale economies not enjoyed by a plant of 300 million pounds per year (Goodrich F 60; DiLiddo Dkt. 9159, 3345). These additional scale economies were a significant factor in Goodrich's 1979 decision to build a 550 million pound-per-year facility at Convent, Louisiana (Goodrich F 61). 5 246. [##] (Goodrich F 61; Compare Dkt. 9159 CX 302G In Camera Dkt. 9159 CX 308E) [##] (Goodrich F 61; DiLiddo Dkt. 9159, 3345; Dkt. 9159 CX 38 In Camera).

247. [##] (Goodrich F 62; Dkt. 9159 CX 14F Jn Camera; Dkt. 9159 CX 515). [##] (Dkt. 9159 CX 310D In Camera); [##] (Disch Dkt. 9159, 637); [##] (Dkt. 9159 CX 308E); [##] (compare Dkt. 9159 CX 317B,C In Camera and McMath Dkt. 9159, 1892). [##] (Dkt. 9159 CX 54Z8-Z10 In Camera). This environment makes it more difficult than in the past for a firm to enter at a size below minimum efficient scale. Indeed, it suggests that the minimum efficient scale for a new mass or suspension PVC plant is greater than the 300 million pound estimate used at the time of the Goodrich proceeding. Thus, as discussed supra, current estimates of the minimum efficient scale for a mass and suspension PVC homopolymer plant are over 500 million pounds.

248. [##] (Klass Dkt. 9159, 5303). [##] (JX 3, PX 140 Tables 1 3 4 1 13 1798 2376 35 34 86.126320 1 In Camera). This is greater than the level that the Commission found in Goodrich would impede entry into PVC (Goodrich, slip op. at 36, n.85), and is similar to the level that the Commission found would impede entry into VCM (Goodrich, slip op. at 39-40). Initial Decision 115 F.T.C.

2. Suspension PVC copolymer 249. The minimum efficient plant size for a suspension PVC copolymer plant is at least 50 million pounds per year, and there is evidence that it could be as high as 300 to 400 million pounds per year (JX 3, PX 15 at 80-81; JX 3, PX 20 at 29-30; JX 3, PX 8 at 67 In. 3-9). Mr. Disch of Tenneco testified that the minimum efficient scale for a grassroots suspension PVC copolymer plant would be 180-200 million pounds (JX 3, PX 8 at 65). 250. [##] (JX 3, PX 140 Tables 1 4 2 1 8 1399 1136 61 35 95.207649 17 Jn Camera). [##] (Id.). This is significantly higher, as a percentage of the overall market, than the minimum efficient scale of entry into either mass and suspension PVC or VCM, as found in Goodrich (Goodrich, slip op. at 36, n.85, 41).

251. Entry into the suspension PVC copolymer market at the minimum efficient scale would therefore be significant relative to the overall size of the market and would likely depress the price of suspension PVC copolymer (Goodrich, slip op. at 41; Kaserman JX 1, 327 In. 3-328 In. 8; Schaefer JX 1, 587 In. 7-14; JX 3, PX 20 at 29; JX 3, PX 8 at 65-66). This fact makes entry into the suspension PVC copolymer market most difficult (See Goodrich, slip op. at 39-41). 252. Mr. Schaefer of Occidental testified that, because of the small size of the suspension PVC copolymer market, Occidental would not consider restarting its Perryville, Maryland plant to produce suspension PVC copolymer resin (Schaefer JX 1, 585 In. 21- 586 In. 14). He testified further that new entry into suspension PVC copolymer at any scale, because of the depressing effect it would have on prices in that market, would be unprofitable (Schaefer JX 1, 587 1n.7-14; accord JX 3, PX 20 at 29). In January 1988, despite the increased prices and profits realized in the PVC industry, Occidental reaffirmed that it has no intention to restart its Perryville plant (CX 1000).

3. Dispersion PVC 253. The minimum efficient plant size for a dispersion PVC plant is at least 36 million pounds, and could be as high as 300-400 million pounds (JX 3, PX 8 at 73 In. 22-74 In. 23; JX 3, PX 15 at 80-81; JX OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1073 1010 Initial Decision 3, PX 20 at 29-30). Mr. Disch testified that the minimum efficient scale of a grassroots dispersion PVC plant would be approximately 80 to 100 million pounds (JX 3, PX 8 73 In. 22 - 74 In. 23). 254. [##] (JX 3, PX 140 Tables 1 3 2 1 8 1218 804 65 35 95.983330 24 In Camera). [##] (Id.). This also is a significantly higher, as a percentage of the overall market, than the minimum efficient scale of entry into either the mass and suspension PVC or the VCM market, as found in Goodrich. 255. Entry into the dispersion PVC market through construction of a minimum efficient scale dispersion PVC plant would therefore be a significant move relative to the overall size of the dispersion PVC market, and would likely depress the price of dispersion PVC (Goodrich, slip op. at 41; Kaserman JX 1, 327 In. 3-328 In. 8; Schaefer JX 1, 587 In. 7-17; JX 3, PX 20 at 29). This fact makes entry into dispersion PVC less likely (Goodrich, slip op. at 39-40). Indeed, Tenneco has stated its belief that a grassroots dispersion PVC plant would not be commercially5 1 3 3 9 6 1198 1503 136 36 95.015541 viable (JX 3, PX 20 at 29). B. The Minimum Efficient Scale of PVC Plants Is Large Relative to the Rate of Growth of Demand in the Relevant Markets 256. The significance of the size of a minimum efficient scale plant in relation to the size of the market is affected by the rate of growth of demand (Goodrich F 235; Goodrich ID at 94; Kaserman JX 1, 329 In. 13-17; Kaserman Dkt. 9159, 2318). If the market demand is growing rapidly, then a new firm might be able to come in, capture a good share of that growth, and run its plant profitably without having a depressing effect on industry prices (Kaserman JX 1, 328 In. 19 - 329 In. 4; Kaserman Dkt. 9159, 2318: See also Schaefer Dkt. 9159, 1133). Conversely, where demand is growing slowly, the price depressing effect of efficient sized entry is particularly great. In circumstances of slow growth, entry is more difficult (Kaserman JX 1, 328 In. 19 - 329 In. 4; Klass Dkt. 9159, 4447, 4637-38; See Schaefer JX 1, 585 In. 2 - 587 In. 20). 257. In the mass and suspension PVC market, it is the consensus of industry members that the rate of demand growth for mass and suspension PVC, through the 1980's, will be at approximately the rate of growth of GNP (Goodrich, slip op. at 41, n.96; Goodrich F 235; Initial Decision 115 F.T.C.

JX 3, PX 8 at 89 In. 1-5; JX 3, PX 9 at 125 In. 15-17; JX 3, PX 10 at 1154 In. 18 - 1157 In. 8; Disch Dkt. 9159, 691). Mass and suspension PVC has become a mature product as it reaches the limits of replacement for other materials in a number of applications (Goodrich F 234, F 235; DiLiddo Dkt. 9159, 3324-3325; Schaefer Dkt. 9159, 1155-1157; Becker Dkt. 9159, 1266-1268; Eades Dkt. 9159, 1475; H. Wheeler Dkt. 9159, 1732-1733). The rate of growth of demand for mass and suspension PVC homopolymer is substantially lower than that which occurred in the 1960's and 1970's (Goodrich F 234; DiLiddo Dkt. 9159, 3107-3119; Disch Dkt. 9159, 691-692; Schaefer Dkt. 9159, 1122; Becker Dkt. 9159 1265-1268; Dkt. 9159 CX 64U).

258. The slowdown in the growth of demand for mass and suspension PVC homopolymer makes new entry less likely (JX 1, Kaserman 329 In. 13-17; Kaserman Dkt. 9159, 2320-21; Eades 1468-69, 1486-87).

259. That slower rate of growth makes entry more difficult is supported by industry experience. Although there have been some recent incremental expansions, no construction of new plants has begun since the downward shift in the rate of growth in demand beginning in 1979 (Goodrich F 216). The slower projected growth was a factor in ICI's decision not to enter (Eades Dkt. 9159, 1468-69, 1486-87).

260. [##] (CX 43L; CX 166; RX 1L In Camera; RX 300B; RX 307A; RX 312J; Donnelly CX 176D { 4 Jn Camera; Heath CX 178E ¥ 8 In Camera; See CPF 272-274). The long-term rate of 3.4% in the growth of demand for mass and suspension PVC from 1979 through 1988 is consistent with the growth in the economy, and is consistent with the status of a mature industry (compare Dkt. 9159 CX 672Z5 and CX 213C. Goodrich ID at 94; RX 1V; RX 1L; RX 43E; RX 43C; Schaefer Dkt. 9159, 1154 In. 18 - 1157 In. 8; Schaefer JX 1, 585 In. 2 - 587 In. 20; Becker 1266-67; Eades 1470). 261. [##] (Hornack CX 182C | 7 In Camera; Hill CX 183F { 16 In Camera; Boyer CX 185G J 16; Schaefer JX 1, 585 In. 18-586 In. 14; JX 3, PX 6 at 82 In. 11-23; JX 3, PX 18 In. 7-15, 89 In. 8-10; JX 3, PX 136 at 105 In. 3-5; JX 3, PX 13 at 452726). [##] (Barlet JX 1, 70 In. 11-13; Weimar CX 192F-G ] 16 In Camera; Hill CX 183F J 16 In Camera; JX 3, PX 6 82 In. 11 - 83 In. 12). OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1075 1010 Initial Decision 262. The slow decline in the level of demand for suspension PVC copolymer makes new entry unlikely (Kaserman JX 1, 329 In. 13-17; Flammer CX 184D ¥ 7; Schaefer JX 1, 585 In. 2- 587 In. 14; JX 3, PX 136 at 91 In. 24-92 In. 20, 95).

263. In dispersion PVC, it is projected that the growth in demand will be flat over the next several years (Boyer CX 185E { 10; JX 3, PX 8 at 89 In. 1-10; JX 3, PX 9 at 100 In. 24-101 In. 8; Schaefer JX 1, 587 In. 7-20). The demand for dispersion PVC resin was slightly higher in 1986 than it was in previous years (CX 37J). In part, this growth likely reflects the underlying strength in the economy, which has led to strong demand for PVC resins overall. It does not, however, alter the long-term outlook for dispersion PVC demand. Thus, there was testimony and other evidence that demand is expected to grow slowly in most dispersion PVC resin end-use applications, such as flooring, coatings, bottle and cap linings, and other consumer products (i.e., furniture, recreational products) (Barlet JX 1, 70 In. 14-18; Lore JX 1, 188 In. 4-6; See generally CX 43D). [##] (See, e.g., Boulay CX 189C J 6 Jn Camera). [##] The absence of growth in demand for dispersion PVC makes new entry less likely (Kaserman JX 1, 329 In. 13-17; Flammer CX 184D 7 7; JX 3, PX 9 at 100 In. 24-101 In. 8 JX 3, PX 136 at 96 In. 10-21; Schaefer JX 1, 587 In. 7-20).

C. Because Demand for the Relevant Products Is Inelastic, Entry at Minimum Efficient Scale Is More Difficult 264. The significance of the size of a minimum efficient sized plant in relation to the size of the market is also affected by the elasticity of demand (Kaserman Dkt. 9159, 2316-2320; Klass Dkt. 9159, 4633-34). The less elastic the demand for a product is to changes in the price, the more the industry price is likely to be depressed as a result of the entry of a new efficient sized plant (Kaserman Dkt. 9159, 2316-20; Klass Dkt. 9159, 5305-06). 265. [##] (Dkt. 9159 CX 110 Jn Camera).

266. A new entrant bringing a new plant on line would5 1 5 3 1 12 1770 2596 59 28 96.862450 cut4 1 5 3 2 0 489 2643 1339 49 -1 5 1 5 3 2 1 489 2643 116 46 96.790382 prices5 1 5 3 2 2 624 2654 86 36 96.761353 very5 1 5 3 2 3 729 2644 248 46 96.472282 substantially5 1 5 3 2 4 995 2645 68 35 96.348526 ands 1 5 3 2 5 1081 2656 87 24 96.348526 overs 1 5 3 2 6 1184 2656 20 24 96.974739 a5 1 5 3 2 7 1221 2645 86 46 96.850754 long5 1 5 3 2 8 1324 2645 124 47 96.645706 periods 1 5 3 2 9 1466 2646 42 35 96.968994 of5 1 5 3 2 10 1522 2646 103 36 93.255486 time (DiLiddo Dkt. 9159, 3255-56; See also H. Wheeler Dkt. 9159, 1742-43; Schaefer Dkt. 9159, 1132-33). A new entrant faces a period of both Initial Decision 115 F.T.C.

low prices and low volume as it attempts to load its plant (Schaefer Dkt. 9159, 1132; Schaefer JX 1, 585 In. 13-20). Mr. Schaefer testified that it would take two to four years to find a market for the suspension PVC copolymer resin that Occidental would produce if it restarted its Perryville plant (Schaefer JX 1, 585 In. 13-20). A new entrant would expect to incur losses for some period of time after entry (Schaefer Dkt. 9159, 1132; See also H. Wheeler Dkt. 9159, 1742-43 (need by new entrant to cut price to load plant would have a disastrous effect on profitability)).

D. The Substantial Sunk Costs Associated with PVC Plants Increase the Risk of Entry into the Relevant Markets 267. Sunk costs are costs of entering an industry which one cannot retrieve upon leaving the industry (Goodrich F 63; Kaserman JX 1, 329 In. 18 - 330 In. 2; Kaserman Dkt. 9159, 2321-22). The magnitude of sunk costs affects the riskiness of the investment by a new entrant (Goodrich, slip op. at 36, n.85; Goodrich F 63; Kaserman JX 1, 330 In. 2-7; Kaserman Dkt. 9159, 2325). The economic literature recognizes the existence of sunk costs as a condition that may make entry more difficult (Klass Dkt. 9159, 4444). High sunk costs may result in anticompetitive entry conditions (Goodrich, slip op. at 41-42, n.97; Klass Dkt. 9159, 4622-23; See B.A.T. Industries Ltd., 104 FTC 852, 935 (1984); DOJ Merger Guidelines at Section 33 nm 21).

268. In assessing the magnitude of sunk costs, the relevant data are those costs which are specialized and committed to the industry, rather than the amount received if one were able to sell the plant to someone for retention in the industry. This is because the sales price one could receive is a function of expected prices and profits in the industry and is therefore subject to risk (See Kaserman Dkt. 9159, 2323-25).

269. The magnitude of sunk costs for PVC plants in each of the relevant markets is high (Goodrich, slip op. at 36, n.85; Goodrich F 63; Goodrich ID at 92; Kaserman JX 1, 330 In. 8-18; Kaserman Dkt. 9159, 2325-26; JX 3, PX 8 at 84 In. 1-9, 74 In. 18 - 75 In. 4; Klass Dkt. 9159, 4397, 4521-24; H. Wheeler Dkt. 9159, 1724-25, 1744-45; Schaefer Dkt. 9159, 1219). [##] (Goodrich ID at 92 In Camera). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1077 1010 Initial Decision PVC plants are durable and highly specialized (Goodrich, slip op. at 36, n.85; Klass 4397, 4621-24; Disch Dkt. 9159, 686; See Disch 652). 270. PVC plants are specialized in that one cannot normally make materials other than PVC in a PVC plant (Goodrich, slip op. at 36, n.85; Goodrich F 63; Disch 686). It is very difficult to convert a PVC plant to another use, and it may be easier to start fresh and build a new plant (Goodrich F 63; H. Wheeler 1724-25, 1744-45). Sunk costs represent 75-80% of the total value of a PVC plant (Goodrich F 63; H. Wheeler 1744-45; Schaefer Dkt. 9159, 1219). Total costs for an efficient sized plant could exceed as much as $100 million (Goodrich F 63; Schaefer Dkt. 9159, 1211-12; Dkt. 9159 CX 6S).

271. The significance of the specialized nature of PVC plant assets upon the conditions of entry is not merely a theoretical one. The industry recognizes that investment in a new plant entails considerable risk (Goodrich F 63; DiLiddo Dkt. 9159, 3134-3137). Should it become necessary to close the plant, virtually the entire investment could be lost (Goodrich F 63; Liao Dkt. 9159, 15 19-22; cf. DiLiddo Dkt. 9159, 3396).

272. Theoretically, it is possible that the magnitude of sunk costs required for construction of either a dispersion PVC plant or a suspension PVC copolymer plant could be reduced by conversion of such plant to suspension PVC production, if entry into the intended market proved unsuccessful. However, conversion of a dispersion PVC plant to suspension PVC production would not likely be practical (Boyer CX 185C-D {J 5-6). It would require changes in the reactor, changes in raw material tanks and changes in the VCM stripping and recovery system (Boyer CX 185C J 5: See also Flammer CX 184C { 5, describing, for the same reasons, the conversion of a suspension plant to a dispersion plant as economically5 1 3 4 12 2 803 2342 268 47 94.102501 impractical). Mr. Boyer also noted that the use of spray-dryers in the resin drying system is specialized to the production of dispersion PVC (Boyer CX 185C ¥5). A spray dryer with an annual capacity of 50 million pounds would have a capital cost of approximately $15-20 million (JX 3, PX 8 at 74 In. 19 - 75 In. 4). [##] (Hill CX 183C 5 In Camera; Hornack CX 182B-C J 6 In Camera; Flammer CX 184C 7 5; JX 3, PX 15 at 83; JX 3, PX 20 at 30). [##] (Hornack CX 182B-C { 6 Jn Camera; Hill CX 183C | 5 OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1077 1010 Initial Decision PVC plants are durable and highly specialized (Goodrich, slip op. at 36, n.85; Klass 4397, 4621-24; Disch Dkt. 9159, 686; See Disch 652). 270. PVC plants are specialized in that one cannot normally make materials other than PVC in a PVC plant (Goodrich, slip op. at 36, n.85; Goodrich F 63; Disch 686). It is very difficult to convert a PVC plant to another use, and it may be easier to start fresh and build a new plant (Goodrich F 63; H. Wheeler 1724-25, 1744-45). Sunk costs represent 75-80% of the total value of a PVC plant (Goodrich F 63; H. Wheeler 1744-45; Schaefer Dkt. 9159, 1219). Total costs for an efficient sized plant could exceed as much as $100 million (Goodrich F 63; Schaefer Dkt. 9159, 1211-12; Dkt. 9159 CX 6S).

271. The significance of the specialized nature of PVC plant assets upon the conditions of entry is not merely a theoretical one. The industry recognizes that investment in a new plant entails considerable risk (Goodrich F 63; DiLiddo Dkt. 9159, 3134-3137). Should it become necessary to close the plant, virtually the entire investment could be lost (Goodrich F 63; Liao Dkt. 9159, 1519-22: cf. DiLiddo Dkt. 9159, 3396).

272. Theoretically, it is possible that the magnitude of sunk costs required for construction of either a dispersion PVC plant or a suspension PVC copolymer plant could be reduced by conversion of such plant to suspension PVC production, if entry into the intended market proved unsuccessful. However, conversion of a dispersion PVC plant to suspension PVC production would not likely be practical (Boyer CX 185C-D 5-6). It would require changes in the reactor, changes in raw material tanks and changes in the VCM stripping and recovery system (Boyer CX 185C J 5; See also Flammer CX 184C { 5, describing, for the same reasons, the conversion of a suspension plant to a dispersion plant as economically5 1 3 4 12 2 800 2346 268 46 87.834305 impractical). Mr. Boyer also noted that the use of spray-dryers in the resin drying system is specialized to the production of dispersion PVC (Boyer CX 185C ¥5). A spray dryer with an annual capacity of 50 million pounds would have a capital cost of approximately $15-20 million (JX 3, PX 8 at 74 In. 19 - 75 In. 4). [##] (Hill CX 183C J 5 In Camera; Hornack CX 182B-C J 6 In Camera; Flammer CX 184C 9 5; JX 3, PX 15 at 83; JX 3, PX 20 at 30). [##] (Hornack CX 182B-C { 6 In Camera; Hill CX 183C 5 Initial Decision 115 F.T.C.

In Camera). These investments would be wasted in the event the plant is converted to homopolymer production. In addition, investment in a grassroots dispersion or suspension PVC copolymer plant requires, at a minimum, the same magnitude of sunk investment per pound of capacity that is required of a suspension PVC plant. E. Vertical Integration in the PVC Industry Increases the Difficulty of Entry into the Relevant Markets 273. If complete ownership integration as to VCM and PVC occurs, a new entrant may be required to enter the PVC and VCM industries simultaneously (Kaserman Dkt. 9159, 2338-39). Such a trend could make entry into the relevant PVC markets that much more difficult (Kaserman Dkt. 9159, 2340-41). 274. Vertical integration between two stages of production may make entry into one stage more difficult if (1) the vertical integration makes it necessary to enter both stages rather than just one, and (2) if two-stage entry is more difficult then entry at only one level (Kaserman Dkt. 9159, 2337-40). Two-stage entry might be more difficult because entry at the second stage might be more difficult than at the first (Kaserman Dkt. 9159, 2337-40). For example, where the size of the minimum efficient size plant is larger at the second stage than at the first, the new entrant will have to enter both stages at the larger size (Kaserman Dkt. 9159, 2337-40). 275. In mass and suspension PVC the requirement of simultaneous entry into VCM would make entry more difficult since the size of a minimum efficient sized VCM plant is 800 million to one billion pounds per year, as compared to the 300 to 600 million pounds per year needed for mass or suspension PVC (See Goodrich, slip op. at 40). Simultaneous two-stage entry would require entering at both levels at the larger size. This disparity would be even greater for entry into suspension PVC copolymer or dispersion PVC. 276. [##] (Goodrich F 76; Dkt. 9159 CX 667 In Camera). [##] (Dkt. 9159 CX 17Z14 In Camera; Dkt. 9159 CX 16R In Camera, Dkt. 9159 CX 67N In Camera; See CX 310C In Camera; CX 11L In Camera; Dkt. 9159 CX 50B; Dkt. 9159 524X In Camera; Dkt. 9159 RX 1061L-O). The increase in vertical integration has caused concern that a prospective PVC entrant might also need to enter OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1079 1010 Initial Decision VCM in order to secure a VCM supply (Disch Dkt. 9159, 727; See Goodrich, slip op. at 78, n.174).

277. [##] (Goodrich F 76; Dkt. 9159 CX 667I-J In Camera). However, the degree of vertical integration has increased since the time of the Goodrich proceeding. Occidental's successive acquisition of Tenneco's PVC operations and Shell's VCM manufacturing facilities, has eliminated both Tenneco and Occidental from the ranks of non-integrated PVC producers, and has eliminated Shell as a source of VCM for prospective entrants into PVC manufacture. The increasing degree of vertical integration does act as an additional deterrent to new entry, although to the extent that it is not complete, the deterring effect is reduced (Goodrich ID at 92; Kaserman Dkt. 9159, 2340-41). If the degree of vertical integration were to proceed to completion it would make entry that much more difficult (Kaserman Dkt. 9159, 2340-41).

F, Entry into the Relevant Markets Takes a Long Period of Time 278. The lead time required for a new entrant to enter the industry and begin production is significant (Kaserman JX 1, 324 In. 25 - 325 In. 14; See Klass Dkt. 9159, 5289-91). First, this provides incumbent firms with a period of time to profit from anticompetitive behavior without the risk of entry response (Goodrich at 30; Kaserman JX 1, 324 In. 25 - 325 In. 8; Kaserman Dkt. 9159, 2326- 27). Second, this provides incumbent firms the opportunity to engage in strategic response, measures, increasing the risk of new entry (Goodrich, slip op at 30 & n.70; Kaserman JX I, 324 In. 25 - 325 In. 14; Kaserman Dkt. 9159, 2326-27). [##] (Kaserman Dkt. 9159, 2326-27; Dkt. 9159 CX 14D In Camera; DiLiddo Dkt. 9159, 3187-88, 3396; Dkt. 9159 CX 114 In Camera). 279. [##] (Goodrich, slip op. at 31; Goodrich F 64; Goodrich ID at 92; JX 3, PX 8 at 76 In. 13 - 80 In. 8; JX 3, PX 92; Dkt. 9159 CX 15A In Camera; Dkt. 9159 CX 16B-Z 10; Dkt. 9159 CX 182I In Camera; Dkt. 9159 CX 196A In Camera; Dkt. 9159 CX 439B; Dkt. 9159 CX 446C; See DSCC Admission 445, Dkt. 9159 CX 6S In Camera). This long lead time increases the likelihood and potential duration for anticompetitive behavior in each of the relevant markets (Kaserman JX 1, 325 In. 15-17; Kaserman Dkt. 9159, 2328). Initial Decision 115 F.T.C.

280. Actual physical construction of a PVC plant is likely to take as long as two years (Goodrich, slip op. at 32; Goodrich F 65; JX 3, PX 11 653 In. 4-20; JX 3, PX 8 79 In. 25 - 80 In.2; JX 3, PX 18 at 47; JX 3, PX 20 at 30; Schaefer Dkt. 9159, 1134; McMath Dkt. 9159, 1938-40, Disch Dkt. 9159, 653; See also Dkt. 9159 CX 446C). 281. In the present governmental climate, it is necessary to obtain environmental permits prior to beginning plant construction!® '9 Air emissions from VCM and PVC resin plants are subject to the restrictions of the Clean Air Act, as amended, 42 U.S.C. 7401-7642. PVC plants are subject to specific air-quality standards restricting vinyl chloride emissions from manufacturing facilities in accordance with the National Emissions Standard for Vinyl Chloride, 40 CFR 61.60-.68, promulgated pursuant to the National Emission Standard for Hazardous Air Pollutants (NESHAP), 42 U.S.C. 7412. In addition, the Prevention of Significant Deterioration (PSD) regulations include vinyl] chloride as a pollutant covered under the regulations, with a one ton per year emission rate as the triggering amount. 40 CFR 51.24(b)(23), 52.21(b)(23). New PVC plants, as well as major expansions of existing PVC manufacturing facilities, may otherwise be subject to federal PSD requirements as major potential sources of any of the other air pollutants subject to regulation under the Clean Air Act, including the need to obtain preconstruction permits. 42 U.S.C. 7470-7479; 40 CFR 51.24, 52.21. Federal PSD air emission requirements apply only to sources locating in areas presently meeting the National Ambient Air Quality Standards (NAAQS). 42 U.S.C. 7407(d), 7475. For new or existing sources locating or located in “nonattainment areas," a more stringent set of regulations applies. 42 U.S.C. 7501-7508; 40 CFR 52.24. See also 40 CFR Part 51, Appendix S ("Emission Offset Interpretative Ruling").

Effluent discharges from PVC plants are subject to the restrictions of the Clean Water Act, as amended by the Federal Water Pollution Control Act, 33 U.S.C. 1251-1376. Vinyl chloride has been specifically designated by the EPA as a toxic pollutant under the Act (33 U.S.C. 1317; 40 CFR 401.15), and PVC manufacturing facilities have been identified as a category of pollutant discharge point sources (33 U.S.C. 1316(B)((1)(A)). See 40 CFR 401.12, 416.10-.15. New and existing PVC manufacturing facilities are therefore subject to the permit requirements of the National Pollutant Discharge Elimination System (NPDES) program as potential sources of the discharge of pollutants (33 U.S.C. 1342). A PVC plant may also be subject to local regulatory authority preconstruction permits, particularly land-use requirements.

Because these pre-permit monitoring requirements are relatively new, few if any firms had to comply regarding new plants constructed in the past. It is, therefore, a factor that is likely to make the lead time for future plants longer than in the past. Furthermore, a longer lead time means a higher cost both for monitoring and in accumulated interest charges on expenses attendant to pre-permit applications.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1081 1010 Initial Decision (Goodrich, slip op. at 32-33; Goodrich F 66; Schaefer Dkt. 9159, 1133; Dkt. 9159 CX 597; Dkt. 9159 CX 642; Dkt. 9159 CX 643; DS Admission 443, Dkt. 9159 CX 6S; Dkt. 9159 CX 4223). Securing the necessary permits is a costly and time consuming process (Goodrich, slip op. at 33; Goodrich F 66; JX 3, PX 6 98 In. 20 - 99 In. 3; DS Admission 415, Dkt. 9159 CX 6Q). [##] (Goodrich, slip op. at 31; Goodrich F 66; JX 3, PX 92; Schaefer Dkt. 9159, 1133, Dkt. 9159 CX 38V In Camera, Dkt. 9159 CX 506B In Camera; Dkt. 9159 CX 592 In Camera). The time required for securing regulatory permits should be increasing as enforcement of Federal emission standards tightens (CX 162A-B). [##] (Dkt. 9159 CX 196A In Camera. See also Goodrich, slip op. at 32- 34; Dkt. 9159 CX 67Z7 In Camera; Dkt. 9159 CX 183D In Camera).

282. Substantial engineering work must be done prior to applying for necessary regulatory permits because detailed data must be presented in the permit application (Goodrich, slip op. at 31-32 & n.74; Goodrich F 67; DiLiddo Dkt. 9159, 3337). [##] (Goodrich F 67; DiLiddo Dkt. 9159, 3337; Dkt. 9159 CX 183D In Camera). The engineering work necessary before filing for permits is likely to take six months (Goodrich, slip op. at 31-32; Goodrich F 67; DiLiddo Dkt. 9159, 3337). In 1980, EPA amended its Prevention of Significant Deterioration Regulations to require that air quality near the site may have to be monitored for a period of time prior to applying for the permits (Goodrich slip op. at 33; Goodrich F 67; 40 CFR 51.24(m), 40 CFR 52.21(m)). This change may add additional time to the process of obtaining permits. DSCC, now part of Occidental, observed that:

On August 7, 1980 EPA amended its Prevention of Significant Deterioration (PSD) Regulations. These Regulations outline the requirements for obtaining a federal air pollution construction permit for grass root plants and plant expansion in attainment areas - areas presently meeting the National Ambient Air Quality Standards. The major impact of these regulations is the requirements for continuous air monitoring data to be presented prior to the processing of a permit application. This could add up to one year to the time it takes to get a construction permit. This means it will take from one to two years to get a PSD Permit before construction can begin.

Initial Decision 115 F.T.C.

(Goodrich, slip op. at 33; Dkt. 9159 CX 446D). A consultant working for Tenneco noted the significance of the new regulations: [A]n action plan is proposed to ensure that unnecessary delays are not encountered in the permitting stages of the project development. It is important to option the site as soon as possible since prime industrial tracts that satisfy this project's requirements are becoming scarce in the river region. It is critical that the Prevention of Significant Deterioration (PSD) permit be submitted by early December before the proposed revisions to the PSD regulations are scheduled to be instituted. Under the revised regulations, one year ambient air quality monitoring will likely be required before the preconstruction permit can be submitted.

(Goodrich, slip op. at 33; Dkt. 9159 CX 574J; See also Kienholz Dkt. 9159, 803-04).

283. Since the site for the plant must be known at the time of the permit application, the site must be selected prior to filing. Selection of a site is a complicated process (Goodrich F 68; See DiLiddo Dkt. 9159, 3335-36). [##] (Goodrich F 68; Dkt. 9159 CX 5741 & M-U In Camera; See also Dkt. 9159 CX 193B In Camera; Dkt. 9159 CX 643; Dkt. 9159 CX 594A-B; Dkt. 9159 RX 1061 D-E; Dkt. 9159 RX 1304; Dkt. 9159 RX 1308).

284. A new entrant may also need to take time to evaluate and license PVC manufacturing technology. Such work is likely to take approximately one year (Goodrich, slip op. at 32; Disch Dkt. 9159, 645-47; Schaefer Dkt. 9159, 1133).

285. Since entry into any of the relevant markets is a major strategic decision involving substantial amounts of sunk capital, a new entrant is likely to make an extensive study of the market prior to any entry decision (See Goodrich F 71; Dkt. 9159 CX 594A-B; Dkt. 9159 CX 53A).

20 Because these pre-permit monitoring requirements are relatively new, few if any firms had to comply with it for new plants constructed in the past. It is, therefore, a factor that is likely to make the lead time for future plants longer than in the past. Furthermore, a longer lead time means a higher cost both in monitoring costs and in accumulated interest charges on expenses attendant to pre-permit applications.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1083 1010 Initial Decision 286. Given the time required for construction and permitting, and the extensive efforts needed to obtain technology, find a site, conduct the necessary strategic studies, and complete the pre-permit engineering and air quality monitoring, a lead time of four years (two years for construction, one year to obtain permits, and one year for pre-permit engineering, air quality monitoring, site selection, licensing of technology, and strategic analysis) is a fairly conservative estimate of the amount of time required for de novo entry (Goodrich, slip op. at 30-31; Goodrich ID at 92). 287. Actual entry experience buttresses the conclusion that the likely lead time to enter any of the relevant markets is about four to five years (Goodrich, slip op. at 34-35). Formosa Plastics began looking for a site for its PVC/VCM complex in the latter half of 1978 (Liao Dkt. 9159, 1523-24), and began full production in the first quarter of 1983 (Goodrich F 70; Liao 1534-35). This time period -approximately four and one-half years -- does not include any strategic analysis done prior to Formosa's search for a site. Furthermore, Formosa had some advantages over other possible entrants in that it already had its own PVC production technology (Liao Dkt. 9159, 1539), and had prior experience in the United States market through its participation in the Rico Chemicals project (Liao Dkt. 9159, 1519-22; Goodrich F 15).

288. [##] (Goodrich, slip op. at 35; Goodrich F 71; DiLiddo Dkt. 9159, 3337; Dkt. 9159 CX 36S In Camera). Prior to its July 1979 announcement, Goodrich had completed an extensive PVC/VCM strategy study over an eight-month time period (Goodrich, slip op. at 35; Goodrich F 71; DiLiddo Dkt. 9159, 3334-35; Dkt. 9159 CX 53A). During these eight months Goodrich had also completed a complicated site relation process and chosen the Convent, Louisiana site (Goodrich, slip op. at 35; Dkt. 9159 DiLiddo 3335-36; See Weyerhaeuser Co., 106 FTC at 287-88 & n. 69). The lead time for the Convent project was likely to be shorter than that for other potential entrants, since Goodrich was utilizing its own technology (DiLiddo Dkt. 9159, 3336), obviating the need for obtaining needed licenses from other companies.

289. In 1981, Diamond Shamrock projected the lead time for a new Diamond Shamrock suspension PVC homopolymer plant at Deer Park, Texas, using existing Diamond Shamrock technology, to be Initial Decision 115 F.T.C.

four to five years (Goodrich, slip op. at 35; Goodrich F 2; Dkt. 9159 CX 439B).

290. [##] (Dkt. 9159 CX 185Z2 In Camera; See also Dkt. 9159 CX 1821 In Camera).

291. [##] (Goodrich, slip op. at 36 n. 85; Cf DiLiddo Dkt. 9159, 3162-64; Dkt. 9159 CX 51Y-Z In Camera).

292. That long lead times increase the risk that industry conditions will change between the time the decision is made to enter and the completion of a new plant is supported by actual experience in the mass and suspension PVC market. In the late 1970's several firms decided to build new plants, including Goodrich, Borden and Formosa Plastics (See DiLiddo Dkt. 9159, 3131; Liao Dkt. 9159 1523-24). [##] (DiLiddo 3187-88, 3396; Cf Dkt. 9159 CX 114 In Camera). [##] (Dkt. 9159 CX 302F In Camera; Liao 1534-35). [##] (Dkt. 9159 CX 14F In Camera [##]).

G. New Entry into the Relevant Markets Is Unlikely Despite High Prices and Profits Realized by Incumbent Firms 293. Some PVC producers have recently announced expansions to their existing plant capacities, with the greatest expansions on the part of Occidental, Shintech and Formosa, three of the larger mass and suspension PVC homopolymer producers (See, e.g., CX 165A). These expansions would substantially increase the risk of new entry into the mass and suspension PVC market. A potential new entrant would necessarily evaluate the risks and benefits of entry in terms of the likelihood that demand would be strong enough to support current capacity, announced expansions, and the additional capacity that would be added by a new entrant. The announced capacity expansions therefore increase the risk that, with a change in business conditions, entry into the production of PVC would be unprofitable. This factor thus makes new entry into the production of PVC the more unlikely, especially in view of the experience of the PVC industry during the early 1980's.

294. Excess existing capacity in an industry makes new entry less likely by affording incumbent firms the opportunity to deter entry through strategic behavior (Kaserman Dkt. 9159, 2328-29). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1085 1010 Initial Decision 295. [##] (Goodrich ID at 92; Dkt. 9159 CX 666H In Camera). The magnitude of excess capacity has declined significantly since that time as the industry has recovered from a substantial temporary decline in demand during the recent recession (See CX 165A; DiLiddo Dkt. 9159, 3116-18; Eades Dkt. 9159 1471-73). [#4] (Donnelly CX 176B-C { 3 Jn Camera; Kulkaski CX 195C ¥ 4 In Camera; CX 165A).

296. However, given the excess capacity that as recently as the early 1980's was a significant factor in the PVC industry, the ability of producers in these markets to deter entry through strategic behavior remains enhanced (See Kaserman Dkt. 9159, 2328-29). Potential new entrants would probably be unwilling to risk a large amount of the needed sunk capital costs, given the experience of producers who entered into PVC markets in the late 1970's and early 1980's, when growth projections for PVC were optimistic. 297. Announced incremental capacity expansions by Occidental, Shintech, and Formosa, three of the larger-firms in the industry, serve to deter both potential new entry into mass and suspension PVC homopolymer production, and possible larger expansion by smaller mass and suspension PVC producers who might otherwise have sought to attain increased market share.

298. [##] (Goodrich, slip op. at 36 n. 85 (DiLiddo Dkt. 9159, 3151-53; Dkt. 9159 CX 51Z2, Z16 In Camera; Dkt. 9159 CX 47B; Dkt. 9159 CX 226I-M)). [##] (DiLiddo Dkt. 9159, 3151-53; Dkt. 9159 CX 51Z2, Z16 In Camera; Dkt. 9159 CX 226I-M; Dkt. 9159 CX 47B). Similarly, Occidental's strategy in its planned expansion of its Pasadena plant is to maintains 1 3 4 6 7 1249 2117 43 35 96.505463 its5 1 3 4 6 8 1316 2117 158 46 96.301872 positions 1 3 4 6 9 1498 2128 38 24 96.637436 as5 1 3 4 6 10 1561 2118 58 34 96.581207 thes 1 3 4 6 11 1642 2118 217 45 96.581207 recognized4 1 3 4 7 0 523 2175 481 43 -1 5 1 3 4 7 1 523 2175 135 35 96.742744 markets 1 3 4 7 2 674 2175 136 35 95.833565 leader (RX 1L).

299, Industry members recognize that entry into the relevant markets is difficult (Goodrich, slip op. at 36). In developing its preemptive strategy, Goodrich concluded that [rJelatively5 1 3 5 3 7 1771 2349 85 46 96.835281 high4 1 3 5 4 0 521 2406 1335 46 -1 5 1 3 5 4 1 521 2406 147 35 96.836472 barriers5 1 3 5 4 2 683 2413 36 29 96.894203 to5 1 3 5 4 3 732 2413 98 39 96.728867 entry5 1 3 5 4 4 845 2407 127 35 96.620766 should5 1 3 5 4 5 985 2413 145 39 96.438065 prevents 1 3 5 4 6 1144 2417 19 24 96.327789 a5 1 3 5 4 7 1176 2407 95 45 96.327789 large5 1 3 5 4 8 1284 2407 148 35 96.955345 numbers 1 3 5 4 9 1444 2406 43 36 96.806091 of5 1 3 5 4 10 1495 2407 216 45 95.941315 expansions5 1 3 5 4 11 1725 2418 40 24 96.427437 or5 1 3 5 4 12 1777 2418 79 24 96.675781 new4 1 3 5 5 0 521 2464 1335 46 -1 5 1 3 5 5 1 521 2465 150 35 91.125679 entries (Goodrich, slip op. at 36; Dkt. 9159 CX 199Z76; See also Dkt. 9159 CX 199Z82). [##] (Dkt. 9159 CX 248E In Camera). Initial Decision 115 F.T.C.

300. [##] (Goodrich, slip op. at 36; Goodrich ID at 92; Kaserman Dkt. 9159, 2341-44; Dkt. 9159 CX 664G-W In Camera).”' 301. Three important factors made entry and expansion easier in mass and suspension PVC during the 1970's than exist at present. First, during the 1970's the industry substantially converted from small to large reactor technology (Disch Dkt. 9159, 637-42). New firms entering with modern large reactor plants had a cost advantage over those incumbent firms with old small reactor facilities (Kaserman Dkt. 9159, 2344). Second, extensive EPA and OSHA regulation of the PVC industry was instituted during the 1970's (Goodrich, slip op. 32 n.76; Disch Dkt. 9159, 698-53). One effect of these regulations was to force some plants to shutdown, and to temporarily reduce the effective capacity of many other plants (Disch Dkt. 9159, 652-53; Dkt. 9159 CX 447J; Dkt. 9159 CX S5O5T; DS Admission 439, Dkt. 9159 CX 6R; Goodrich Admission 396, DKt. 9159 CX 4Z23). This reduction of capacity created opportunities for new entry and construction of new plants by incumbent firms (Kaserman Dkt. 9159, 2344-45; Klass Dkt. 9159, 5355). Finally, demand for PVC grew rapidly during the 1970's, and this rapid growth created opportunities for entry and for construction of new plants by incumbent firms (Kaserman Dkt. 9159, 2344-45). 302. The conditions that facilitated entry in the 1970's have changed drastically during the 1980's, making entry more difficult. The large reactor technology has become widely diffused through the industry (Goodrich F 198; Klass Dkt. 9159, 5488-89; See generally Disch Dkt. 9159, 637-428). Furthermore, the rate of technological change in PVC has become slow, as PVC manufacturing technology has approached its limitations (Goodrich F 197, 232; Dkt. 9159 CX 642Z50-51). Thus, a firm presently seeking to enter any of the relevant markets through new-plant construction would not have a technological or cost advantage over incumbent firms. Moreover, PVC firms have adjusted to the imposition of environmental and safety regulations, and current and planned capacity is sufficiently geared to meet demand (Goodrich F 232; Disch Dkt. 9159, 649-51; 21 [##] (Goodrich F. 70 & n. 15, F. 56; CX 318A,D In Camera; Liao Dkt. 9159, 1519-22: Dkt. 9159 CX 308D-E; Dkt. 9159 CX 333A; Dkt. 9159 CX 354B), OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1087 1010 Initial Decision Dkt. 9159 CX 642Z6, Z49-Z137). Finally, demand growth is slow compared to the 1970's, making entry more difficult (Goodrich F 232, 235-36; CPF 272-278). These changed conditions thus help to explain the lack of de novo entry since the mid-1970's (Kaserman Dkt. 9159, 2345-47), H. Barriers to New Entry into PVC Production 303. As the Commission stated in Goodrich, more stringent environmental regulations not only increase the lead time required for new entry into PVC production, but also may5 1 5 1 3 9 1448 1193 44 36 96.969116 be5 1 5 1 3 10 1507 1194 262 37 96.737190 characterized5 1 5 1 3 11 1785 1208 37 25 95.561691 as5 1 5 1 3 12 1839 1208 19 25 95.561691 a4 1 5 1 4 0 521 1241 1336 57 -1 5 1 5 1 4 1 521 1241 128 36 95.537285 barriers 1 5 1 4 2 661 1249 36 29 95.537285 to5 1 5 1 4 3 710 1250 97 40 96.954666 entry5 1 5 1 4 4 821 1244 73 36 96.949364 into5 1 5 1 4 5 908 1245 57 36 96.931931 thes 1 5 1 4 6 977 1246 93 36 95.834717 PVC5 1 5 1 4 7 1084 1248 151 36 96.626244 market (Goodrich, slip op. at 35). The difficulty that a new entrant would have in obtaining permits represents 1 5 1 6 2 727 1371 20 24 96.701927 a5 1 5 1 6 3 760 1371 78 24 96.701927 news 1 5 1 6 4 851 1368 77 28 96.913750 costs 1 5 1 6 5 940 1362 70 35 96.913750 that5 1 5 1 6 6 1022 1363 204 36 96.399200 incumbents 1 5 1 6 7 1238 1365 99 36 96.939972 firms5 1 5 1 6 8 1351 1367 59 34 96.584061 did5 1 5 1 6 9 1423 1374 60 28 96.584061 not5 1 5 1 6 10 1495 1368 90 35 96.971985 have5 1 5 1 6 11 1598 1375 35 29 96.948212 to5 1 5 1 6 12 1645 1370 100 34 92.485115 bear (Id.). I. Entry into the Suspension PVC Copolymer Market Through Conversion of an Existing Suspension PVC Homopolymer Plant Is Unlikely 304. An existing producer of suspension PVC homopolymer would have little advantage relative to other firms in attempting to enter the suspension PVC copolymer market (Flammer CX 184D {| 6-7; Disch JX 3, PX 8 at 86 In. 5-23). [##] (Hill CX 183C J 5 In Camera; Flammer CX 184C J 5; Fisher CX 208D Y 4; Disch JX 3, PX 8 at 68 In. 14-22; Lull JX 1, 509 In. 9-510 In. 13). 305. The minimum efficient size of a suspension PVC copolymer plant converted from a suspension PVC homopolymer plant would be approximately 70-80 million pounds of capacity (Disch JX 3, PX 8 at 67 In. 3-9).

306. In the suspension PVC copolymer market, a minimum efficient scale of 70 to 80 million pounds would be significant (Kaserman JX 1, 327 In. 25-328 In. 8). [##] (Goodrich, slip op. at 41; Kaserman JX 1, 328 In. 9-18; See Boyer CX 185G J 16; Hill CX 183B { 3 In Camera; Hornack CX 182C {7 Jn Camera). 307. [##] (Hornack CX 182C | 7 In Camera; Hill CX 183F { 16 In Camera; Boyer CX 185G { 16; Flammer CX 184D ¥ 7; JX 3, PX 6 at 82 In. 11-23; JX 3, PX 8 at 18 In. 7-15; JX 3, PX 98 at 40885). This projected decline makes it unlikely that a suspension PVC homopolymer producer would enter the suspension PVC copolymer Initial Decision 115 F.T.C.

market (Kaserman 329 In. 13-17; Boyer CX 185G § 16; Flammer CX 184D 7; JX 3, PX 8 at 89 In. 16-90 In. 2; Schaefer JX 1, 585 In. 21-586 In. 14; JX 3, PX 136 at 91 In. 24-92 In. 20). 308. Air Products exited the suspension PVC copolymer market because the size of the market was insufficient, in light of the existing capacity and projected decline in demand, to allow Air Products to4 1 3 2 4 0 688 970 1337 56 -1 5 1 3 2 4 1 688 970 158 45 96.823730 produces 1 3 2 4 2 862 971 69 35 96.663757 ands 1 3 2 4 3 947 971 65 36 95.853027 sells 1 3 2 4 4 1028 983 20 24 96.538292 a5 1 3 2 4 5 1063 972 184 37 96.990814 sufficient5 1 3 2 4 6 1263 975 145 36 96.372902 volumes 1 3 2 4 7 1423 976 43 35 96.705856 of5 1 3 2 4 8 1477 978 214 45 96.461914 suspension5 1 3 2 4 9 1706 981 212 45 96.448845 copolymer5 1 3 2 4 10 1930 982 95 36 96.795921 resin4 1 3 2 5 0 688 1028 1337 55 -1 5 1 3 2 5 1 688 1034 36 30 96.444489 to5 1 3 2 5 2 741 1038 110 26 96.444489 covers 1 3 2 5 3 866 1028 45 37 96.927986 its5 1 3 2 5 4 927 1030 214 47 96.619949 productions 1 3 2 5 5 1156 1038 97 30 96.943207 costs5 1 3 2 5 6 1270 1038 34 30 96.925262 at5 1 3 2 5 7 1320 1033 58 36 96.885811 thes 1 3 2 5 8 1395 1034 143 37 96.885811 Calvert5 1 3 2 5 9 1555 1035 82 48 96.919731 City5 1 3 2 5 10 1653 1037 116 46 88.414848 plant (Fisher CX 208B J 2).

309. [##] (Hornack CX 182A J 2 In Camera), [##] (Hornack CX 182A-B ] 4 Jn Camera). [##] (Hornack CX 182D J 8 In Camera). [##] (Fisher CX 208C J 3; See Boyer CX 185G J 7; Hill CX 183B 4 In Camera; Flammer CX 184D 6). [##] (CX 114 In Camera). [##) (Disch CX 219E In Camera). Tenneco does not shift capacity between suspension PVC homopolymer and suspension PVC copolymer in response to changes in the relative prices of the two resins (Disch JX 3, PX 8 at 32 In. 7-11). The production of these resins are two5 1 3 3 9 2 788 1612 144 37 96.248627 distinct5 1 3 3 9 3 948 1614 205 36 93.277512 situations (Id.). 310. [##] (Disch CX 219D Jn Camera). [##] (Hornack CX 182D {8 In Camera; Fisher CX 208C 3). [##] (Fisher CX 208C ] 3; Hornack CX 182D-E J 9 In Camera). Mr. Boyer agreed that contamination problems would reduce the value of the plant output relative to what would be experienced in a plant that had dedicated capacity (Boyer CX 185G J 15).

311. [##] (CX 126C Jn Camera). [##] (CX 72 In Camera; CX 61B In Camera). [##] (CX 61B In Camera). [##] (CX 125 In Camera). |##] (CX 126E Jn Camera). Armstrong, perhaps the largest purchaser of suspension PVC copolymer, would not purchase copolymer resin from a supplier that produced resin on an “intermittent basis" throughout the year, because it is interested5 1 3 5 6 9 1756 2317 35 35 96.940559 in5 1 3 5 6 10 1814 2318 195 46 96.978683 long-term4 1 3 5 7 0 673 2369 1285 51 -1 5 1 3 5 7 1 673 2369 113 35 96.972153 stable5 1 3 5 7 2 801 2370 197 35 96.594154 consistent5 1 3 5 7 3 1013 2381 144 26 96.733879 sources5 1 3 5 7 4 1174 2371 42 35 96.596001 of5 1 3 5 7 5 1228 2373 146 45 96.249191 supply (Beveridge JX 1, 85 In. 1-7).

312. [##] (Hornack CX 182D J 8 Jn Camera). [##] (Hornack CX 182D { 8 In Camera). [##] (Hornack CX 182D J 8 In Camera). Mr. Fisher testified that even with thorough cleaning of the reactors, a process which would require shut down of the reactors for a number of days, it is was likely that contamination problems could never be completely avoided (Fisher CX 208C-D { 3). Thus, he noted that frequent swinging of capacity would reduce overall reactor OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1089 1010 Initial Decision productivity, resulting in increased production costs (Fisher CX 208D J 3). He further testified that making infrequent switches between copolymer and homopolymer, in an attempt to reduce the cost of swinging, would not likely present a less costly alternative, noting the additional significant inventory carrying and dedicated storage costs (Fisher CX 208D 3).

313. Mr. Schaefer, an Occidental Vice-President, testified regarding the likelihood of entry through conversion of existing homopolymer facilities. Mr. Schaefer stated that Occidental would not consider reopening a shut-down PVC facility at Perryville, Maryland, to produce suspension copolymer resin, even if the price would increase three or four cents a pound and stayed at that level for a year (Schaefer JX 1, 585 In. 21-586 In. 1). This is the exact question the DOJ Merger Guidelines asks to assess the likelihood of entry. DOJ Merger Guidelines, supra, Section 3.3, 2 Trade Reg. Rep. (CCH) J 4493 at 6879-15. In addition to the one-year period in which Occidental would not even consider entry, there must be added the additional time it would take to enter at Perryville, if Occidental should ever consider it. Mr. Schaefer testified that it would take 18 months to get the shut-down plant up and running, and would take two to four years to find a market for the output of the plant (Schaefer JX 1, 585 In. 9-15). Under any set of circumstances, the time for entry -- if Occidental were to change its mind and consider entry -- would extend beyond the two-year period set forth in the DOJ Merger Guidelines, supra, Section 3.3. 314. [##] (Schaefer JX 1, 585 In. 21-586 In. 4; See also Flammer CX 184D J 7 In Camera). This is consistent with the statement in the DOJ Merger Guidelines: Entry5 1 3 3 3 5 1258 2184 30 36 96.664452 is5 1 3 3 3 6 1314 2184 182 46 96.664452 generally5 1 3 3 3 7 1522 2184 196 37 96.440453 facilitated5 1 3 3 3 8 1744 2186 47 46 96.592957 by5 1 3 3 3 9 1817 2186 58 35 96.973198 thea 1 3 3 4 0 539 2241 1339 48 -1 5 1 3 3 4 1 539 2242 135 45 96.994942 growths 1 3 3 4 2 687 2241 42 36 96.964996 of5 1 3 3 4 3 738 2242 58 35 96.488823 thes 1 3 3 4 4 808 2242 133 35 96.736908 markets 1 3 3 4 5 954 2243 68 35 96.851318 ands 1 3 3 4 6 1034 2242 167 36 96.858963 hindered5 1 3 3 4 7 1213 2243 46 45 95.884537 by5 1 3 3 4 8 1273 2243 43 35 96.909859 its5 1 3 3 4 9 1330 2244 196 45 97.006882 stagnation5 1 3 3 4 10 1540 2255 39 24 97.016792 or5 1 3 3 4 11 1591 2244 167 35 60.290180 decline. DOJ Merger Guidelines, supra, Section 3.3 n.21, 2 Trade Reg. Rep. (CCH) J 4493 at 6879-15.

315. Mr. Schaefer also testified that Occidental would not convert additional capacity to copolymer at Pottstown, Pennsylvania, where Occidental presently produces copolymer (Schaefer JX 1, 586 In, 24-587 In. 3). The reason advanced for not converting additional capacity at Pottstown was again because no additional market existed for the product (Schaefer JX 1, 587 In. 2-6). Initial Decision 115 F.T.C.

316. Mr. Schaefer also testified generally as to the likelihood of entry into copolymer. He concluded that there was no scale at which a company could profitably enter copolymer as long as the outlook for consumption continued to be one of negative growth (Schaefer JX 1, 587 In. 7-11). Entry at any scale would have too much of a depressing effect on price (Schaefer JX 1, 587 In. 12-14; See also Harris JX 1, 902 In. 6-15; Flammer CX 184D J 7; See Goodrich, slip op. at 41).

317. Mr. Schaefer's testimony is supported by the testimony of other PVC producers. Air Products is one producer identified by Occidental as having previously had suspension PVC copolymer capacity. Mr. Fisher testified that an increase of less than 30-50% in the price of suspension PVC copolymer, relative to the price of suspension PVC homopolymer, would not induce Air Products to consider entry into the copolymer market (Fisher CX 208C { 3). Similarly, Mr. Boyer of Formosa testified that a 10-percent increase in the price of copolymer resin would not induce Formosa to enter the market (Boyer CX 185G { 16). Formosa's Delaware City plant had previously been used by Stauffer Chemical in the production of copolymer resin (Boyer CX 185G § 15). Mr. Boyer testified that entry by Formosa would, because of the small size of the market, and the declining demand for copolymer resin, create excess supply of resin and drive the market price of the resin down to an unprofitable level (Boyer CX 185G { 16). [##] (Hornack CX 182C J 7 In Camera). See generally Goodrich, slip op. at 41. 318. [##] (CX 210C In Camera). [##] (CX 210D In Camera), 319. Long-term, fixed-price contracts between potential entrants and prospective customers, or backward-integration by suspension PVC copolymer customers, would not solve the problem of lack of profitability of entry. Entry would expand the available supply of suspension PVC copolymer in the market, and would drive the post-entry price down to unprofitable levels, notwithstanding the profits currently realized by incumbent firms in the market. PVC customers who have signed a long-term, fixed-price contract to induce entry would be at a severe disadvantage compared with their competitors. For this reason, fixed-price contracts are not observed in the suspension PVC copolymer market (Kaserman JX 1, 340 In. 5-342 In. 16).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1091 1010 Initial Decision 320. The construction time required for conversion of a suspension PVC homopolymer plant to suspension PVC copolymer production would be approximately 9-10 months, if the plant, or part of the plant being converted, were shut down during such construction (See e.g., JX 3, PX 8 at 66 In. 18-25 ; Lull JX 1, 517 In. 7-14; JX 3, PX 98 at 40891, 40909; Schaefer 585 In. 1-12). [##] (Hill CX 183C-D J 7 In Camera). [##] (Hill CX 183D 7 Jn Camera). 321. The time required for conversion of a suspension PVC homopolymer plant to suspension PVC copolymer production would also include the time required for ordering the necessary equipment. That time would involve at least three to four months (JX 3, PX 8 at 69 In. 20-70 In. 1).

322. The time for planning and making the decision with respect to the conversion of a suspension PVC homopolymer plant to suspension PVC copolymer could take as long as two years (JX 3, PX 8 at 76 In. 20-77 In. 1, 78 In. 9-12). 323. New environmental permits, which would add to the lead time required for entry, may also be required, due to the addition of the viny] acetate in the suspension polymerization process (Goodrich, slip op. at 32-33 & n. 76; See e.g., Lull JX 1, 532 In. 11-533 In. 9; IX 3, PX 8 at 77 In. 24-78 In. 8; JX 3, PX 98 at 40891). [##] (Hill CX 183C J 6 In Camera). [##] (CX 5D-E In Camera). [##] (Lull JX 1, 533 In. 3-9; See Hill CX 183C J 6 Jn Camera). 324. It would take a total of two to two and one-half years, including equipment-ordering lead time and environmental permitting, to convert a suspension PVC homopolymer plant to the production of suspension PVC copolymer resin (Flammer CX 184D-E { 8; See JX 3, PX 25 at 9, 15, 24 (projects with capital expenditures greater than one million dollars required a minimum of three years, as many as four, from the date of the initial proposal to completion of the project); Schaefer JX 1, 585 In. 1-17). Essentially only the reactors, boilers, and other infrastructure could be used (Flammer CX 184E { 8).

325. Further, after completion of the physical conversion of the plant, at least 3 to 6 months of trial production operations would be required before a marketable copolymer resin could be produced (Flammer CX 184E J 8).

Initial Decision 115 F.T.C.

326. Customer approval of a resin would be required before the copolymer could be sold, which could increase the lead time for entry by a period of three months to over one year (Beveridge JX 1, 84 In. 16-25; JX°3, PX 8 at 70 In. Il-71 In. 2; See Friedman JX 1, 129 In. 7-14). The intention on the part of a copolymer producer to produce both copolymer and homopolymer in the same plant facilities, at different times, could discourage potential customers from even qualifying that producer (Beveridge JX 1, 85 In. 1-4). 327. The long lead time required for conversion of a suspension PVC homopolymer plant to copolymer production increases the potential for and duration of anticompetitive conduct in the suspension PVC copolymer industry (Kaserman JX 1, 324 In. 24-325 In. 14; See Goodrich, slip op. at 31).

328. [##] (Fisher CX 208D-E ] 4; Hill CX 183C {5 In Camera, Hornack CX 182C ] 6-7 In Camera; See Lull JX 1, 550 In. 10-17; JX 3, PX 98 at 4010-11; JX 3, PX 8 at 70 In. 2-9; CX 51 In Camera). The most significant portion of this investment would go to the installation of a recovery system designed to recover mixed streams of VCM and vinyl acetate monomer (VAM) (Fisher CX 208D-E ] 4). The type of recovery system used to recover these mixed streams is different from the type of recovery system that would be- used to recover only VCM (Fisher CX 208D-E { 4). [##] (CX 5D-E In Camera). These capital investments could not be recovered if entry by conversion of a suspension PVC homopolymer plant proved unsuccessful (JX 3, PX 8 at 71 In. 3-7). This sunk cost further reduces the likelihood of entry by conversion into suspension PVC copolymer production (Goodrich, slip op. at 41-42, n.96). 329. [##] (Hill CX 183C-D J 7 In Camera, CX 183B-C 4; Fisher CX 208C-D J 3; Flammer CX 184D { 6; JX 3, PX 6 at 76 In. 21-78 In. 3; JX 3, PX 8 at 71 In. 8-72 In. 6; Kaserman 327 In. 18-328 In. 18). Mr. Lull testified to the technical problems that some PVC producers have had in attempting to produce copolymer resin (Lull JX 1, 534 In. 16 - 535 In. 15). Mr. Boyer noted that the production of suspension PVC copolymer by Stauffer Chemical at the Delaware City plant had an overall negative impact on plant operations at the plant, because of inter-product contamination, and because of the corrosive effect of vinyl acetate on plant equipment (Boyer CX 185G q 15). [##] (Boyer CX 185G { 15; See also Hill CX 183B-C { 4 In OCCIDENTAL PETROLEUM CORPORATION, ETAL. —_ 1093 1010 Initial Decision Camera). Formosa has explained to one copolymer customer that it stopped manufacture of copolymer resin because of thes 1 3 1 2 9 1637 670 181 46 96.778366 problems5 1 3 1 2 10 1832 669 42 36 96.296783 of4 1 3 1 3 0 533 728 1211 48 -1 5 1 3 1 3 1 533 729 288 47 96.786682 manufacturing5 1 3 1 3 2 835 730 211 45 96.852951 copolymer5 1 3 1 3 3 1060 729 112 35 95.868073 resin (CX 121; See also CX 122).

330. [##] (Hornack CX 182D J 8 In Camera). Mr. Fisher noted that any production of suspension PVC copolymer at Air Products' Calvert City plant would result in a reduction in total plant production capacity of 20-30 percent (Fisher CX 208D J 3). The cost of a reduction in homopolymer sales increases as the price of homopolymer increases relative to the price of copolymer, as it has over the past year. Thus, the effect on overall plant operations and the opportunity cost of forgone homopolymer sales reduce the likelihood of entry into the suspension PVC copolymer market through conversion of a suspension PVC homopolymer plant (JX 3, PX 6 at 76 In. 21-78 In. 3; Harris JX 1, 896 In. 16-22). 331. As a result of the significant minimum efficient size required, the declining copolymer demand, the magnitude of the sunk costs, the lead time required for entry, and the effect of entry on overall plant operations and production capacity,” entry into the suspension PVC copolymer market through conversion of all or a portion of a suspension PVC homopolymer plant is unlikely to occur in response to non-competitive pricing in the suspension PVC copolymer market (Kaserman JX 1, 342 In. 17-343 In. 5, 344 In. 3-7; See JX 3, PX 8 at 89 In. 16-90 In. 2; See generally Goodrich, slip op. at 31-43).”° J. Entry into the Dispersion PVC Through Conversion of an Existing PVC Plant Is Unlikely 332. An existing producer of suspension PVC would have very little advantage relative to firms not in the PVC industry in attempting to enter the dispersion PVC market (Flammer CX 184D {1 { 6-7; Disch JX 3, PX 8 at 86 In. 5-23). 22 (##] (CX 210 F-H In Camera). [##] (Compare Lull JX 1, 516 In. 5-24 with CX 51 In Camera).

°3 The Ashtabula, Ohio PVC plant purchased by Vygen Corp. from GenCorp, Inc., was already configured to produce, and was used by GenCorp to produce, suspension PVC copolymer resin (Kaserman 470 In. 13-471 In. 21). Initial Decision 115 F.T.C.

333. Entry into the dispersion PVC market through conversion of existing suspension PVC capacity would involve primarily the addition of a spray dryer, which is substantially different and more powerful than the dryer used to manufacture suspension resin, grinding equipment for reducing the size of the dispersion PVC particles, different VCM stripping equipment and specialized packaging and conveyance equipment (Boyer CX 185B-C { 3,{ 5; Flammer CX 184C J 4-5, 184E J 8 ("Essentially only the reactors, boilers and other infrastructure could be used."); JX 3, PX 8 at 811 In. 9-18).

334. The minimum efficient size of a dispersion PVC plant would depend on the capacity of the spray dryer that would be added (JX 3, PX 8 at 82 In. 4-14). A spray-dryer is a major capital investment in a dispersion PVC plant (Boyer CX 185C 5). It is likely that a dispersion PVC plant created through conversion of former suspension PVC capacity would be scaled at such a size that it would constitute a significant percentage of total market dispersion PVC demand (See Boyer CX 185D 1 7; JX 3, PX 8 at 81 In. 1-9, 82 In. 4-14, 73 In. 22 - 74 In. 13).

335. Entry into the dispersion PVC market at a large scale, through conversion, would be likely to have a depressing effect on prices, and, accordingly, entry through such conversion is unlikely (Goodrich, slip op. at 41; Kaserman JX 1, 328 In. 9-18; See JX 3, PX 8 at 119 In. 7-120 In. 16).

336. It is projected that, over the next five years, the demand for dispersion PVC will be flat (Flammer CX 184D 7 7; Boyer CX 185E q 10; JX 3, PX 8 at 80 In. 9-81 In. 2; JX 3, PX 9 at 100 In. 24-101 In. 8). The projected flat demand makes it unlikely that a suspension PVC homopolymer producer will, through plant conversion, enter into the dispersion PVC market (Flammer CX 184D 7; JX 3, PX 9 at 100 In. 24-101 In. 8; JX 3, PX 136 at 96 In. 10-21; Schaefer JX 1, 587 In. 15-20; See Kaserman JX 1, 338 In. 6-13). 337. The time required for conversion of a suspension PVC homopolymer plant to dispersion PVC production would be at least two to two and one half years (Boyer CX 185D-E { 6; Flammer CX 184D-E J 8; JX 3, PX 136 at 97 In. 20-24), 338. [##] (Flammer CX 184E J 8; See van Haaren CX 187D J 13-14 In Camera).

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1095 1010 Initial Decision 339. A suspension PVC producer converting a plant would also be required to develop a research and development operation, and obtain customer approval for its resin (Boyer CX 185C-D J 8; Flammer CX 184D-E 8; JX 3, PX 8 at 82 In. 19-83 In. 7). [##] (van Haaren CX 187D 913-14 In Camera; Boyer CX 185E 99; Flammer CX 184D-E 8; JX 3, PX 9 at 56 In. 22-57 In. 8; Beveridge JX 1, 89 In. 4-10; JX 3, PX 8 at 83 In. 8-13; See Friedman JX 1, 129 In. 7-14). Mr. Boyer noted that it would take 6 months to a year before a converted plant could produce high quality dispersion resin (Boyer CX 185E 79).

340. The capital cost of converting a suspension PVC plant to dispersion PVC would range from $20-$30 million (Disch JX 3, PX 8 at 81 In. 19-21). A large portion of this capital investment would be for the installation of spray-dryers, equipment specialized to the production of dispersion PVC (Disch JX 3, PX 8 at 84 In. 1-9; Boyer CX 185C 95). This investment would not be recovered if entry by conversion of a suspension PVC plant proved unsuccessful (Disch JX 3, PX 8 at 84 In. 1-9). This sunk cost would increase the riskiness of an investment by a suspension PVC producer in converting a plant to the production of dispersion PVC, thus reducing the likelihood of such entry (Goodrich, slip op. at 41-42, n.96; Kaserman JX 1, 331 In. 18-22).

341. A suspension PVC producer would also have to consider the cost of loss of use of the plant during construction (Disch JX 3, PX 8 at 71 In. 21-72 In. 5). This cost and the loss of suspension PVC production, and sales attributable to the plant capacity that is withdrawn from suspension PVC use, reduces the attractiveness of conversion of a suspension PVC plant to dispersion PVC, thus further reducing the likelihood of such entry (See Kaserman JX 1, 337 In. 19-338 In. 5). The cost of lost suspension output increases as the price of suspension PVC resin increases relative to the price of dispersion PVC resin, as it has over the last year. 342. As a result of the significant minimum efficient size required, the declining dispersion PVC demand, the significant lead time required for entry, and the magnitude of the sunk costs and opportunity costs, entry into dispersion PVC through conversion of a suspension PVC plant is unlikely in response to non-competitive Initial Decision 115 F.T.C.

pricing in the dispersion PVC market (Goodrich, slip op. at 31-43; Kaserman JX 1, 342 In. 17-343 In. 5, 344 In. 3-7). K. Entry Through Restart of Shutdown PVC Plants Is Unlikely 343. It is respondents’ contention that non-competitive pricing in the relevant PVC markets would likely be defeated by the restart of shutdown PVC facilities. It is unlikely, however, that these plants would be restarted for such purpose.

344. [##] (RX 1N In Camera).

345. In a market that is competitive, one would expect that idle plants would be brought on stream were it economical to make the required investment. Occidental, in 1985, studied the possibility of restarting its Perryville, Maryland plant (JX 3, PX 136 at 79 In. 11-19). At that time, it decided that restart of the plant would not be economical (JX 3, PX 136 at 79 In. 14-16). Mr. Schaefer testified that the cost of refurbishing the plant would be high, and that thea 1 5 3 8 0 659 1617 1337 51 -1 5 1 5 3 8 1 659 1623 288 45 96.602982 manufacturing5 1 5 3 8 2 968 1621 208 36 96.562889 economics5 1 5 3 8 3 1199 1621 96 35 96.389076 there5 1 5 3 8 4 1316 1620 121 35 96.046829 would5 1 5 3 8 5 1458 1620 91 34 96.628860 have5 1 5 3 8 6 1570 1625 61 28 96.628860 not5 1 5 3 8 7 1651 1619 90 34 96.751450 been5 1 5 3 8 8 1763 1617 233 45 96.699478 competitive4 1 5 3 9 0 661 1677 1058 48 -1 5 1 5 3 9 1 661 1683 76 36 64.188698 ... (JX 3, PX 136 at 79 In. 20-24). [##] (CX 1000). 346. [##] (CX 43L; Pflugrath CX 177F J 11 Jn Camera; Donnelly CX 176D-E J5 In Camera; See RX 198B In Camera). 347. [##] (Donnelly CX 176D-E 5 In Camera; CX 43K-L). [##] (See Goodrich, slip op. at 32-34; Donnelly CX 176D-E { 5 In Camera; See CPF 296). The capital investment that would be required in order to bring these plants on stream is an important factor affecting the likelihood of their re-opening (CX 43L). 348. Other than plants owned by Occidental or Goodrich, the shutdown PVC plants identified by Occidental as potential restarters are, in fact, in the process of being dismantled, or are planned soon to be dismantled.

349. [##] (Taylor CX 181C In Camera). [##] (Taylor CX 181D In Camera). [##] (Taylor CX 181B Jn Camera). [##] (Taylor CX 181C In Camera). [##] (Taylor CX 181D In Camera). [##] (See Taylor CX 181C-D In Camera).

350. Borden has dismantled its Leominster, Massachusetts, site, and has transferred equipment from there to other Borden operations throughout the United States (Standly CX 186). It is offering the site for sale as real estate (Standly CX 186). [##1 (RX 1N Jn Camera). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1097 1010 Initial Decision 351. Of the shutdown plants identified by Occidental, the only plants not already being dismantled are owned by Occidental and Goodrich, respectively. Assuming arguendo these plants could be returned to production, the fact remains that Goodrich and Occidental are currently keeping these plants idle notwithstanding skyrocketing PVC prices and supply allocation by PVC producers. Accordingly, the plants are not likely to be a source for defeating collusive price increases in the industry. One cannot rely on the restart or sale to third parties of idle plants by the leading PVC producers to serve the purpose of new entry (Cf. Kaserman, Dkt. 9159, 2947-49, 2891-92, 2963-64). Indeed, as the Commission noted in Goodrich, restarting4 1 3 1 12 0 540 1275 1341 54 -1 5 1 3 1 12 1 540 1284 223 36 92.715355 mothballed5 1 3 1 12 2 778 1283 163 46 96.454437 capacity5 1 3 1 12 3 958 1281 73 36 96.642319 will5 1 3 1 12 4 1048 1280 141 46 96.482475 usually5 1 3 1 12 5 1205 1279 179 36 96.974411 constrain5 1 3 1 12 6 1400 1278 59 36 96.873375 thes 1 3 1 12 7 1474 1277 138 46 96.873375 pricing5 1 3 1 12 8 1629 1276 194 36 96.448875 discretion5 1 3 1 12 9 1839 1275 42 36 96.878174 of4 1 3 1 13 0 541 1334 1336 53 -1 5 1 3 1 13 1 541 1344 205 36 96.519287 incumbents 1 3 1 13 2 760 1342 100 36 96.745857 firms5 1 3 1 13 3 875 1341 85 46 95.804588 only5 1 3 1 13 4 974 1341 31 35 96.922821 if5 1 3 1 13 5 1015 1340 216 36 96.884880 undertaken5 1 3 1 13 6 1244 1339 47 45 96.714127 by5 1 3 1 13 7 1294 1330 21 61 96.891685 a5 1 3 1 13 8 1339 1337 114 46 96.858131 fringes 1 3 1 13 9 1467 1336 83 36 96.898804 firms 1 3 1 13 10 1563 1335 71 37 96.089172 that5 1 3 1 13 11 1648 1335 29 36 96.089172 is5 1 3 1 13 12 1693 1341 61 30 96.911407 not5 1 3 1 13 13 1768 1334 109 46 96.988266 likely4 1 3 1 14 0 540 1392 1336 54 -1 5 1 3 1 14 1 540 1409 36 28 95.057312 to5 1 3 1 14 2 592 1403 45 34 95.057312 be5 1 3 1 14 3 654 1413 20 24 96.659653 a5 1 3 1 14 4 689 1407 100 39 96.190811 party5 1 3 1 14 5 805 1407 36 28 94.687683 to5 1 3 1 14 6 857 1410 20 24 89.008774 a5 1 3 1 14 7 892 1398 177 36 89.008774 collusive5 1 3 1 14 8 1085 1397 263 45 93.207550 arrangement (Goodrich, slip op. at 42, n.97).

352. Itis therefore found that it is unlikely that the restart of idle PVC resin plants will deter or defeat non-competitive pricing in any of the relevant markets.

L. The Potential for Capacity Expansions Does Not Deter Non-competitive Pricing in the Relevant Markets 353. Respondents contend that the potential for new entry through capacity expansion is likely to deter or defeat an attempted exercise of market power in any of the relevant markets. 354. However, capacity expansion is not analogous to new entry, and thus the plant expansions currently being undertaken by a number of PVC producers are not properly analogized to new entry that would thwart an attempted exercise of market power (Goodrich, slip op. at 35). [##] (See, e.g., Pflugrath CX 177F {[ 11 In Camera; Heath CX 178EJ 8 In Camera). Indeed, capacity expansion by firms already in the relevant markets may deter new entry that would otherwise reduce market concentration. See Spence, Entry, Capacity, Investment and Oligopolistic Pricing, 8 Bell J. of Econ. 53 (1977). Thus, one cannot rely on expansions by incumbent firms to serve the same purpose as new entry (Goodrich, slip op. at 35; Kaserman DKt. 9159, 2947-49, 2891-92, 2963-64).

Initial Decision 115 F.T.C.

355. The DOJ Merger Guidelines recognize that expansion is, in almost all circumstances, not equivalent to new entry. The DOJ Merger Guidelines consider expansion equivalent to new entry only in those situations where fringes 1 3 1 4 6 1312 812 101 36 96.796867 firms5 1 3 1 4 7 1429 812 35 36 96.167435 in5 1 3 1 4 8 1480 812 58 36 96.515671 thes 1 3 1 4 9 1552 812 136 36 96.790215 markets 1 3 1 4 10 1702 812 136 46 96.918022 greatly5 1 3 1 4 11 1853 811 142 46 96.926895 expand4 1 3 1 5 0 657 870 1338 50 -1 5 1 3 1 5 1 657 874 152 46 96.907494 existing5 1 3 1 5 2 821 872 189 47 93.199486 capacity. DOJ Merger Guidelines Section 3.3 n.20, 2 Trade Reg. Rep. (CCH) 74,493 at 6879-15. Clearly this circumstance does not apply in any of the relevant markets. 356. That capacity expansion is not analogous to new entry that would erode or deter non-competitive pricing in the relevant PVC markets is illustrated by the nature of the expansion activity currently being undertaken by PVC producers. Some of the largest producers such as Shintech and Occidental have announced large additions to capacity. Formosa has also announced a relatively large capacity expansion, noting at the same time that it hopes it is doing the expansion in5 1 3 2 8 3 955 1456 87 35 96.537949 such5 1 3 2 8 4 1064 1466 20 25 96.537949 a5 1 3 2 8 5 1104 1466 79 34 96.795830 ways 1 3 2 8 6 1205 1465 38 25 96.795830 as5 1 3 2 8 7 1264 1461 61 28 96.927681 not5 1 3 2 8 8 1345 1461 36 28 97.012840 to5 1 3 2 8 9 1402 1454 62 35 96.991989 stir5 1 3 2 8 10 1483 1454 58 34 96.973152 thes 1 3 2 8 11 1561 1452 241 46 96.291000 marketplace5 1 3 2 8 12 1822 1452 67 45 93.638893 up (CX 165B). Similarly, Vista has noted its intention to make capacity expansions that would match market growth, so as to maintain a constant market share (CX 166).

357. Thus, expansion of PVC capacity is not being undertaken by producers in the relevant markets in order to obtain a larger share of the market, but merely to accommodate expected demand growth and maintain full capacity utilization levels (RX IR). [##] (CX 43C; Donnelly CX 176C-D { 4 Jn Camera; Heath CX 178E { 8 Jn Camera; Kulkaski CX 195C ¥ 4 In Camera; Pflugrath CX 177F { 11 In Camera).

358. Finally, expansion by existing PVC producers is likely to be difficult and take a long time. Construction of new plants by incumbent firms involves the same obstacles of large minimum efficient scale, high sunk costs, and long lead times as for potential new entrants. An incumbent firm may be able to bring a new plant on stream slightly faster because it may already have the technology and may have an existing and usable site. 359. Smaller expansions of existing plants ("debottlenecking" projects), which generally result in a relatively small addition to industry capacity, and hence do not have a significant competitive effect, can also involve a substantial period of time. For example, there was testimony in the Goodrich proceeding that a plant expansion by Shintech took approximately two years, with unknown OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1099 1010 Initial Decision additional time for planning and permitting (McMath Dkt. 9159, 1940).

360. Thus, it is not likely that expansion by existing PVC producers would defeat or deter non-competitive pricing in any of the relevant PVC markets (Goodrich, slip op. at 35). VII. OTHER QUALITATIVE FACTORS NEEDED TO EVALUATE THE LIKELIHOOD OF COLLUSION IN EACH OF THE RELEVANT MARKETS A. Because Demand for PVC in Each of the Relevant Markets Is Inelastic, PVC Producers Have a Strong Incentive to Raise Prices Above Competitive Levels ]. Introduction 361. The fact that mass and suspension PVC, suspension PVC copolymer, and dispersion PVC are each relevant product markets means that demand for each of the relevant products is sufficiently inelastic that firms could profit if they coordinated their actions and engaged in collusion. In other words, if PVC producers in any of the relevant markets increased price by a small but significant and nontransitory amount, the increase in profits due to the higher price would more than offset the decrease in profits due to lower sales (Kaserman JX 1, 252-54).

362. [##] (Goodrich, slip op. at 19-20, 75; Becker Dkt. 9159, 1325-26; Schaefer Dkt. 9159, 1141; Kaserman JX 1, 257, 260-62, 269, 270-71, 345, 357; Kaserman Dkt. 9159, 2381; accord, Dkt. 9159 CX 297Z,1-Z2 In Camera; Dkt. 9159 CX 295Z53-Z54 In Camera). The price inelasticity of demand for each of the relevant products increases the incentive to collude in each of the relevant markets (Kaserman JX 1, 345, 357; Kaserman Dkt. 9159, 2353-55, 2381; See Goodrich slip op. at 70-71).

363. The price elasticity of demand is the percentage change in the quantity demanded for a product divided by the percentage change in the price of the product (Goodrich slip op. at 70 & n.156; Kaserman JX 1, 254; Kaserman Dkt. 9159, 2348-49). It is a measure of the responsiveness of consumers to changes in the price (Kaserman JX 1, 254; Kaserman Dkt. 9159, 2349). The degree to which demand for a product is elastic or inelastic is a function of the extent Initial Decision 115 F.T.C.

to which other products are close substitutes for the product at a particular price (See Kaserman JX 1, 254; Kaserman Dkt. 9159, 2350-51). The more customers will shift to other products for a given price increase, the more elastic is demand. Conversely, to the extent that customers do not switch to other products for a given price increase, the less elastic (or more inelastic) is demand. 364. The lower the elasticity of demand for a product, the more an industry would profit from a price increase resulting from collusion (Kaserman JX 1, 345; Kaserman Dkt. 9159, 2353-55; See Goodrich, slip op. at 70-71). The lower the price elasticity of demand, the smaller is the restriction in output necessary to cause a given increase in industry prices (Klass Dkt. 9159, 4268; See Kaserman JX 1, 357). In other words, when demand is price inelastic, a small cutback in output or sales by a collusive group will lead to a significant increase in price.

365. In estimating the price elasticity of demand for the relevant PVC products, it is important that each of these is an intermediate (or input) product rather than a consumer good (Goodrich F 95; Goodrich, slip op. at 71-72; Kaserman JX 1, 260, 70; Kaserman Dkt. 9159, 2369). The price elasticity of demand for an intermediate product is a function of three factors: (1) the ease of substitutability between the intermediate product and other inputs in the production of the final product; (2) the cost share of the intermediate product in the production of the final products; and (3) the price elasticity of demand for the final products produced from the intermediate product (Goodrich, slip op. at 72; Kaserman JX 1, 260, 270; Kaserman Dkt. 9159, 2370-71). Where there is no substitutability between the intermediate product and other inputs in the manufacture of the final product, the price elasticity of demand of the intermediate product will necessarily be lower than the price elasticity of demand for the final product (Kaserman Dkt. 9159, 2377. See Klass Dkt. 9159, 4267). How much lower is a function of the cost share of the intermediate product used in the manufacture of the final product (Kaserman Dkt. 9159, 2375-76).

366. Analysis of the elasticity of demand for an intermediate product is made more complicated where, as in the case of mass and suspension PVC homopolymer and the case of dispersion PVC resin, there are hundreds of end use products made from the intermediate OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1101 1010 Initial Decision product (See Kaserman JX 1, 262). The aggregate (or industry) price elasticity of demand for each of the relevant products is the weighted average of the price elasticity of demand for the resin used in each of its end uses. The price elasticity of demand for the resin used in any one end use is a function of the price elasticity of demand for the final end use product and the cost share of the PVC resin in that product. Thus, an end use segment that consumes a large amount of the relevant product is relatively more important in determining the overall elasticity of demand for the relevant product than is a segment that uses a small amount.”

367. Analysis of these factors shows that the price elasticity of demand for each of the relevant products is very low. First, there is no substitutability between each of the relevant products and other input products in the manufacture of final products normally made from the respective relevant product (Goodrich F 95; Goodrich, slip op. at 19-20, 72; Kaserman JX 1, 260, 270; Kaserman Dkt. 9159, 2376-77). Second, the cost share of each of the relevant products is only a portion of the total cost of the end product, and very often the proportion is quite low (Goodrich F 96; Goodrich, slip op. at 72-74; Kaserman JX 1, 260, 270-71; Kaserman Dkt. 9159, 2375). Third, the elasticity of demand for final products made from each of the relevant products is low (Goodrich F 97-98; Goodrich, slip op. at 74-75; Kaserman Dkt. 9159, 2373-75; Kaserman JX 1, 270-71). Because there is little substitutability between each of the relevant products and other input products in the manufacture of final products, the price elasticity of demand for each of the relevant products is necessarily lower than the price elasticity of demand for the final products (Goodrich F 96; Kaserman Dkt. 9159, 2377. See Klass Dkt. 9159, 4267). The price elasticity of demand for each of the relevant products is significantly less than the price elasticity of demand for the final products due to the low cost share of mass and suspension PVC in many final products (See Goodrich F 96; Goodrich, slip op. at 74).

4 In Camera [##] (Waggoner Dkt. 9159, 3620-21; CX 756Z20; RX 165E In Camera). Furthermore, municipal water pipe in small diameters of 4, 6, and 8 inches may be more important in terms of volume demanded than large diameter municipal water pipe of 10 and 12 inches. Initial Decision 115 F.T.C.

2. Mass and suspension PVC homopolymer a. There is no substitutability of other inputs for mass and suspension PVC homopolymer 368. There are no substitutes for mass and suspension PVC homopolymer in the manufacture of mass and suspension PVC end use products (Goodrich, slip op. at 19, 72, 75; Goodrich F 95; Kaserman Dkt. 9159, 2376-77; Kaserman JX 1, 260, 270). Generally, PVC resin is the primary raw material input and imparts essential properties to the product (Goodrich, slip op. at 72; Goodrich F 95. See H. Wheeler Dkt. 9159, 1751-52). The fabrication process is essentially one of giving the product its necessary shape (Goodrich F 95; See Disch Dkt. 9159, 661-662). Furthermore, in many cases, the fabrication equipment for mass and suspension PVC products can process only mass or suspension PVC resins (Goodrich, slip op. at 19-20, 72; Goodrich F 95; H. Wheeler Dkt. 9159, 1751-52; See McMath Dkt. 9159, 1922-23; Disch Dkt. 9159, 663). b. The cost share of mass and suspension PVC homopolymer in many end-use products is low 369. Mass and suspension PVC homopolymer accounts for only a portion of the cost of the finished products made from these resins. Value is added to the PVC resin at several stages in the production of the final PVC end product. First, all mass and suspension PVC homopolymer resins are compounded before they are processed (Goodrich, slip op. at 72; Disch Dkt. 9159, 655-56). Compounding involves mixing the resin with various additives, which may include heat and light stabilizers, impact modifiers plasticizers, and pigments (Goodrich, slip op. at 72-73 & n.162; Disch Dkt. 9159, 656-57; See Goodrich F 96). The amount of value added at the compounding stage varies. For example, flexible compounds require the addition of plasticizers while rigid compounds do not (See Goodrich at 72-13 & n.162; Goodrich F 96; Disch 657-58). As a result of the addition of plasticizers and other additives, flexible compounds may contain no more than 50 to 70 percent resin by weight (/d.; See Disch Dkt. OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1103 1010 Initial Decision 9159, 659; DiLiddo Dkt. 9159, 3377; Becker Dkt. 9159, 1308-09). Rigid compounds that require special additives, like UV (ultraviolet) stabilizers for siding or impact modifiers for bottles, are more costly than pipe compounds (See Goodrich F 96; Disch Dkt. 9159, 660; Becker Dkt. 9159, 1300). Second, mass and suspension PVC compounds are converted into fabricated products through various production processes that include extrusion, calendering, blowmolding, injection-molding, and compression-molding (Goodrich, slip op. at 72; Goodrich F 96; Disch Dkt. 9159, 661-662). Once again, the value added varies with each PVC product (See Goodrich, slip op. at 72-75; Goodrich FF 96-19), for a discussion of the cost share in the various mass and suspension PVC homopolymer end products). Finally, some products must be installed before they can be used. For products such as pipe, siding, and windows, the cost share of the mass and suspension PVC homopolymer resin is a very small portion of the total installed cost of the finished PVC product (See Goodrich, slip op. at 73-74 & n.164; Goodrich FF 163, 168, 178). The low cost share of mass and suspension PVC homopolymer resin in end products means that the demand for mass and suspension PVC homopolymer resin is significantly less elastic than the demand for the end products themselves (See Goodrich F 96; Goodrich, slip op. at 74; Kaserman Dkt. 9159, 2375-78; Kaserman JX 1, 260, 270). c. The price elasticity of mass and suspension PVC homopolymer end-use products is low 370. [##] (See Goodrich F 97; Goodrich, slip op. at 73-74; Disch Dkt. 9159, 663-80; Becker Dkt. 9159, 1268-1325; H. Wheeler Dkt. 9159, 1727-28, 1753; Dkt. 9159 CX 591G-K In Camera). 371. Because mass and suspension PVC homopolymer is used in so many applications, it is difficult to generalize about why demand for mass and suspension PVC homopolymer products is inelastic and why products made out of other materials are not close substitutes. However, two major reasons can be identified. First, mass and suspension PVC homopolymer products have specific properties that distinguish them from products made from other materials (Goodrich F 98; Yu Dkt. 9159, 2118-2129; Becker Dkt. 9159, 1274-79; DiLiddo Dkt. 9159, 3348-50; Disch Dkt. 9159, 672-77). As a result, mass and Initial Decision 115 F.T.C.

suspension PVC products are often chosen on the basis of their properties, and not on the basis of changes in the prices of the products. Second, where mass and suspension PVC products are chosen because they offer a cost savings to the purchaser, the cost savings are often so substantial that the PVC product would still be far less expensive than alterative products, even if mass and suspension PVC resin prices rose by a small but significant amount (Goodrich, slip op. at 74-75; Id.). Thus, customers would continue to buy the PVC product even if mass and suspension PVC resin prices would rise by a small but significant amount (See Kaserman JX 1, 260, 270).

(1) Pipe and pipe fittings 372. [##] (Goodrich F 99; Disch Dkt. 9159, 663; See also Dkt. 9159 RX 145L In Camera; Commission Physical Exhibit 6). PVC pipe fittings, which are used primarily in conjunction with PVC pipe (Goodrich F 99; Becker Dkt. 9159, 1323-24), account for an additional 3% to 4% of PVC resin consumption (Goodrich F 99; Disch Dkt. 9159 663; See Commission Physical Exhibit 7). Like other rigid applications for PVC, PVC pipe is a relatively new product, coming into commercial prominence in the late 1960's and 1970's (Goodrich F 99; Becker Dkt. 9159, 1276-78). In the mid-tolate 1960's, only about 134 million pounds of mass and suspension PVC were consumed in the pipe segment of the market (Goodrich F 99; Dkt. 9159 RX 3Z14). [##] (Goodrich F 99; Dkt. 9159 RX 165E In Camera; See generally Dkt. 9159 CX 756Z19). [##] (See, e.g., Dkt. 9159 CX 244F; Dkt. 9159 CX 49K; Pflugrath CX 177B { 3 In Camera; Heath CX 178B-C J 3 In Camera; Wilhite CX 179A-C ] Z-3 In Camera Porter CX 198B-C J 3 In Camera; Stuart CX 201A-C q 2-5 In Camera Underwood CX 203B { 3 In Camera). 373. The PVC pipe market has grown primarily because PVC pipe provides a superior package of properties that make it a substantially better pipe product than pipe made from other materials in many pipe applications (Goodrich F 100; Dkt. 9159 CX 49K; Dkt. 9159 CX 244G). [##] (Goodrich F 100 & n.21 at 27; Pflugrath CX 177B J 3 In Camera Heath CX 178B-C J 3 Jn Camera; Wilhite CX OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1105 1010 Initial Decision 179B-C { 3 In Camera Porter CX 198B-C § 3 Jn Camera, Alberti CX 199F-G J 9 In Camera).

374. [##] (Goodrich F 101; Pflugrath CX 177B 3 In Camera; Porter CX 198B-C { 3 In Camera Stuart CX 201C J 5 In Camera McMath Dkt. 9159, 1924-26; Dkt. 9159 CX 591H In Camera; Dkt. 9159 CX 247A, L In Camera; Dkt. 9159 RX 958A; CPF 391; See also Becker Dkt. 9159, 1293-94). [##] (Goodrich F 101; Wilhite CX 179B-C J 3 In Camera Alberti 199F-G { 9 Jn Camera; Stuart CX 201B J 3 In Camera; Dkt. 9159 CX 247A, L In Camera). [##] (Goodrich, slip op. at 74-75; Dkt. 9159 CX 247A In Camera). [##] (Dkt. 9159 CX 591H In Camera; See Goodrich F 101; See also Alberti CX 199F J 9 In Camera; Wilhite CX 179A-B J 2-3 In Camera; Dkt. 9159 CX 566D; Dkt. 9159 CX 244G). 375. PVC pipe is easier to handle and less costly to install than most other types of pipe. PVC pipe is also lighter in weight compared to most traditional pipe material (Yu Dkt. 9159, 2122-23 DiLiddo Dkt. 9159, 3347; Goodrich F 102). The light weight of PVC pipe means that it can often be installed by hand-labor, whereas heavy equipment is required to lay ductile iron pipe or cement pipe into atrench (Goodrich F 102; Stuart 201B-C { 3-4; Yu Dkt. 9159, 2123-24; DiLiddo Dkt. 9159, 3347-48). PVC pipe is made in relatively long lengths compared to pipe manufactured from other materials, such as ductile iron, clay and asbestos cement (Yu Dkt. 9159, 2123-24; DiLiddo Dkt. 9159, 3347; Waggoner Dkt. 9159, 3632). Longer lengths of pipe mean that fewer joints are necessary. PVC pipe generally is joined with a bell joint or with solvents, which tends to be faster and easier than the methods for joining traditional pipe material (Goodrich F 102; Yu Dkt. 9159, 2126-27; Waggoner Dkt. 9159, 3632. See also Dkt. 9159 CX 377B). Because there are fewer joints and easier joining procedures, PVC pipe can often be installed more quickly than other pipe products (Goodrich F 102; Yu Dkt. 9159, 2126-27; Waggoner Dkt. 9159, 3632). [##] (Goodrich F 102; Yu Dkt. 9159, 2123-27; Dkt. 9159 CX 247A In Camera). [##] (See Dkt. 9159 CX 247A In Camera). Because the most important cost factor to the pipe end user is usually the total installed cost (DiLiddo Dkt. 9159, 3348; Goodrich F 102 & n.22 at 28), [##] (DKt. 9159 RX 4V In Camera). [##] (Dkt. 9159 CX 566E; Goodrich F 102 & n.22 at 28; See also Dkt. 9159 CX 247 A In Camera). Initial Decision 115 F.T.C.

376. PVC pipe is resistant to corrosion from chemicals. It will not corrode in acid, alkaline or wet soils, whereas metal pipe may rust and deteriorate (Goodrich F 103; Yu Dkt. 9159, 2121-22; DiLiddo Dkt. 9159, 3348-50; Becker Dkt. 9159, 1274). [##] (Yu Dkt. 9159, 2121-22; DiLiddo Dkt. 9159, 3348-50; Becker Dkt. 9159 1274; Goodrich F 103; See Pflugrath CX 177B J 3 Jn Camera; Alberti CX 199F-G In Camera). Given the fact that the cost of installation may exceed the cost of the pipe itself, the replacement costs associated with pipe materials that corrode over time can be a major expense, and can add significantly to the actual long-term costs of an installed pipe system (See Yu Dkt. 9159, 2112-14, 2121-22). 377. PVC pipe has excellent flow properties. For example, the smooth walls of PVC pipe may allow a 12" PVC pipe to carry as much water at a given pressure-rating as a 14" ductile iron pipe (Yu Dkt. 9159, 2118-21; Goodrich F 104; See also Waggoner Dkt. 9159, 3576). Moreover, PVC pipe's smooth walls mean that deposits do not build up on the inside wall (Yu Dkt. 9159, 2118-21; Becker Dkt. 9159, 1276-78; Goodrich F 104). With some traditional pipe materials such as ductile iron, these deposits can build up over time, reducing the effective diameter of the pipe over the life of the pipe (Yu Dkt. 9159, 2118-21; Becker Dkt. 9159, 1276-78; Goodrich F 104). This can have a significant impact on the service life of a pipe under certain conditions, e.g., water conditions with high mineral content (Becker Dkt. 9159, 1277-78).

378. PVC pipe has distinctive properties compared to other plastic pipe which substantially limit the likelihood that other plastics will be used as a substitute pipe material. PVC5 1 3 3 3 10 1584 2166 29 34 96.992416 is5 1 3 3 3 11 1629 2166 57 35 96.992416 thes 1 3 3 3 12 1700 2173 93 29 96.906654 most5 1 3 3 3 13 1807 2168 165 35 95.994957 versatile4 1 3 3 4 0 634 2218 1336 47 -1 5 1 3 3 4 1 634 2218 69 35 96.825592 ands 1 3 3 4 2 717 2219 224 35 96.729095 economical5 1 3 3 4 3 955 2219 43 35 97.013451 of5 1 3 3 4 4 1009 2220 56 34 97.013451 thes 1 3 3 4 5 1079 2220 126 45 96.519859 plastics 1 3 3 4 6 1221 2221 175 36 96.756386 materials5 1 3 3 4 7 1412 2223 69 34 96.456245 ands 1 3 3 4 8 1495 2223 29 34 96.849915 is5 1 3 3 4 9 1540 2223 86 35 96.826599 used5 1 3 3 4 10 1642 2224 103 35 96.558556 twice5 1 3 3 4 11 1761 2235 37 25 96.413414 as5 1 3 3 4 12 1813 2226 108 34 95.940598 much5 1 3 3 4 13 1936 2226 34 34 95.940598 in4 1 3 3 5 0 633 2276 1337 50 -1 5 1 3 3 5 1 633 2276 122 46 96.740280 piping5 1 3 3 5 2 770 2288 37 24 96.497612 as5 1 3 3 5 3 822 2277 44 35 96.082977 all5 1 3 3 5 4 882 2278 57 35 96.750763 thes 1 3 3 5 5 952 2278 99 35 96.882492 others 1 3 3 5 6 1063 2278 261 46 96.415352 thermoplastic5 1 3 3 5 7 1339 2281 174 35 96.592102 materials5 1 3 3 5 8 1528 2282 206 35 91.948746 combined (Dkt. 9159 RX 3Z13). An A.D. Little study estimating PVC demand growth concluded that PVC pipe had substantial advantages over other plastics in the areas in which PVC pipe is used: With regard to competition from other plastics, i.e, ABS, polyethylene, polybutylene, etc., we believe that polyvinyl chloride represents a better performance value, has better and more widespread code approval, has the advantage of flame resistance, and can be easily joined and handled in the field. This gives a substantial advantage to PVC. There is also a suitable supply of PVC fittings, whereas polyolefin must suffer from the disadvantages of problems in OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1107 1010 Initial Decision joining, lack of suitable fittings, lack of code approval, fallibility restrictions, etc. We therefore believe that PVC pipe will continue its dominance of the field, and that its growth will be rapid as long as there is not an overall disapproval of all plastic pipe in any uses. Major areas of growth that we foresee are in electrical conduit; conduit for telephone lines; drain, waste and vent in single residents housing; its use in large development tract housing; and a substantial increase in non-code areas such as farming. A new development which will enhance growth in drain, waste and vent use is a structural foam pipe being made by Armotech, a joint venture of Robintech U.S.A. and Armosig in France. We foresee continued increase in demand for PVC pipe in the handling of chemicals and other corrosive materials where PVC has the advantage of rigidity, corrosion resistance, and non-flammability. We know of no plastic pipe which will effectively compete with PVC in these areas.

(Dkt. 9159 CX 45S-T (emphasis added)). One significant property that PVC provides in pipe applications is the ability of PVC to withstand internal pressure, a necessary property of the pressure4 1 4 1 4 0 532 1464 1336 56 -1 5 1 4 1 4 1 532 1464 102 45 89.224251 pipe applications, such as water pipe and irrigation pipe. A Goodrich product manager explained how the properties of PVC pipe give it a distinct cost advantage among plastics for pressure pipe applications:

A prime example is PVC pressure pipe. The ability to withstand internal pressure in a piping system is dependent upon the physical, chemical and thermal properties of a particular material. When considering PVC and other thermoplastics for use in a pressure piping system, cost effectiveness is the bottom line. To handle a particular pressure, a thinner wall thickness is required for PVC compared to other major thermoplastic materials. So PVC is the most economical material for pressure piping systems.

(Dkt. 9159 CX 457D).

379. The selection of a particular pipe material for use in a given application is a function of the combination of in-use conditions to which the pipe will be subjected, and the suitability of the pipe materia] for use in that application given the inherent characteristics of the material (See Waggoner Dkt. 9159, 3623-28). Thus, despite the distinct performance advantages that PVC provides in most pipe applications, PVC pipe also has a number of characteristics that make it unsuitable for general use in certain applications. For example, PVC lacks the requisite stiffness for use in above-the-ground urigation applications (Yu Dkt. 9159, 2154; Goodrich F 105). There Initial Decision 115 F.T.C.

is also continuing controversy over the extent to which PVC pipe emits toxic smoke when it burns (See, e.g., Dkt. 9159, CX 45S; Goodrich F 105). As a result, the use of PVC pipe is banned by many building codes for use in drain, waste, and vent (DWV) and conduit applications, particularly in high-rise buildings (See Waggoner DKt. 9159, 3638; Goodrich F 105). PVC pipe also does not have the degree of strength of such materials as ductile iron pipe. Thus, ductile iron pipe may be preferred over PVC pipe in municipal water pipe applications involving rocky or shifting soils, or installation under heavily traveled roads and railroad crossings, (See Waggoner Dkt. 9159, 3578-79; Goodrich F 105). To protect it from breakage in rocky or shifting soils, PVC pipe may require a special gravel backfill whereas another kind of pipe may not (See Waggoner Dkt. 9159, 3578-79; Goodrich F 114). The cost of this backfill requirement may sometimes eliminate the installation cost advantage of PVC pipe (See Waggoner Dkt. 9159, 3651-53; Goodrich F 114). Thus, PVC pipe is not always suitable for use in all piping applications or circumstances.

380. PVC pipe is a relatively new product compared to traditional pipe products. Thus, PVC pipe does not have a long track record on which users and purchasers can rely in judging its long-term performance properties (Yu Dkt. 9159, 2121-22, 2131-33: DiLiddo Dkt. 9159, 3350-51; Waggoner Dkt. 9159 3628-30, 3634- 35; Goodrich F 105). This aspect is particularly significant because, in many applications, pipe may be expected to function for 50 years or more (Yu Dkt. 9159, 2122; Waggoner Dkt. 9159, 3630; See Goodrich F 105).

381. Overall, the use of pipe is not a single undifferentiated demand with a single set of end use requirements. The distinctive differences in performance properties among PVC pipe products and other types of pipe are of varying importance depending upon the wide variety of circumstances in which the pipe is used. A closer analysis shows that, in most of the applications for which PVC pipe can be used, it has substantial performance and cost advantages over other types of pipe (See Goodrich, slip op. at 74-75). Most of the mass and suspension PVC homopolymer used in pipe is accounted for by the following applications: (1) municipal water pipe; (2) rural water pipe; (3) water service and distribution pipe; (4) sewer pipe; (5) OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1109 1010 Initial Decision drain, waste and vent pipe; (6) irrigation pipe; (7) communications duct; and (8) electrical conduit (See Goodrich F 106; Dkt. 9159 CX 756Z20).

(a) Municipal water pipe 382. Municipal water pipe is pipe that carries the municipal, potable (i.e., drinking) water supply from reservoirs, lakes or rivers to treatment facilities, and thence to water mains that distribute the water throughout the community. Municipal water pipe is a pressure pipe application, which means that the pipe conveys water under pressure. The higher performance requirements in pressure pipe applications have implications for the design and cost of pressure pipe products, i.e., the pipe product is engineered and tested to withstand high internal and external pressures, and to provide an assurance of safety and longevity once installed (See Yu Dkt. 9159, 2096-99; Goodrich F 107). Municipal water pipe comes in a wide range of diameters; the largest diameter pipes being used to transport water from the reservoir to the treatment center and the main lines (Yu Dkt. 9159, 2114-15; Goodrich F 108). Smaller lines are used to distribute the water through individual subdivisions (Yu Dkt. 9159, 2115-16; Goodrich F 108). Water mains generally vary in size from 4 inches to about 36 inches in diameter (Yu Dkt. 9159, 2115; Goodrich F 108; See also Waggoner Dkt. 9159, 3579-80; Dkt. 9159 RX 3Z35). PVC municipal water pipe is generally sold in diameters of 12 inches or less (Yu Dkt. 9159, 2115; Eecker Dkt. 9159, 1278; Waggoner Dkt. 9159, 3580; Goodrich F 108; See Dkt. 9159 CX 377A-F). [##] (Dkt. 9159 RX 165E In Camera; Goodrich F 109). 383. Purchasers of municipal water pipe are generally the contractors who install the system (Waggoner Dkt. 9159, 3574; Yu Dkt. 9159, 2112; Goodrich F 110). However, the contractor's choice of pipe is limited by the specifications for the project, as prepared by the design or consulting engineer for the municipality (Waggoner DKt. 9159, 3574-75, 3584-85; Yu Dkt. 9159, 2107-12; Goodrich F 110) These specifications set forth the required diameters, pipe classes, installation methods, and materials that may be used (Waggoner DKt. 9159, 3586; Goodrich F 110). In some cases, an engineer will approve only one pipe material, such as PVC or ductile iron, in the Initial Decision 115 F.T.C.

specification (Waggoner Dkt. 9159, 3626; Goodrich F 110). In other cases, more than one material will be permitted (Waggoner Dkt. 9159, 3586). In considering what pipe materials to specify, an engineer will take into account a number of factors, including soil conditions, terrain, and the depth of the trench, to determine whether a given kind of pipe can provide the performance required for a particular situation (Waggoner Dkt. 9159, 3585, 3623-26; Goodrich F 110). An engineer may also have a preference for a certain type of pipe based on previous experience (Yu Dkt. 9159, 2132-33; Waggoner DKt. 9159, 3624, 3629, 3631; DiLiddo Dkt. 9159, 3352- 53; Goodrich F 110; See also Dkt. 9159 CX 756Z23). 384. [##] (Yu Dkt. 9159, 2116-17; Waggoner Dkt. 9159, 3626-27, 3645-46; Becker Dkt. 9159, 1275; Goodrich F 111; See Wilhite CX.179A-C ] J 2-3 In Camera; Porter CX 198B-C J 3 In Camera). [##] (Goodrich F 111; Wilhite CX 179 A-C q 2-3 In Camera; See Porter CX 198B-C ] 3 In Camera; Waggoner 3617-18; Yu 2131-32; Becker 1276-78; DiLiddo 3348-53) . 385. PVC pipe has smooth interior walls that remain clean over the life of the pipe (Yu Dkt. 9159, 2118-21; Becker Dkt. 9159, 1276-77; Dkt. 9159 RX 3Z37; Goodrich F 112). In comparison, concrete pipe and ductile iron pipe may accumulate deposits over time on the interior walls, a phenomenon known as tuberculation (Yu Dkt. 9159, 2118-21; Becker Dkt. 9159, 1276-77; Dkt. 9159 RX 3Z37; Goodrich F 112). Over time, the effective pipe diameter may be reduced in such cases, thereby decreasing the useful life of the system (Yu Dkt. 9159, 2118-21; Becker Dkt. 9159, 1276-77). The problem of tuberculation of traditional pipe products can be overcome, but at added cost and weight to the pipe (See Dkt. 9159 Waggoner 3577: must add a cement liner to ductile iron pipe; Goodrich F 112). Thus, in areas where the water supply has a high mineral content, PVC pipe may well tend to be the material specified (See Dkt. 9159 Becker 1276-77).

386. PVC pipe does not corrode in acid, alkaline, or wet soils (Becker Dkt. 9159, 1274, 1276; Yu Dkt. 9159, 2121-22; Dkt. 9159 DiLiddo 3348-50; Dkt. 9159 RX 3Z37; Goodrich F 113). Ductile iron pipe and steel pipe are subject to corrosion, thus reducing the life of the pipe (Yu Dkt. 9159, 2121-22). Accordingly, PVC may be the preferred material in areas where the soil conditions may cause other OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1111 1010 Initial Decision types of pipe to corrode (See Yu Dkt. 9159, 2121-22; Goodrich F 113).

387. Ductile iron pipe is stronger than PVC pipe (See Waggoner Dkt. 9159, 3575, 3628-29; Goodrich F 115). Ductile iron pipe may therefore tend to be specified in areas with shifting or rocky soils, and where the specifying engineer may be concerned that PVC pipe would break (See Dkt. 9159 Waggoner 3631; Goodrich F 115). Ductile iron pipe may also be selected over PVC pipe for a water line running under a major road or railroad crossing. In these circumstances, the pipe may be subject to great stress, so that the high strength characteristics of ductile iron pipe may be preferred (Waggoner Dkt. 9159, 3625; Goodrich F 115). It is not unusual to find instances of a water line of PVC pipe which is interrupted by a length of ductile iron pipe where such circumstances are presented (Waggoner Dkt. 9159, 3625; Goodrich F 115). 388. All of the traditional materials have an advantage over PVC pipe in that they have a longer history of use. Use of PVC pipe in municipal water applications is relatively recent (Yu Dkt. 9159, 2131-32; Waggoner Dkt. 9159, 3626-27). The American Water Works Association only issued a standard covering PVC municipal water pipe as recently as 1975 (Waggoner Dkt. 9159, 3615; Dkt. 9159 CX 756223; Goodrich F 116). The issuance of this standard was critical for the market acceptance of PVC pipe, because many communities install only code-approved products (Dkt. 9159 RX 3Z37). Since that time, demand for PVC pipe has grown consistently at the expense of other materials in the diameters in which PVC pipe is used (See e.g., Becker Dkt. 9159, 1276-78; Dkt. 9159 CX 244F; Dkt. 9159 CX 49K). [##] (Underwood CX 203B { 3 In Camera; Yu Dkt. 9159, 2122; Goodrich F 116 & n.24 at 32. See Waggoner DKt. 9159, 3628-30, 3634-35). Specifying engineers who have not as yet had experience with PVC pipe, or who are reluctant to forego established materials, may be reluctant to permit the use of PVC pipe in a project (Yu Dkt. 9159, 2131-33; Becker Dkt. 9159, 1280; DiLiddo Dkt. 9159, 3352-53, See Waggoner Dkt. 9159, 3524, 3629, 3634-43).

389. Where the specifications in a project permit the use of more than one kind of pipe, the favorable properties of PVC pipe are significant factors affecting its selection. For example, a contractor Initial Decision 115 F.T.C.

may prefer working with PVC pipe based on such factors as ease of installation (See Waggoner Dkt. 9159, 3627-28). 390. PVC pipe frequently is easier and less expensive to install than other materials used for municipal water pipe (Yu Dkt. 9159, 2122-27; Dkt. 9159 RX 3Z36-37; CPF 391; See Goodrich F 111). [##] (See Wilhite CX 179B-C { 3 In Camera; Alberti CX 199F-G ] 9 In Camera; Stuart CX 201B J 3 In Camera; DiLiddo Dkt. 9159, 3348; Yu Dkt. 9159, 2112-14; Goodrich F 102 & n.22 at 28). The cost of installation tends to be a substantial portion of the total cost of a job or project (Yu 2112-14; See also Dkt. 9159 RX 3Z36). PVC pipe is approximately 25 percent the weight of ductile iron pipe (Yu Dkt. 9159, 2122-23; See also DiLiddo Dkt. 9159 3347; Waggoner Dkt. 9159, 3656). [##] (Stuart CX 201B-C ] 4 Jn Camera; Yu Dkt. 9159 2123-24; See Goodrich F 114; See also Dkt. 9159 RX 3Z36- Z37; DiLiddo Dkt. 9159, 3347). [##] (Stuart CX 201B-C J 4 Jn Camera; Yu Dkt. 9159, 2123-24; See also Dkt. 9159 RX 3Z36-37, 54-55). PVC pipe is made in longer lengths, thereby requiring fewer joints (Yu Dkt. 9159, 2124-27; Waggoner Dkt. 9159, 3632; See Goodrich F 114). The bell joint or solvent joining systems for PVC pipe also tend to be easier and faster than joining methods used for other materials (Yu Dkt. 9159, 2126-27; Goodrich F 114). PVC pipe can also be cut more easily in the field than can traditional pipe materials (Yu Dkt. 9159, 2127; Goodrich F 114). The extent of any installation cost advantage for PVC pipe will vary from project to project, depending upon the depth of the line, soil conditions, and other factors (Yu Dkt. 9159, 2112-14; Goodrich F 114). For example, in some soil conditions it may be necessary to install a special backfill for PVC pipe (See Waggoner Dkt. 9159, 3578-79; Goodrich F 114). The added cost of this requirement may offset the installation cost advantage that would otherwise exist for PVC pipe (Waggoner Dkt. 9159, 3651-53; Goodrich F 114). 391. Ductile iron pipe is not a close substitute for PVC pipe in municipal water applications. In many situations, PVC pipe or ductile iron pipe will be selected on the basis of their respective distinct performance properties rather than the relative prices of the two products. Moreover, PVC pipe is generally less expensive than ductile iron pipe (See Waggoner Dkt. 9159, 3631, 3635, 3652-53, 3673; Dkt. 9159 CX 756Z23; Goodrich F 118). The price advantage OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1113 1010 Initial Decision of PVC pipe over ductile iron pipe is substantial in small (4-8 inch) diameters (Waggoner Dkt. 9159, 3635-36; Goodrich F 117-18). [##] (Heath CX 178B-C J 3 In Camera; Alberti CX 199F-G { 9 In Camera; Waggoner Dkt. 9159, 3635-36), [##] (Alberti CX 199F J 9 In Camera; CPF 624.; See, e.g., Dkt. 9159 CX 566D; Dkt. 9159 CX 522B In Camera -- [##]).

392. Pre-stressed concrete pipe is also not a close substitute for PVC pipe in municipal water applications. PVC pipe is substantially less expensive than pre-stressed concrete pipe in the smaller diameters in which PVC pipe is used (See Waggoner Dkt. 9159, 3645; Goodrich F 118). Pre-stressed concrete pipe tends to be even more expensive than ductile iron pipe in small diameters (See Dkt. 9159 Waggoner 3645). Concrete pipe is more commonly used in larger diameters (Dkt. 9159, RX 3Z36, Z48, Z50). 393. Asbestos cement pipe is not a significant competitive factor in potable water pipe applications (Waggoner Dkt. 9159, 3626-27). [##] (Underwood CX 203B { 3 In Camera See Waggoner Dkt. 9159, 3626-27; Goodrich F 118; See also Dkt. 9159 CX 756Z34). [##] (RX 72C In Camera). Its use is now largely confined to the Texas and Arizona area (See Waggoner Dkt. 9159, 3626-27). The use of asbestos cement pipe may eventually be banned in potable water applications (See Dkt. 9159 CX 566C, G).

394. Thus, as discussed above, the demand for PVC municipal water pipe is inelastic primarily for two reasons. First, in many situations the choice of pipe material is based on factors other than price. These factors include the needs of a municipality for the distinctive properties of one kind of pipe or another to meet the use conditions presented in a particular area. Another significant factor guiding the selection of pipe materials is the unwillingness of some engineers to specify a relatively new and unproven material such as PVC municipal water pipe. Where the pipe product is selected on the basis of factors other than price, the small change in the price of PVC pipe resulting from a PVC resin price increase will not affect the purchase decision (See Kaserman Dkt. 9159, 2373-75; Goodrich, slip op. at 74-75). Second, in cases where price is an important consideration for pipe selection, the total installed cost of a PVC pipe system is often substantially less than that of a system using ductile iron or some other material (Goodrich F 117). For example, PVC Initial Decision 115 F.T.C.

pipe tends to be much less expensive than ductile iron pipe in small (4-8 inch) diameters (Goodrich F 118). In the majority of cases where the installation cost of PVC is lower than that of other materials (See, e.g., Waggoner Dkt. 9159, 3651-53), the cost advantage of PVC pipe will widen even further. Thus, in many cases, even after a small but significant PVC resin price increase, PVC municipal pipe will still be substantially more cost-effective than other materials pipe, particularly on an installed cost basis (See Goodrich F 117-18). Given these factors, it is not surprising that industry members observed limited substitution between PVC pipe and other municipal pipe as a result of PVC resin price changes. Regarding the sensitivity of the level of demand for PVC pipe in municipal water applications to changes in the price of PVC resin, Mr. Rodney Becker testified: I don't think in the time that I was in the plastics business that we ever saw significant shifts on the basis of changes in price. Typically, PVC resins have varied from 15 cents to 35 cents a pound. In that kind of range I don't think it made very much difference what the price was. When demand is down, it is down and the price is not going to convince a municipality, which doesn't have any money to carry forward the process, to go ahead with it. (Becker Dkt. 9159, 1281-82; See generally Yu Dkt. 9159, 2178-79). (b) Rural water pipe 395. Rural potable water pipe includes pipe used in water wells and Farmers' Home Administration ("FmHA") projects (Dkt. 9159, RX 3Z401; Goodrich F 121; See also Dkt. 9159 CX 756Z21-22), PVC pipe is the predominant material used in FmHA projects (Dkt. 9159 CX 756Z22622; Dkt. 9159 RX 3Z41; Goodrich F 121. See Dkt. 9159 CX 378A-F).” [##] (Dkt. 9159 RX 165E In Camera; Goodrich F 121).

396. PVC has a dominant position in the rural water pipe segment because its distinctive properties are particularly suited to the requirements of this application (Goodrich F 122; Dkt. 9159 CX 25 PVC pipe is also used as the drop pipe in many wells. However, precise market share data on the well segment is almost nonexistent (CX 756Z21-22). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1115 1010 Initial Decision 756Z22; Dkt. 9159 RX 3Z41). Rural water systems can generally employ pipe with a somewhat lower break-resistance safety factor than that required for municipal uses. A lower safety factor is possible in rural areas where the pipe is relatively easier to replace, because replacement would not require digging up a paved street or building (Goodrich F 122; See Yu Dkt. 9159, 2099-100, 2133-34). PVC pressure pipe used in rural applications has a large cost advantage over traditional pipe materials (Waggoner Dkt. 9159, 3619-22; See also Dkt. 9159 CX 756Z22). The light weight, long lengths and ease of joining factors mean that PVC pipe can be installed quickly and easily by hand labor. This ease of installation adds to the cost advantage of using PVC (See Yu Dkt. 9159, 2134, 2112-17). As a result, the vast majority (up to 85%) of PVC water pressure pipe sold on a footage basis is sold for rural water applications (See Dkt. 9159 Waggoner 3620-21; Dkt. 9159 CX 756Z20; Goodrich F 122). [##] (Goodrich F 122; Dkt. 9159 RX 3Z41; See Stuart CX 201B-C ] 4 Jn Camera). 397. Thus, the demand for PVC in rural water pipe applications is inelastic as a result of the distinctive properties of PVC pipe, and because of its large cost advantage on the basis of the cost of the pipe alone, and on an installed cost basis. Thus, even after a small but significant PVC resin price increase, PVC pipe would still be preferred in rural applications, and would remain substantially more cost-effective than other materials used for this purpose. (c) Water service and distribution pipe 398. Water service pipe is used for conveying potable water from water mains to individual homes or buildings (Dkt. 9159 RX 3Z37; Goodrich F 123). Distribution pipe carries water from the water meter to taps and other outlets (Dkt. 9159 CX 3Z37). As with other potable water pipe applications, service and distribution pipes are pressure applications (Dkt. 9159 CX 756Z20; Goodrich F 123). Pressure pipe used in these applications are significantly smaller in diameter than pipes used in water mains: Pipes 1 5 1 8 9 1600 2600 190 36 96.336746 diameters5 1 5 1 8 10 1818 2612 58 24 96.336746 area 1 5 1 9 0 539 2656 1335 47 -1 5 1 5 1 9 1 539 2656 177 45 96.386330 normally5 1 5 1 9 2 733 2656 167 35 96.630112 one-half5 1 5 1 9 3 912 2663 35 28 96.630112 to5 1 5 1 9 4 963 2667 69 24 96.625298 ones 1 5 1 9 5 1047 2656 83 36 96.632622 inch5 1 5 1 9 6 1146 2657 56 35 96.972626 for5 1 5 1 9 7 1217 2657 116 46 96.219223 singles 1 5 1 9 8 1348 2658 126 45 96.550667 family5 1 5 1 9 9 1489 2659 205 35 96.550667 residential5 1 5 1 9 10 1709 2670 65 24 96.167725 uses 1 5 1 9 11 1789 2659 85 35 96.167725 with4 1 5 1 10 0 539 2714 1335 47 -1 5 1 5 1 10 1 539 2714 113 45 96.760925 larger5 1 5 1 10 2 665 2714 92 35 96.891235 sizes5 1 5 1 10 3 771 2715 88 34 96.912285 used5 1 5 1 10 4 872 2715 36 34 96.419121 in5 1 5 1 10 5 921 2715 256 46 96.410233 multi-family,5 1 5 1 10 6 1192 2716 228 36 96.578812 commercials 1 5 1 10 7 1434 2728 40 24 96.982590 or5 1 5 1 10 8 1486 2717 100 35 96.995399 others 1 5 1 10 9 1598 2718 276 35 96.462044 nonresidential Initial Decision 115 F.T.C.

applications" (Dkt. 9159 RX 3Z38; Goodrich F 123). [##] (Goodrich F 123; Dkt. 9159 RX 165E In Camera).

399. The most popular traditional material for water service and distribution pipe applications has been copper (Becker 1272-74; Dkt. 9159 RX 3Z38; Dkt. 9159 CX 756Z26; Goodrich F 124). Steel has also been used, but this material corrodes, suffers from deposit build-up, is difficult to join, and is heavy (Dkt. 9159 RX 3Z38; Goodrich F 124). It has, therefore, generally been displaced by other materials (Dkt. 9159 RX 3Z38; Goodrich F 124). Previously restricted by lack of code approval, PVC pipe is now enjoying major growth in the service pipe market (Dkt. 9159 RX 3Z37-40,; Dkt. 9159 CX 756Z26-Z27; Goodrich F 125). Among plastics, PVC5 1 3 2 10 9 1882 1271 31 36 96.502449 is5 1 3 2 10 10 1933 1271 59 36 96.964691 thea 1 3 2 11 0 653 1330 1338 47 -1 5 1 3 2 11 1 653 1334 162 35 96.667862 materials 1 3 2 11 2 835 1333 42 35 96.679665 of5 1 3 2 11 3 891 1333 127 35 96.562225 choices 1 3 2 11 4 1036 1333 155 35 96.866043 because5 1 3 2 11 5 1210 1331 42 36 96.737823 of5 1 3 2 11 6 1267 1331 43 36 96.392586 its5 1 3 2 11 7 1330 1331 156 46 96.414726 strengths 1 3 2 11 8 1504 1331 69 35 96.513496 ands 1 3 2 11 9 1591 1331 72 35 96.427666 lows 1 3 2 11 10 1681 1331 96 34 95.084351 cost in service pipe applications (Dkt. 9159 RX 3Z38; Goodrich F 125). PVC pipe is also used for distribution pipe, although it is not used for hot water applications because of heat distortion problems (Becker Dkt. 9159, 1272-73; Dkt. 9159 CX 756Z26; Goodrich F 125). (However, CPVC (chlorinated PVC) can be used in hot water applications (Dkt. 9159 RX 3Z39)). [##] (See Stuart CX 201B J 3 Jn Camera). A 1983 Goodrich document estimated the manufacturing cost per foot for two inch diameter pipe in the years 1976-82 as follows: [##] (Dkt. 9159 CX 247L In Camera; Goodrich F 126). Copper tubing is only slightly less expensive than steel tubing (See Dkt. 9159 CX 756Z29, Z31; Goodrich F 126). [##] (See Dkt. 9159 RX 247L In Camera). [##] (Dkt. 9159 CX 247L In Camera; Dkt. 9159 RX 3Z38), [##] (See Stuart CX 201B J 3 In Camera).

(d) Sewer and drain pipe 400. The sewer and drain pipe segment includes sanitary sewers, storm sewers and drainage applications (Dkt. 9159 RX 3Z44 Dkt. 9159 CX 756Z24; Goodrich F 127). While there are some pressure sewer applications, about 90 percent of this application involves gravity sewer systems, which is a non-pressure use (Dkt. 9159 CX 756Z24-Z25; Goodrich F 127; See Dkt. 9159 CX 380A-L; Dkt. 9159 CX 383A-L). [##] (Dkt. 9159 RX 165E Jn Camera; Goodrich F 127). 401. The principal materials other than PVC used in sewer and drain pipe are concrete, clay, corrugated iron (Yu Dkt. 9159, 2141 OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1117 1010 Initial Decision Waggoner Dkt. 9159, 3645-46; Goodrich F 128). [##] (Waggoner Dkt. 9159, 3645; Goodrich F 128; See Stuart CX 201B-C ] 4 In Camera; Underwood CX 203B { 3 Jn Camera). Very small amounts of ductile iron pipe are used in sewer applications, and generally only in pressure situations (Dkt. 9159 CX 756Z25; Goodrich F 128). 402. The distinct properties of PVC pipe are again a significant factor in its selection for use in sewer and drain applications. PVC pipe is not subject to attack and corrosion from hydrogen sulfide gas, as are concrete and asbestos cement pipe (Dkt. 9159 RX 3Z48-49; Goodrich F129). Concrete is therefore likely to be used only where hydrogen sulfide gas is not a problem, such as in storm sewer and drainage applications (Dkt. 9159 RX 3Z48; See Goodrich F 129).”° As with water pipe, the corrosion resistance of PVC pipe makes it particularly well suited for certain types of soils, as compared with corrugated metal pipe (Yu Dkt. 9159, 2142). [##] (Dkt. 9159 CX 756Z24-25; See Goodrich F 129; Yu 2142-44; Dkt. 9159 RX 3Z49; Dkt. 9159 CX 300Z7 In Camera). Many engineers remain reluctant to specify PVC pipe, as opposed to pipe with which they are familiar and for which performance characteristics are proven (See Dkt. 9159 Yu 2146-48; CX 756Z24-25; Goodrich F 130). [##] (Dkt. 9159 CX 300Z7 In Camera).

403. [##] (Yu Dkt. 9159, 2142-44; Dkt. 9159 CX 300Z7 Jn Camera; Goodrich F 129).

404. Ductile iron pipe is not a close substitute for PVC pipe in sewer and drain applications. About 90 percent of such applications are non-pressure (Dkt. 9159 CX 756Z25; See Goodrich F 131). In non-pressure applications, PVC pipe can be made with thinner walls than that required in pressure applications (Yu Dkt. 9159, 2137-39; Waggoner Dkt. 9159, 3643-44; Goodrich F 131). The cost of PVC sewer pipe is therefore even less than that of PVC municipal water pipe, as illustrated by the prices for these two PVC pipe products furnished given by Mr. Yu of J-M Manufacturing Co., Inc., one of the largest PVC pipe producers in the United States: 6 The hydrogen sulfide problem is less acute in pressure sewers since there is little airspace. It is most acute in flat areas, where the sewage is slow moving with large airspaces (See RX 3Z48).

Initial Decision 115 F.T.C.

Diameter PVC Water Pipe PVC Sewer (inches) Class 150 Pipe 8" $3.90 $1.82 (Yu Dkt. 9159, 2105-06, 2140-41; Goodrich F 131), Ductile iron pipe producers sell the same pipe product for both pressure and nonpressure applications (Waggoner Dkt. 9159, 3579, 3644: Goodrich F 131). As PVC pressure pipe is already considerably less expensive than ductile iron pipe in most diameters, the substantial cost disadvantage of ductile iron pipe relative to PVC pipe in municipal water applications becomes an even greater disadvantage in gravity sewer applications (Waggoner Dkt. 9159, 3583; Goodrich F 132). Mr. Waggoner of Griffin Pipe Products Co., a ductile iron pipe producer, agreed that PVC pipe has a significant cost advantage over ductile iron pipe in gravity sewer applications (Waggoner Dkt. 9159, 3643-44). Mr. Waggoner explained:

A gravity sewer application is when you are moving sewage from housing development or from municipality to the treatment plant. A gravity sewer line is where the contractor lays it at an incline or a decline so that the sewage is moving along at its own rate or the lay of the land controls it versus a pressure sewer where there is some pressure exerted to move that sewage along. So for that application we would sell the same piece of ductile iron pipe for that application as we would for a water main application but obviously you don't need the pressure rating or the strengths. PVC has managed to segment that market, they have products that are thinner wall and less pressure rated to handle that type of application. So when we get into the sewer applications, we have a more significant cost disadvantage than we would for a pressure application.

(Waggoner Dkt. 9159, 3644). Thus, ductile iron pipe has but a small fraction of the market in sewer and drain applications (See Dkt. 9159, CX 756Z25).

405. [##] (Dkt. 9159 CX 3248 In Camera; Waggoner Dkt. 9159, 3646; Goodrich F 130), [##] (Wilhite CX 1198-C ] 3 In Camera; Yu Dkt. 9159, 2142-44; Waggoner Dkt. 9159, 3646; Dkt. 9159 CX 300Z7 In Camera; Goodrich F 130). [##] (See Dkt. 159 CX 579M, 5 In Camera; Goodrich F 130). [##] (Dkt. 9159 CX 525] In Camera; Goodrich F 130). [##] (Dkt. 9159 CX 579R In Camera; Goodrich F 130). The dramatic rate of replacement of clay pipe by PVC pipe in OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1119 1010 Initial Decision sewer applications has occurred because PVC offers substantial advantages in cost and performance over clay pipe (See Dkt. 9159 Waggoner 3646; Goodrich F 130).

406. Concrete pipe is also not a close substitute for PVC pipe in sewer and drain pipe applications. The susceptibility of concrete to hydrogen sulfide attack, and the difficulties in sealing joints, has resulted in a distinct disadvantage for concrete pipe for most sanitary sewer uses (See Dkt. 9159 RX 3Z48; Goodrich F 132). As in the case of municipal water pipe, concrete is not cost competitive in small diameters, particularly on an installed cost basis (Dkt. 9159 RX 3248, Z50; Goodrich F 132). Thus, concrete pipe tends to be used for very large diameter needs, and thus does not compete directly with PVC pipe in most sewer and drain applications (Goodrich F 132; Dkt. 9159 RX 3Z48).

407. Thus, the demand for PVC sewer and drain pipe is inelastic (Becker Dkt. 9159, 1286-87). In many situations, the choice of sewer pipe material is based on factors other than price, such as a preference or demand for the distinctive properties of PVC pipe. In addition, the total installed cost of a PVC sewer pipe system is often substantially less than that of a system using other materials. Thus, even after a small but significant PVC resin price increase, PVC sewer pipe would still be substantially more cost-effective than other materials, particularly on an installed cost basis. Mr. Rodney Becker, former Sales and Marketing Manager for Diamond Shamrock, testified as follows regarding the sensitivity of the level of demand for PVC sewer pipe to changes in the price of PVC resin: Once again, I would go back to the fact that in the price range that PVC typically has been sold, and I use the broad range of 15 to 35 cents per pound, I don't think it would make very much difference.

For example, .. . the municipality already has a sewer system they have to replace. You can imagine the tearing up of the streets or anything else that is involved. They don't want to replace that system again. So, if they could be convinced that PVC is going to last longer than whatever was in there before, I think they would even be willing to pay more money for the pipe. (Becker Dkt. 9159, 1286-87).

Initial Decision 115 F.T.C.

(e) Drain, waste and vent (DWV) pipe 408. The drain, waste and vent (DWV) pipe segment includes pipe that drains water and waste from buildings into sewer systems (Dkt. 9159 CX 756Z25-Z26; Dkt. 9159 RX 3Z52; Waggoner Dkt. 9159, 3637; Goodrich F 133). These indoor drainage systems include vent pipes to the outside to permit air to vent the system (Dkt. 9159 RX 3Z52; See Goodrich F 133). The contents of a DWV system are moved by gravity; it is therefore a non-pressure application (DKt. 9159 CX 756Z20; Waggoner Dkt. 9159, 3639; Goodrich F 133). Typical diameters are in the 1-2 inch to 8 inch range (See, e.g., Dkt. 9159 CX 379; Goodrich F 133). [##] (Dkt. 9159 RX 165E In Camera; Goodrich F 133).

409. [##] (Wilhite CX 179A-B J 2 In Camera; Becker Dkt. 9159, 1292; Dkt. 9159 RX 3Z54-55; Waggoner Dkt. 9159, 3637-38; Goodrich F 134). Use of copper has essentially disappeared in DWV applications (Dkt. 9159 RX 3Z54-55; See Goodrich F 134). 410. PVC pipe has replaced traditional pipe material in this segment because it offers substantial savings in both the cost of pipe and the cost of installation (Dkt. 9159 RX 3Z54-55; Dkt. 9159 CX 756Z25-Z26; Goodrich F 135). However, cast iron soil pipe provides lower noise conductivity, an attribute that is particularly important in multi-family dwellings; moreover, there remain substantial concerns about the toxicity of smoke emitted by PVC pipe when it burns (Waggoner Dkt. 9159, 3638; Dkt. 9159 RX 3Z54; Goodrich F 135). As a result, the use of PVC DWV pipe is often banned in high-rise structures (See Waggoner Dkt. 9159, 3637-39; Dkt. 9159 RX 3Z54; Dkt. 9159 CX 756Z35; Goodrich F 135). Nevertheless, PVC pipe has essentially captured this application in single family dwellings (See Dkt. 9159 Waggoner 3637; Goodrich F 135). The significant cost savings offered by PVC pipe suggests that it may continue to displace traditional material pipe to the extent permitted by building codes (Dkt. 9159 RX 3Z55; Dkt. 9159 CX 756Z26; Goodrich F 135). 411. Until about 1973, more ABS pipe was used in DWV applications than PVC pipe (Dkt. 9159 CX 583 Z80; Goodrich F 136). [##] (Wilhite CX 179A-B J 2 In Camera; Dkt. 9159 CX 583Z80; Dkt. 9159 RX 3Z55; Goodrich F 136). The development of improved PVC compounds yielded a PVC pipe with properties OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1121 1010 Initial Decision comparable to ABS (Dkt. 9159 CX 583Z80; See Goodrich F 136). [##] (Wilhite CX 179A-B J 2 In Camera; Stuart CX 201C J 5 In Camera; Weber Dkt. 9159, 1806-09; Dkt. 9159 CX 583Z80; Dkt. 9159 CX 756Z26; Goodrich F 136). In5 1 3 1 4 8 1389 790 115 46 96.708786 singles 1 3 1 4 9 1522 790 126 46 96.180359 family5 1 3 1 4 10 1668 790 205 35 96.775459 residential4 1 3 1 5 0 537 847 1334 47 -1 5 1 3 1 5 1 537 847 240 35 96.198013 construction5 1 3 1 5 2 790 847 94 36 96.641495 PVC5 1 3 1 5 3 896 848 63 35 96.641495 has5 1 3 1 5 4 973 848 151 35 96.432167 becomes 1 3 1 5 5 1137 848 58 34 96.432167 thes 1 3 1 5 6 1207 848 184 36 96.099342 dominant5 1 3 1 5 7 1403 848 158 36 96.099342 materials 1 3 1 5 8 1575 848 56 36 96.805183 for5 1 3 1 5 9 1642 849 115 35 95.534927 DWV5 1 3 1 5 10 1770 848 101 46 89.741127 pipe (Dkt. 9159 CX 756Z25; See also Weber Dkt. 9159, 1806-09). ABS pipe producers have developed a foam core product to cut costs, but it does not significantly alter the wide economic advantage of PVC pipe (Dkt. 9159 CX 756Z26; Goodrich F 136). 412. [##] (Stuart CX 201C J 5 In Camera). Goodrich estimates the manufacturing costs for the three type of pipe for the period 1976-82 for a three inch diameter pipe as follows: [##] (Dkt. 9159 CX 247L In Camera; Goodrich F 137). Because of easier installation, the cost gap between PVC DWV pipe and cast iron soil pipe is even wider on an installed cost basis. 413. [##] (Wilhite CX 179A-B 2 In Camera; Becker Dkt. 9159, 1294-95).

(f) Irrigation pipe 414. Irrigation pipe is a pressure application (Yu Dkt. 9159, 2099-100; Dkt. 9159 CX 156Z20; Goodrich F 138; See, e.g., Dkt. 9159 CX 378A-F; Dkt. 9159 CX 381A-D). However, pressure ratings for irrigation pipe are lower than those used for municipal water pipe applications, so that a thinner wall PVC pipe may be used for irrigation purposes (Yu Dkt. 9159, 2049-100, 2150-52; Goodrich F 138). Irrigation systems can be divided into three major categories: below-ground systems, above-ground systems, and on-the-ground systems (See Yu Dkt. 9159, 2148-50; Goodrich F 138). Belowground systems can be further divided into sprinkler systems and drip pipe systems (Dkt. 9159 CX 756Z23-Z24; Dkt. 9159 RX 3Z67- 68; Goodrich F 138). [##] (Dkt. 9159 RX 165E In Camera; Goodrich F 138).

415. The lower pressure ratings and smaller diameters used mean that traditional materials such as ductile iron and asbestos cement are not significant competitive materials in irrigation applications (See Dkt. 9159 CX 756Z23-Z24; Dkt. 9159 RX 3Z68; Yu Dkt. 9159, 2153; See Goodrich F 139). Mr. Waggoner of Griffin Pipe explained Initial Decision 115 F.T.C.

that the reason why ductile iron pipe is rarely used in a majority of irrigation applications was because the high strength characteristics of ductile iron would not be needed; and that the pressure ratings and the depth of an irrigation system would cause ductile iron pipe not to be a significant factor in that market (Waggoner Dkt. 9159, 3642; See Goodrich F 141 & n.28 at 41). Mr. Waggoner agreed that, because the strength characteristics of ductile iron would not be needed, the cost disadvantage of ductile iron pipe in irrigation applications would be overwhelming: Yes,5 1 3 1 9 4 1201 1105 55 25 96.458023 we5 1 3 1 9 5 1283 1094 169 36 96.374397 wouldn't5 1 3 1 9 6 1479 1105 91 24 96.793022 even5 1 3 1 9 7 1597 1094 45 35 96.530151 be5 1 3 1 9 8 1669 1094 37 35 96.725807 in5 1 3 1 9 9 1734 1094 58 36 96.398773 thes 1 3 1 9 10 1819 1094 181 46 96.403450 ballpark (Waggoner Dkt. 9159, 3642; See Goodrich F 141 & n.28 at 41). 416. For the large majority of irrigation systems, the only types of pipe used are PVC and aluminum (Yu Dkt. 9159, 2153; Dkt. 9159 CX 756Z24; See Goodrich F 139). A small amount of polyethylene is used in drip irrigation systems (Dkt. 9159 CX 756Z24; See Goodrich F 141 & n.28 at 41).

417. PVC pipe is becoming the material of choice in belowground sprinkler systems (Dkt. 9159 CX 756Z24; Goodrich F 139). Almost all PVC pipe used in irrigation is for underground applications (Dkt. 9159 CX 756Z24; Goodrich F 139), where PVC pipe has a significant performance advantage over aluminum pipe in that it has better impact resistance. In diameters over 6 inches, aluminum does not have the requisite impact resistance for below-ground use and may be crushed on installation (Yu Dkt. 9159, 2154; See Goodrich F 139). PVC pipe also enjoys a substantial cost advantage over aluminum (Becker Dkt. 9159, 1290; Dkt. 9159 CX 756Z24; Goodrich F 139). [##] (Dkt. 9159 CX 247L In Camera). 418. PVC pipe is generally not used in above-the-ground sprinkler systems (Yu Dkt. 9159, 2152-54; Goodrich F 140). In these systems, the pipe is suspended above the ground and is moved across the field on large wheels (Yu Dkt. 9159, 2153-54). PVC pipe does not have the necessary stiffness to be used in this application (Yu Dkt. 9159, 2153-54; Goodrich F 140). [##] (Dkt. 9159 Cx 756224; Dkt. 9159 CX 300Z7 In Camera; See Goodrich F 140). 419. Both aluminum and PVC pipe are used in portable on-the-ground systems (Yu Dkt. 9159, 2154), although aluminum has held a commanding position in above and on-the-ground applications (Dkt. 9159 CX 756Z24; Goodrich F 141). The large cost advantage of PVC over aluminum found in on-the-ground systems is not as OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1123 1010 Initial Decision great as that in below-ground systems, because of the need to add stabilizers to the PVC compound to protect the PVC pipe from degradation on exposure to heat and light (Dkt. 9159 CX 756Z24 Becker Dkt. 9159, 1289-90; Goodrich F 141). Nevertheless, PVC pipe has a significant cost advantage over aluminum in on-the-ground systems (Dkt. 9159 CX 756Z24; Becker Dkt. 9159, 1290). This cost advantage should widen over time due to projected increases in the price of aluminum versus PVC (Dkt. 9159 CX 756Z24; See CPF 467; Goodrich F 140). [##] (Dkt. 9159 CX 300Z7 In Camera; See Goodrich F 141).

420. Thus, the selection of pipe material for irrigation applications is determined largely by the type of system chosen. Furthermore, the type of irrigation system selected depends primarily upon particular performance needs and requirements of specific systems, rather than the cost of alternative systems (See Yu Dkt. 9159, 2150-51, 2152-53; Goodrich F 139). Thus, the demand for PVC pipe in irrigation applications overall is inelastic (Becker 1291). Since PVC pipe is generally not suitable for use in the above-theground and drip systems, a PVC resin price increase will not affect PVC pipe demand in those applications. In below-ground systems, the cost advantage of PVC pipe over aluminum is so significant that it would remain significant even after a substantial PVC resin price increase. In addition, PVC pipe has superior impact-resistance characteristics in the larger diameter underground irrigation pipe applications. Finally, the widening gap between PVC pipe and aluminum pipe prices should leave room for increased PVC resin prices without a loss of market share in any of the types of present irrigation systems.

(g) Communications duct 421. Communications duct (or conduit) is used to protect telephone cable and wire running to and from telephone company facilities (Becker Dkt. 9159, 1296; Dkt. 9159 RX 756Z27; Goodrich F 142). [##] (Goodrich F 142; Dkt. 9159 CX 756Z20; See Alberti CX 199A J 1 Jn Camera ). Nearly all communications conduit is buried, and most is made of non-corrosive materials (Dkt. 9159 CX 756228; Dkt. 9159 RX 3Z59; See Goodrich F 142). [##] (Dkt. 9159 CX Initial Decision 115 F.T.C.

756Z26-26; Dkt. 9159 CX 300Z7-Z8 In Camera; Dkt. 9159 CX 3Z59-60). [##] (Dkt. 9159 RX 165E In Camera; Goodrich F 142). 422. In5 1 3 2 1 3 936 734 324 35 96.465752 communications5 1 3 2 1 4 1277 734 157 41 96.135078 conduit,5 1 3 2 1 5 1451 734 94 35 96.097610 PVC5 1 3 2 1 6 1561 734 64 35 96.250854 has5 1 3 2 1 7 1641 734 131 45 96.545486 gained5 1 3 2 1 8 1789 745 19 24 95.977829 a5 1 3 2 1 9 1824 734 186 35 95.977829 dominant4 1 3 2 2 0 670 791 1337 48 -1 5 1 3 2 2 1 670 793 179 46 72.227356 position (Dkt. 9159 CX 756Z28; See Goodrich F 143). [##] (Dkt. 9159 RX 165E In Camera; See also Dkt. 9159 CX 756228; Dkt. 9159 RX 3Z60-Z62). [##] (Dkt. 9159 CX 300Z7-8 In Camera). [##] (Dkt. 9159 CX 300Z7-8 In Camera). [##] (Dkt. 9159 CX 241L In Camera; See also Dkt. 9159 RX 3Z59).

423. PVC communications conduit and concrete and steel conduit each have distinct properties that make each well suited for particular applications (Dkt. 9159 CX 756Z27; Dkt. 9159 RX 3Z59). Moreover, the cost disparity between PVC communications conduit and both concrete and steel] communications conduit is so great that PVC communications conduit is very likely to remain substantially more cost-effective than either concrete or steel conduit, even after a substantial PVC resin price increase. Thus, PVC communications conduit will continue to be selected in those applications where it meets the necessary performance requirements notwithstanding PVC resin price fluctuations or increases (See Goodrich F 143), (h) Electrical conduit 424. Electrical conduit is used for the protection of bundled wires (Dkt. 9159 CX 756Z27; Goodrich F 144). [##] (Dkt. 9159 CX 300Z7 In Camera; Dkt. 9159 CX 756Z27-28; Goodrich F 144). [##] (Dkt. 9159 RX 165E In Camera; Goodrich F 144).

425. [##] (Dkt. 9159 RX 3Z62; Dkt. 9159 CX 300Z7-Z8 In Camera; See Goodrich F 146). These properties of PVC electrical conduit make it particularly well-suited for underground applications (Dkt. 9159 CX 756Z28; Dkt. 9159 RX 3Z61; Goodrich F 146). [##] (Dkt. 9159 CX 247L In Camera; See also Dkt. 9159 CX 756228, Dkt. 9159 CX 300Z7-Z8 In Camera). [##] (Dkt. 9159 CX 300Z7-Z8 In Camera; See Goodrich F 145). In addition, PVC electrical conduit requires the use of a ground wire (Dkt. 9159 CX 756Z28; Goodrich F 146).

426. Steel is the principal material used in most electrical conduit (Dkt. 9159 CX 756Z28; Dkt. 9159 RX 3Z60-Z61; Goodrich F 145). One reason for this is that much electrical conduit is used in OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1125 1010 Initia] Decision above-ground applications (Dkt. 9159 RX 3Z60), [##] (Dkt. 9159 CX 756Z28; Dkt. 9159 RX 3Z60-Z61; Goodrich F 145; See also Dkt. 9159 CX 300Z8 In Camera). In addition, the controversy surrounding the toxicity of smoke from burning PVC pipe has caused PVC conduit to be banned by fire and building codes in many areas (Dkt. 9159 CX 756Z28; Goodrich F 146).

427. Thus, PVC and steel have distinct properties that make each well suited for particular applications. In addition, the cost disparity between PVC and steel in electrical conduit is so great that PVC electrical conduit will remain substantially more cost-effective than steel, even after a substantial PVC resin price increase. Thus, while steel may be used in those areas where PVC is barred by codes, or where the strength of steel is required, PVC conduit will continue to be selected in the applications where it is used notwithstanding fluctuations or increases in the price of PVC resin (See Becker Dkt. 9159, 1295-98).

(i) Summary of pipe 428. Thus, in the applications in which it is used, PVC pipe has distinct performance properties that are an important factor affecting its selection.” In many applications, PVC pipe also has a substantial cost advantage over pipe made from other materials (See Goodrich, slip op. at 14-75). The fact that PVC pipe products and pipe products made out of other materials are not close substitutes as a result of substantial differences in performance properties and costs is shown by the testimony of the witness representing the only PVC pipe manufacturer to appear in the proceeding, Mr. Yu of J-M Manufacturing Co., Inc., one of the largest PVC pipe producers in the United States (Yu Dkt. 9159, 2091-92). [##] (Yu Dkt. 9159, 2156- 58; See Stuart CX 201B ] 3 In Camera). Accordingly, pipe made from materials other than PVC are not close substitutes for PVC pipe. 429. The elasticity of demand for mass and suspension PVC resin is less than the elasticity of demand for PVC pipe because the 77 Because the use of PVC pipe fittings follows from the use of PVC pipe, the demand for PVC pipe fittings is inelastic with respect to changes in the price of PVC resin (Becker 1323-24).

Initial Decision 115 F.T.C.

resin is only a portion of the cost of PVC pipe. The cost share of the resin is about 55% of the cost of PVC pipe sold to distributors (Yu Dkt. 9159, 2104; Goodrich, slip op. at 73 & n.163; Disch Dkt. 9159, 663). [##] (Yu Dkt. 9159, 2106-07; Dkt. 9159 CX 247B-I In Camera [##]). Finally, PVC pipe must be installed before it is used. In many cases, the installation cost is a significant portion of the cost (See Yu Dkt. 9159, 2112-14, 2144-45). Thus, on a total installed cost basis, the cost share of the PVC resin is only a small fraction of the total installed cost of a PVC pipe system. This factor further reduces the elasticity of demand for PVC resin sold into the pipe segment (See Goodrich, slip op. at 73 & n.163).

430. It is likely that the elasticity of demand for mass and suspension PVC resin in pipe applications is less than is reflected in the Goodrich record. At that time, it was generally believed that the price of pipe-grade resin could go as high as only 33 or 34 cents per pound before PVC would lose business to alternative materials in pipe applications (See DiLiddo Dkt. 9159 3264). [##] (CX 217E; See Pflugrath CX 177D-E J 7-8 In Camera; Alberti CX 199F-G ] 9 In Camera). [##] (Porter RX 261B { 4, 6 In Camera). Thus, although the Commission found in Goodrich that the demand for PVC in pipe was relatively inelastic, Goodrich, slip op. at 88, it is likely that it is even more inelastic than the Commission concluded on the basis of that record.

(2) Wire and cable applications 431. [##] (Disch 663 Goodrich F 147; See also Dkt. 9159 CX 428Z100; Dkt. 9159 CX 126C; Dkt. 9159 RX 145L In Camera). [##} (Bendavid CX 194A-B { 2 Jn Camera; Disch Dkt. 9159, 674; Becker Dkt. 9159, 1269-70, 1303; Goodrich F 147). [##] (Dkt. 9159 CX 591] In Camera Goodrich F 141; See Dkt. 9159 Commission Physical Exhibits 9 & 12).

432. Mass and suspension PVC homopolymer coatings for wire and cable have long been the established industry standard. Such coatings have been used since World War II, when a shortage of natural rubber occurred (Dkt. 9159 CX 45Y; Goodrich F 148). Rubber, which had been the traditional material used until the war is flammable and gives off a good deal of smoke when it burns OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1127 1010 Initial Decision (DiLiddo Dkt. 9159, 3108). Rubber also oxidizes and becomes brittle over time, so that it cracks off the wire, necessitating the replacement of entire wiring systems (Becker Dkt. 9159, 1304-05). In contrast, PVC was found to be flame resistant, an important factor in this application (Disch Dkt. 9159, 676; Goodrich F 148), and to have good weathering capabilities, excellent insulation properties, and flexibility, thus providing an assurance of longevity and good performance once installed (Disch Dkt. 9159, 674-76; Becker Dkt. 9159, 1270; DiLiddo Dkt. 9159, 3108; Goodrich F 148). As a result, the entire output of PVC during World War II was used by the U.S. government primarily for the coating of wire in naval ships (DiLiddo Dkt. 9159, 3107; Goodrich F 148).

433. [##] (Clark CX 193B { 2 In Camera; Bendavid CX 194B q 3 In Camera; Dkt. 9159 CX 45Z; Becker Dkt. 9159, 1269-70; Goodrich F 149). [##] (Dkt. 9159 CX 126P-Q ; Becker Dkt. 9159, 1269; Goodrich F 149), [##] (Clark CX 193B J 2 In Camera; Dkt. 9159 CX 45H; Dkt. 9159 CX 126C; See Goodrich F 149-50), 434. [##] (Dkt. 9159 CX 300Z8 In Camera; Disch Dkt. 9159, 675-76; Goodrich F 150). [##] (Clark CX 193B § 2 In Camera; Bendavid CX 194B J 3 In Camera; Disch 676; Dkt. 9159 CX 126C; Goodrich F 150). In addition to its flame resistance properties, PVC is also lower in cost than many other potential alternative materials (Dkt. 9159 CX 126C; Dkt. 9159 CX 45H; See Goodrich F 150). 435. [##] (Clark CX 193D 7 5 In Camera; Disch Dkt. 9159, 675; Becker Dkt. 9159, 1305; Goodrich F 151). One reason for this is that the properties of PVC in this end use are very desirable from the standpoint of both wire and cable producers and purchasers (Disch Dkt. 9159, 675; Goodrich F 151). The large volume of mass and suspension PVC homopolymer consumed in the wire and cable market is a result of its inherent flame retardancy, and its historical good performance in this end use (Dkt. 9159 CX 126C). 436. Moreover, as materials used in wire and cable jacketing and insulation are subject to building code approval, meeting the governing standard or specification is the primary purchasing criteria on the part of wire and cable producers (Dkt. 9159 CX 126Z1; Goodrich F 151). Many potential alternative materials lack building code acceptance (Dkt. 9159 CX 45Z; Goodrich F 151). [##] (Clark Initial Decision 115 F.T.C.

CX 193B J 2 In Camera; Disch Dkt. 9159, 675; Goodrich F 151 & n.30 at 44).

437. [##] (Goodrich, slip op. at 74; Clark CX 193D ] 5 Jn Camera). The single largest cost component is for the copper or aluminum conductor (Becker Dkt. 9159, 1305). PVC resin used in wire and cable applications is also compounded with additives and ingredients that give PVC its preferred properties. As a result, the cost of the PVC resin alone as a percentage of the cost of the wire and cable compound is most likely in the range of 30% to 50%, depending on the specification for the compound (Goodrich, slip op. at 74; Becker Dkt. 9159, 1305-07; See Goodrich F 151 & n.31 at 44), 438. Thus, demand for mass and suspension PVC homopolymer resin used in wire and cable applications is inelastic (See Goodrich, slip op. at 74).

(3) Packaging film and sheet 439. [##] (Goodrich F 152; See Dkt. 9159 CX 591J-K In Camera; Dkt. 9159 CX 581A In Camera; Dkt. 9159 CX 428Z100. See also Disch Dkt. 9159, 663; Dkt. 9159 RX 206A In Camera; Dkt. 9159, RX 145LZ32, Z57 In Camera). [##] (Dkt. 9159 CX 581A-D In Camera; Dkt. 9159 CX 45P; Dkt. 9159 CX 591K Jn Camera; See Goodrich F 152; See also Disch Dkt. 9159, 679; Becker Dkt. 9159, 1307). [##] (Dkt. 9159 CX 581A-D In Camera; Dkt. 9159 CX 45P; Goodrich F 152; See also Dkt. 9159 CX 428Z75-Z76; Dkt. 9159 CX 444D). [##] (Becker Dkt. 9159, 1321-25; Dkt. 9159 CX 428276; Dkt. 9159 CX 444D; Goodrich F 152; See also Dkt. 9159 CX 581D-E, H In Camera), [##] (Dkt. 9159 CX 581H-J In Camera; Dkt. 9159 RX 145Z30 In Camera; Goodrich F 152).

440. [##] (Dkt. 9159 CX 45H; Dkt. 9159 RX 145Z29 In Camera; Goodrich F 152). [##] (Disch Dkt. 9159, 679; Becker Dkt. 9159, 1308; McMath Dkt. 9159, 1936; Dkt. 9159 CX 581B Jn Camera; Dkt. 9159 CX 45H; Dkt. 9159 RX 145Z29 In Camera; Goodrich F 152). Of particular importance in the packaging of fresh meat and produce is the ability of the packaging material to maintain the freshness of the product and to promote the product's appeal, both of which PVC film accomplishes as a result of its superior breathability characteristics and clarity (Becker Dkt. 9159, 1308, 1310-11; OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1129 1010 Initial Decision McMath Dkt. 9159, 1936; Disch Dkt. 9159, 679; Goodrich F 152). [##] (Dkt. 9159 CX 581B Jn Camera; Dkt. 9159 CX 45H; Dkt. 9159 CX 92V; Dkt. 9159 CX 300Z9 In Camera; Dkt. 9159 RX 145229 In Camera; Goodrich F 152). PVC is also preferred for blister packs of non-food items because of its clarity, strength, and tear-resistant properties, and because it is easy to vacuum-form (Becker Dkt. 9159, 1322-24; McMath Dkt. 9159 1921; Goodrich F 152). 441. [##] (Dkt. 9159 CX 300Z9 In Camera; Goodrich F 153). [##] (Dkt. 9159 CX 300Z9 In Camera; Goodrich F 153), [##] (Becker Dkt. 9159, 1310-11; Disch Dkt. 9159, 680; McMath Dkt. 9159, 1936; Dkt. 9159 CX 300Z29 In Camera; Dkt. 9159 RX 39F; Goodrich F 153).

442. The overall demand for mass and suspension PVC homopolymer resin in packaging film and sheet applications is relatively insensitive to fluctuations in PVC resin price for a number of reasons (Becker Dkt. 9159, 1309; Disch Dkt. 9159, 680; See Goodrich F 153). First, a strong preference for PVC film and sheet exists in the applications for which it is used as a result of PVC's unique combination of properties (Disch Dkt. 9159, 680; Becker Dkt. 9159, 1309; Goodrich F 153). In addition, PVC is fairly well entrenched in the applications in which it is used because the packaging fabrication equipment has been developed based on PVC (Dkt. 9159 CX 444D; Goodrich F 153; See also McMath Dkt. 9159, 1936). [##] (RX 59 In Camera).

443. Thus, demand for mass and suspension PVC homopolymer resin used in packaging applications is relatively inelastic (Goodrich, slip op. at 74).

(4) Siding 444, Approximately 300 million pounds of mass and suspension PVC resin is consumed annually in the production of vinyl siding and accessories, accounting for about 5% of PVC consumption (Belt Dkt. 9159, 2065; Goodrich F 154; See also Disch Dkt. 9159, 664). Vinyl siding consists of extruded panels of compounded PVC resin used as exterior sheeting that is typically installed over the existing walls of a house (Belt Dkt. 9159, 1986-87; Goodrich F 154). Vinyl siding accessories consist of extruded products used to install the vinyl Initial Decision 115 F.T.C.

siding, such as trim, corner posts, soffits and fascia board, and are typically sold in conjunction with the vinyl siding (Belt Dkt. 9159, 2000-01; Goodrich F 154; See Commission Physical Exhibit 14). [##](Belt Dkt. 9159, 2002; Dkt. 9159 CX 590B Jn Camera; Goodrich F 154). The remaining 5% to 10% of vinyl siding is sold into the new construction market, which includes both site-built and manufactured homes, such as mobile homes (Belt Dkt. 9159, 2002; Goodrich F 154).

445. Several distinct properties of vinyl siding have led to its increasing popularity. It is light weight and pliable, which makes it easy to install (RX 21G-H). [##] (RX 67C In Camera; RX 21G-H; Belt Dkt. 9159, 2010-11; Goodrich F 155). [##] (Belt Dkt. 9159, 2010-11, 1987-88; Dkt. 9159 CX 300Z8 In Camera; Dkt. 9159 CX 45H; Goodrich F 155).

446. [##] (Belt Dkt. 9159, 2004-05; Becker 1299; Dkt. 9159 CX 300Z8 In Camera; Goodrich F 156). [##] (RX 67C In Camera; RX 21G-H; Becker Dkt. 9159, 1299; Dkt. 9159 CX 300Z8 In Camera; Dkt. 9159 CX 454H; See Goodrich F 158). Vinyl! siding has also displaced aluminum as a re-siding material as a result of a number of its superior properties. Unlike aluminum, vinyl siding does not dent and is thus easier to handle and install; vinyl siding is colored completely through the panel, unlike aluminum siding color which is painted on and easily scratched. Vinyl] siding is less noisy than aluminum, and is more energy-efficient (RX 21G-H). [##] (Belt Dkt. 9159, 2011; Becker Dkt. 9159, 1299; Dkt. 9159 CX 300Z8 Jn Camera; See Goodrich F 157). Compared to steel siding, vinyl siding is much lighter, much easier to install, and generally superior as a siding product (RX 21G-H; Belt Dkt. 9159, 2011-12; See Goodrich F 159). [##] (Belt Dkt. 9159, 2011-12; Dkt. 9159 CX 590D Jn Camera; Goodrich F 159).

447. [##] (RX 67C; RX 21G-H; Belt Dkt. 9159, 2011; Dkt. 9159 CX 300Z8 In Camera; Goodrich F 160). [##]*8 (Belt Dkt. 9159, 8 (Belt 2007-08; CX 590C, In Camera; Goodrich F 160 & n.35 at 48). The alternative distribution channel consists of sales from the manufacturer to chain home centers or lumber yards to professional home remodelers or do-it-yourselfers (Belt 2007-08; Goodrich F 160 & n.35 at 48). OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1131 1010 Initial Decision 2017-18 In Camera; Goodrich F 160; See also Dkt. 9159 CX 588A-B).

448. The substantial price advantage that vinyl siding has over both aluminum and steel siding is generally acknowledged to be of a permanent nature, stemming from the greater energy costs involved in producing aluminum and steel (Belt Dkt. 9159, 2013-14; Becker Dkt. 9159, 1299-3000; Dkt. 9159 CX 588A-B; See Goodrich F 160). [##] (Becker Dkt. 9159, 1299-3000; Belt Dkt. 9159, 2014, 2020; Dkt. 9159 CX 590G, K In Camera; Goodrich F 161; See also Dkt. 9159 RX 70C In Camera; Dkt. 9159 RX 90G In Camera). 449, [##] (Belt Dkt. 9159, 2024-25, 1984 In Camera; Goodrich F 162). [##] (Belt Dkt. 9159, 2025 In Camera; Goodrich F 162; See generally Dkt. 9159 CX 559).

450. [##] (Belt Dkt. 9159, 2019; Becker Dkt. 9159, 1302; Dkt. 9159 CX 590K In Camera). [##] (Dkt. 9159 CX 590C In Camera). [##] (Dkt. 9159 CX 590D Jn Camera). [##] (Dkt. 9159 CX 590B Jn Camera). [##] (Dkt. 9159 CX 590C, G Jn Camera). 451. [##] (Becker Dkt. 9159, 1299-1302; See Goodrich F 164; See also Dkt. 9159 CX 168B Jn Camera; Dkt. 9159 CX 559). 452. In addition, fluctuations in the price of PVC resin are likely to have very little impact on the demand for vinyl siding because the cost of the PVC resin is only a very small portion of the total price of the installed siding product to the homeowner. To convert PVC resin to siding, the resin is first blended with a variety of additives and ingredients, such as titanium dioxide, impact modifiers, heat stabilizers, lubricants, and waxes, to form a compound (Belt Dkt. 9159, 1995; Becker Dkt. 9159, 1300-01; Goodrich F 163; Goodrich, slip op. at 74). [##] (Belt Dkt. 9159, 1995-96; Dkt. 9159 RX 90Z80 In Camera, Goodrich F 163). [##]° (Goodrich F 163; See Belt Dkt. 9159, 2026-27 In Camera; Dkt. 9159 CX 756Z59). [##] (Belt Dkt. 9159, 2017-28 In Camera, 1998; Dkt. 9159 CX 756 Z 59; Goodrich F.163). [##] (Belt Dkt. 9159, 2040-41 In Camera; Goodrich F 163). [##] (Belt Dkt. 9159, 2041 In Camera; Goodrich F 163). Thus, PVC 2° Most siding is sold on the basis of squares, i.e., 100 square feet (Belt 1995, 2004; Goodrich F 163 & n.37 at 50). Initial Decision 115 F.T.C.

resin cost share is an insignificant percentage of the total installed cost of vinyl siding products (See Goodrich, slip op. at 74). 453. [##] (Belt Dkt. 9159, 2039 In Camera; Goodrich F 164). [##] (Belt Dkt. 9159, 2039-40 In Camera; Goodrich F 164; See also Belt Dkt. 9159, 2037-39 In Camera). [##] (Dkt. 9159 CX 168B In Camera, See generally Dkt. 9159 CX 590 In Camera). (5) Bottles . 454, [##] (Dkt. 9159 CX 158A; Goodrich F 169) [##] (Goodrich F 169; See Disch Dkt. 9159, 664; Dkt. 9159 RX 206A In Camera; Dkt. 9159 RX 145L, Z35 In Camera; Friedman JX 1, 161). [##] (Dkt. 9159 CX 158A-B; Dkt. 9159 CX 92X; Dkt. 9159 RX 145Z35 In Camera, Goodrich F 169; See Commission Physical Exhibits 1&2). Food-contact applications account for the remaining 25% for products such as cooking oil, vinegar, and mouthwash (Dkt. 9159 CX 158A-B; Goodrich F 169; See Commission Physical Exhibit 3). 455. [##] (Friedman CX 191B 75 In Camera; Disch Dkt. 9159, 665-67; Becker Dkt. 9159, 1317; Friedman JX 1, 114-15, 122-23; Dkt. 9159 CX 92X; Dkt. 9159 CX 158C; Goodrich F 170), 456. [##] (Disch Dkt. 9159, 667; Becker Dkt. 9159, 1318; Friedman JX 1, 123; Dkt. 9159 CX 157U In Camera; Goodrich F 171).

457. [##] (See Dkt. 9159 CX 158A; Dkt. 9159 CX 581K-L In Camera; Goodrich F 171). The BATF banned PVC as a liquor packaging material in 1975, and the FDA proposed a ban on PVC in all food-contact applications (Dkt. 9159 CX 158A; Goodrich F 171). [##] (See H. Wheeler Dkt. 9159, 1732-33; Dkt. 9159 CX 158A: Dkt. 9159 CX 581K-L Jn Camera; Dkt. 9159 CX 541K-L In Camera; Dkt. 9159 CX 157J In Camera; Goodrich F 171), [##] (Dkt. 9159 RX 145Z35 In Camera; Dkt. 9159 CX 581K In Camera; Goodrich F 171). In addition, public opinion resulting from regulations concerning the use of PVC in food-contact bottles is likely to continue to play a role as a demand factor for some time (Dkt. 9159 CX 459 -R; Goodrich F 171).

458. [##] (Friedman JX 1, 123-24, 147-48; Becker Dkt. 9159, 1317-18; Dkt. 9159 CX 300Z9 In Camera; Goodrich F 172). [##] (Dkt. 9159 CX 92X; See also Dkt. 9159 CX 541K-L In Camera). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1133 1010 Initial Decision [##] (Becker Dkt. 9159, 1317; Dkt. 9159 CX 541L Jn Camera). [##] (Dkt. 9159 CX 157U-V In Camera; See Goodrich F 173). [##] (Dkt. 9159 CX 157U-V In Camera; See Goodrich F 173). [##] (CX 109 In Camera). {##] (CX 120N In Camera).

459. [##] (Dkt. 9159 CX 158C; Dkt. 9159 CX 157V In Camera, See Goodrich F 174). [##] (Dkt. 9159 CX 158C; Dkt. 9159 CX 157U In Camera; Goodrich F 174). [##] (Becker Dkt. 9159, 1318; Dkt. 9159 CX 157U-V In Camera; Dkt. 9159 CX 158C; Goodrich F 174). [##] (Dkt. 9159 CX 158C; Dkt. 9159 CX 581F-G, H, K-L In Camera; Goodrich F 174).

460. [##] (CX 117A In Camera; See RX 150A In Camera). Thus, because of these advantages of PVC over PET, the demand for PVC relative to PVC is relatively inelastic. 461. Thus, demand for mass and suspension PVC homopolymer (in the bottle applications where it is used) is relatively insensitive to fluctuations in the price of PVC resin (Friedman JX 1, 118-21; Becker Dkt. 9159, 1319-20; Goodrich, slip op. at 73 & n.163; Goodrich F 177-78). One reason for this is that PVC is selected as a bottle material primarily on the basis of preferences for its physical properties (Dkt. 9159 CX 158B; Friedman JX 1, 116, 122-23; See Goodrich F 177). [##] (CX 120Q In Camera). [##] (Friedman CX 191B J 5 In Camera). [##] (117A In Camera; CX 109 In Camera; RX 150A In Camera).

462. In addition, the unique demands made by PVC bottle manufacturers on PVC as a material to achieve its combined physical characteristics result in the addition of many ingredients such as impact modifiers, to produce the needed PVC bottle compound. As a result, PVC resin accounts for only a small portion, no more than 30% to 50%, of the cost of the PVC compound used to fabricate bottles (Becker Dkt. 9159, 1318-19; Friedman JX 1, 115; See Goodrich F 178). The process of fabricating the bottle adds more value and further reduces the significance of the cost share of the PVC resin in the final product to about 20% (Friedman JX 1, 116; See Goodrich F 178; Becker Dkt. 9159, 1319-20). Thus, fluctuations in the mass and suspension PVC homopolymer resin price alone have but a minimal effect on the total price of the finished bottle (Friedman JX 1, 118-121; See Goodrich F 177). Initial Decision 115 F.T.C.

463. Finally, the ban by the BATF and the proposed ban by the FDA on the use of PVC as a material in food-contact bottle applications have had a profound effect on the demand for PVC in these applications for reasons wholly unrelated to changes in the price of PVC resin.

464. Thus, the demand for mass and suspension PVC homopolymer resin used in bottle applications is relatively inelastic (Friedman JX 1], 116, 118-21). [##] (Friedman CX 191B J 5 In Camera). Thus, evidence in this record relating to the perceptions of those involved in the production of PVC bottles to the effect that the degree of competition between PVC and other materials is limited (evidence which was not available in Goodrich), shows that the demand for PVC in bottles is more inelastic than the Commission found in Goodrich (Goodrich, slip op. at 75). (6) Windows 465. [##] (Goodrich F 179) [##]°° [##] >! [##] (See Belt Dkt. 9159, 2053, 2065; Dkt. 9159 RX 145223, Z57 In Camera; Dkt. 9159 CX 5911 In Camera; Dkt. 9159 CX 92Y; Dkt. 9159 RX 90Z73 In Camera; Goodrich F.180). [##] (Belt Dkt. 9159, 2050-51, 2057 Jn Camera, See Commission Physical Exhibits 5 & 15; Goodrich F 184 & n.39 at 56).

466. [##] (See Belt Dkt. 9159, 1977, 2052, Dkt. 9159 CX 92Y; Dkt. 9159 RX 90G In Camera; Dkt. 9159 RX 145Z23 In Camera, Goodrich F 180). [##] (Belt Dkt. 9159, 2052-53; Dkt. 9159 RX 145Z23 In Camera; Goodrich F 180).

467. [##] (Belt Dkt. 9159, 2047-48; RX 67D In Camera; Dkt. 9159 CX 92Y; Goodrich F 181). Windows can be the greatest source of heat loss in a home, apart from the attic (Belt Dkt. 9159, 2047; *0 Profile extrusions are rigid or flexible PVC resin compounds extruded into a particular shape and finished with downstream processes (See, e.g., Disch 667-69; Belt 2049; Weber 1807; See also Commission Physical Exhibit 4). [##] (See, e.g., Disch 667-69; Dkt. 9159 CX 92Y; Dkt. 9159 CX 45V; Dkt. 9159 RX 90Z73 In Camera; Dkt. 9159 RX 145Z57 In Camera).

3 [##] (See Dkt. 9159 RX 145Z57 In Camera; Dkt. 9159 RX 90Z73 In Camera). [##] (See Dkt. 9159 CX 45V; Dkt. 9159 RX 145Z57 In Camera). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1135 1010 Initial Decision Goodrich F 181), and heightened energy-consciousness has created a strong demand for vinyl replacement windows to improve thermal efficiency, particularly in older homes (Belt Dkt. 9159 2047, 2051-52; Goodrich F 181). [##] (RX 67D In Camera; Dkt. 9159 CX 92Y; Dkt. 9159 CX 45V; See Goodrich F 182). 468. [##] (Dkt. 9159 CX 300Z8 Jn Camera; Goodrich F 182). [##] (RX 67D In Camera; Dkt. 9159 CX 45V; Dkt. 9159 CX 300Z8 In Camera; Goodrich F 182). [##] (RX 67D In Camera; Belt Dkt. 9159, 2062 In Camera; Dkt. 9159 CX 300Z8 In Camera; Dkt. 9159 CX 145223 In Camera; Goodrich F 182).

469. [##] (See Dkt. 9159 RX 90G, Z60 In Camera; Dkt. 9159 RX 837A-B In Camera; Goodrich F 183), [##] (Belt Dkt. 9159, 2062 In Camera; Dkt. 9159 CX 756Z118; Goodrich F 183), [##] (Belt Dkt. 9159, 2062 In Camera; Dkt. 9159 CX 756Z118; Goodrich F 183). [##] (Belt Dkt. 9159, 2062 In Camera; See Goodrich F 183). 470. [##] (See Belt Dkt. 9159, 2057-61 In Camera; Dkt. 9159 CX 756Z118; Dkt. 9159 RX 90Z80 In Camera; Goodrich, slip op. at 13 & n.164, 74; Goodrich F 184). [##] (Belt Dkt. 9159, 2058 In Camera; Goodrich F 184). [##] (Belt Dkt. 9159, 2059-60 Jn Camera: Goodrich F 184). [##] (Belt Dkt. 9159, 2059-61 Jn Camera; Dkt. 9159 CX 756Z118; Goodrich F 184).

471. Asa result of the strong demand for the superior properties of vinyl in a replacement window product, and because PVC resin cost is an insignificant factor in the price of an installed vinyl window to the ultimate purchaser, demand for mass and suspension PVC homopolymer resin in vinyl replacement windows is highly inelastic with respect to changes in the price of PVC resin (Belt Dkt. 9159, 2062-63; Goodrich, slip op. at 73 & n.164 See Goodrich F 184). Vinyl replacement window fabricators are often the same distributordealers that handle other building products, such as vinyl siding (Belt 2050-51, 2054-55; Dkt. 9159 CX 756Z113, Z118-120). The vast majority of replacement windows are installed by home improvement contractors who buy directly from the fabricators (Belt 2054-55; Dkt. 9159 CX 756Z113). Initial Decision 115 F.T.C.

(7) Medical applications 472. [##] (Dkt. 9159 RX 145Z32 In Camera; Goodrich F 189), [##] (Dkt. 9159 RX 206A Jn Camera: Goodrich F 189). [##] (Dkt. 9159 RX 145Z30-231 In Camera Disch Dkt. 9159 676-77; Becker Dkt. 9159, 1309-12; Goodrich F 189; See Commission Physical Exhibits 10 & 11). [##] (Dkt. 9159 RX 145Z30-Z31 In Camera: Goodrich F 189). PVC also has FDA approval for medical applications (Disch Dkt. 9159, 676; Goodrich F 189). Even if another material were technically suitable for medical applications, it could not be used until all the necessary regulatory approvals had been obtained, a process which can take years (Disch Dkt. 9159, 678). As a result, the demand for mass and suspension PVC homopolymer in medical applications is highly insensitive to changes in the price of PVC resin (Disch Dkt. 9159, 677; Becker Dkt. 9159, 1312; Goodrich, slip op. at 74; Goodrich F 189), (8) Calendered products 473. Much of the remaining consumption of mass and suspension PVC homopolymer resin is accounted for by a wide variety of rigid and flexible calendered products® (See Dkt. 9159 CX 45W-Y, Z-Z2, Z3-Z4; Dkt. 9159 CX 428Z100; Dkt. 9159 RX 1325Z65-Z86; Disch Dkt. 9159, 663; Goodrich F 190). End use applications for rigid calendered PVC sheet include decorative laminates and credit card stock (H. Wheeler Dkt. 9159, 1728, 1753; Dkt. 9159 RX 1325Z85- Z86; Goodrich F 190). [##] (Donnelly CX 176E-F J 6 In Camera; H. Wheeler Dkt. 9159, 1727-28; Becker Dkt. 9159, 1323-14; DiLiddo Dkt. 9159, 3375-79; Dkt. 9159 CX 45W-Y, Z-Z2, Z3-Z4: Goodrich F 190; See Commission Physical Exhibits 16 & 17). 474. The versatility of mass and suspension PVC homopolymer resin as a material is well-illustrated by the broad range of calendered products in which it finds application. The wide use of PVC resin is 3A calendered product is produced by a fabrication technique known as “calendering" in which large heated rolls are used to produce wide sheets of PVC material, which is later turned into a finished product (Becker 1312-13; DiLiddo 3376-77; Goodrich F 190 & n.40 at 58).

OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1137 1010 Initial Decision possible because, with the addition of compound additives and ingredients, it can be flexible or rigid, strong, tear-resistant, and easy to fabricate and color. PVC also has good printability properties (Becker Dkt. 9159, 1268, 1313-14; DiLiddo Dkt. 9159, 3376-77; Goodrich F 190; See also Disch Dkt. 9159, 665). Overall demand for vinyl calendered products is influenced primarily by the general state of economic activity, i.e., the level of demand essentially moves as GNP moves, as opposed to changes in the price of PVC resin (H. Wheeler Dkt. 9159, 1754 Goodrich F 190).

475. [##] (See Dkt. 9159 CX 300Z9 In Camera; Goodrich F 191). [##] (Dkt. 9159 CX 300Z9 In Camera). As stated by Mr. Rodney Becker, former Sales and Marketing Manager for Diamond: I5 1 3 2 3 10 1780 1277 99 37 96.815392 think4 1 3 2 4 0 542 1337 1337 37 -1 5 1 3 2 4 1 542 1338 98 35 96.703857 there5 1 3 2 4 2 670 1349 74 25 96.807724 was5 1 3 2 4 3 775 1349 20 25 95.237175 a5 1 3 2 4 4 825 1338 86 36 95.237175 times 1 3 2 4 5 941 1338 36 35 96.550842 in5 1 3 2 4 6 1008 1338 58 35 93.298279 thes 1 3 2 4 7 1096 1338 272 35 91.745865 mid-seventies5 1 3 2 4 8 1400 1338 103 35 96.251648 when5 1 3 2 4 9 1534 1344 94 29 96.480339 most5 1 3 2 4 10 1658 1337 221 36 96.628410 automotive4 1 3 2 5 0 542 1395 1340 47 -1 5 1 3 2 5 1 542 1396 210 46 96.119888 upholstery5 1 3 2 5 2 768 1407 74 24 96.312103 was5 1 3 2 5 3 859 1395 109 47 95.986565 vinyl.5 1 3 2 5 4 998 1396 89 35 95.986565 That5 1 3 2 5 5 1102 1407 73 24 96.814972 was5 1 3 2 5 6 1192 1407 19 24 91.718697 a5 1 3 2 5 7 1226 1396 131 45 91.718697 typical5 1 3 2 5 8 1374 1407 63 24 86.906105 uses 1 3 2 5 9 1454 1425 82 12 74.862961 ...,5 1 3 2 5 10 1553 1396 159 35 95.935738 whereas5 1 3 2 5 11 1727 1396 108 44 95.935738 today5 1 3 2 5 12 1851 1395 31 35 96.992981 if4 1 3 2 6 0 541 1454 1337 46 -1 5 1 3 2 6 1 541 1465 71 35 96.677277 you5 1 3 2 6 2 625 1455 70 45 93.255035 buys 1 3 2 6 3 709 1465 100 30 89.893654 acar,5 1 3 2 6 4 824 1461 92 28 96.439430 most5 1 3 2 6 5 928 1455 129 45 96.692451 peoples 1 3 2 6 6 1070 1454 136 46 96.910980 specify5 1 3 2 6 7 1219 1454 112 36 96.119194 fabrics 1 3 2 6 8 1345 1465 36 25 96.119194 as5 1 3 2 6 9 1396 1455 158 45 96.684776 opposed5 1 3 2 6 10 1567 1461 36 29 95.865730 to5 1 3 2 6 11 1615 1454 98 46 65.339554 vinyl]5 1 3 2 6 12 1726 1455 152 34 96.548729 because4 1 3 2 7 0 541 1512 1335 42 -1 5 1 3 2 7 1 541 1512 113 35 96.931068 fabrics 1 3 2 7 2 671 1512 30 35 96.426003 is5 1 3 2 7 3 718 1523 100 24 96.616173 more5 1 3 2 7 4 835 1512 236 35 96.357559 comfortable5 1 3 2 7 5 1088 1513 36 34 96.624649 in5 1 3 2 7 6 1141 1512 57 35 96.703171 thes 1 3 2 7 7 1215 1513 61 35 96.183937 hot5 1 3 2 7 8 1293 1512 172 35 73.186813 weather (Becker Dkt. 9159, 1267; See Goodrich F 191). [##] (See, e.g., Dkt. 9159 CX 45W-X: furniture upholstery, Z-Z2: apparel; Goodrich F 190-91; Donnelly CX 176E-F ¥ 6 Jn Camera), [##] (Becker Dkt. 9159, 1314; Goodrich F 191). [##] (Donnelly CX 176E {6).

476. [##] (See, e.g., DiLiddo Dkt. 9159, 3376-79; Goodrich, slip op. at 73-74 & n.165; Goodrich F 193; Donnelly CX 176E-F { 6 Jn Camera). For example, a typical shower curtain could have as much as 25 parts of plasticizer in it per 100 parts of PVC resin, i.e., in a shower curtain weighing approximately 2 pounds, about 12 pound would be plasticizer and about 1% pounds would be PVC resin by composition (DiLiddo Dkt. 9159, 3377-78; Goodrich F 193). Ata PVC resin price of $.30 per pound, the shower curtain might contain $.45 worth of PVC resin. The retail price of vinyl] shower curtains obviously varies with quality, design, packaging, and other factors. To illustrate the disparity between a possible retail price for a finished vinyl shower curtain and the cost of its PVC resin content, Commission Physical Exhibit 16, a viny] shower curtain, carries a retail price of $7.99 (DiLiddo Dkt. 9159, 3378; Goodrich, slip op. at 74; Goodrich F 193). Similarly, a vinyl shower cap weighing approximately 4 ounces might contain 3 ounces of PVC resin, amounting (at a PVC resin price of $.30 per pound) to less than $.08 worth of PVC resin in a vinyl shower cap that might retail for, say, Initial Decision 115 F.T.C.

$1.79 (DiLiddo Dkt. 9159, 3379; Goodrich, slip op. at 74; Goodrich F 193; See Commission Physical Exhibit 17). 477. Because the overall demand for PVC calendered products is influenced primarily by the general level of economic activity and by individual tastes and preferences, and because the cost product price can be insignificant, the demand for mass and suspension PVC homopolymer resin in the production of calendered products is relatively inelastic with respect to changes in the price of PVC resin (Becker Dkt. 9159, 1314-15; H. Wheeler Dkt. 9159, 1754). d. The record shows that overall demand for mass and suspension PVC homopolymer is inelastic 478. The record shows that the demand for mass and suspension PVC homopolymer overall is inelastic with respect to changes in price (Kaserman Dkt. 9159, 2378-79; Goodrich, slip op. at 73-75). 479. The demand for mass and suspension PVC homopolymer is inelastic because mass and suspension PVC resins offer a unique package of performance properties. An Air Products document concludes that PVC's5 1 5 2 4 4 1109 1720 131 46 96.995697 unique5 1 5 2 4 5 1255 1721 194 45 96.489044 properties5 1 5 2 4 6 1465 1722 151 36 96.489044 insulate5 1 5 2 4 7 1632 1722 25 36 96.667580 it5 1 5 2 4 8 1673 1723 93 35 96.384575 from5 1 5 2 4 9 1780 1725 158 45 96.352013 changes5 1 5 2 4 10 1954 1725 36 35 96.457687 in4 1 5 2 5 0 652 1776 1336 45 -1 5 1 5 2 5 1 652 1776 150 35 96.525635 relatives 1 5 2 5 2 817 1776 116 45 72.809341 price (Dkt. 9159 RX 34Z2). The document further notes that energy price changes are overshadowed by PVC performance properties affecting PVC use (Dkt. 9159 RX 34Z1). [##] (Klass Dkt. 9159, 4117-19; See also DiLiddo Dkt. 9159, 3106-07; Dkt. 9159 CX 40Z3 In Camera; Dkt. 9159 CX 428E).

480. [##] (Dkt. 9159 CX 64V; Dkt. 9159 CX 51H In Camera; See also Dkt. 9159 CX 13L In Camera; Dkt. 9159 CX 14F, H, K In Camera), [##] (Dkt. 9159 CX 97C In Camera; See also Dkt. 9159 RX 1151: (Dkt. 9159 CX 186G In Camera; See also DiLiddo Dkt. 9159 3408-11: 10% PVC resin price increase for 1 year would cause little switching away from PVC and would be profitable). 481. Industry members recognize that alternative materials do not place a substantial constraint on the price of mass and suspension PVC homopolymer resin. Mr. Becker stated that, for the mass and suspension PVC homopolymer market overall, there was very little price sensitivity (Becker Dkt. 9159, 1325-26; See Goodrich, slip op. at 73-75 & n.167). [##] (Dkt. 9159 CX 297Z1-Z2 In Camera; Goodrich, slip op. at 75 & n.167; See also Weber Dkt. 9159, OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1139 1010 Initial Decision 1810-11). Mr. Schaefer stated that PVC is not a price elastic market (Schaefer Dkt. 9159, 1141; Goodrich, slip op. at 73-75 & n.168). [##] (Dkt. 9159 CX 295Z53-Z54 In Camera).

482. [##] (See, e.g., DiLiddo Dkt. 9159, 3408-11; Dkt. 9159 CX 135D In Camera).

483. [##] (H. Wheeler Dkt. 9159, 1753-54; DiLiddo Dkt. 9159, 3255; Dkt. 9159 CX 297Z1-Z2 In Camera; Dkt. 9159 CX 298P; Dkt. 9159 CX 147B).

484. Industry members do not perceive a threat of displacement of mass and suspension PVC homopolymer by other products. Following its major strategy study in 1979, Goodrich concluded that [dJespite5 1 3 4 4 2 733 1299 19 24 96.761360 a5 1 3 4 4 3 765 1293 95 40 96.447876 great5 1 3 4 4 4 873 1286 77 37 96.447876 deals 1 3 4 4 5 964 1286 42 36 96.768517 of5 1 3 4 4 6 1016 1285 193 47 96.907669 searching,5 1 3 4 4 7 1224 1296 55 24 96.737968 we5 1 3 4 4 8 1292 1295 92 25 96.735474 were5 1 3 4 4 9 1397 1283 128 37 96.796005 unable5 1 3 4 4 10 1537 1290 37 30 96.288612 to5 1 3 4 4 11 1586 1283 75 37 96.288612 finds 1 3 4 4 12 1676 1294 68 35 96.810928 any5 1 3 4 4 13 1758 1283 113 46 96.887016 major4 1 3 4 5 0 532 1342 1336 46 -1 5 1 3 4 5 1 532 1347 129 35 96.567841 threats5 1 3 4 5 2 677 1353 36 29 96.583504 to5 1 3 4 5 3 728 1346 113 35 89.375977 PVC (Dkt. 9159 CX 53H). [##] (Dkt. 9159 CX 512C In Camera; See also Weber Dkt. 9159 1809-10; Dkt. 9159 CX 64V; Dkt. 9159 CX 200N In Camera; Dkt. 9159 RX 132C). The absence of competitive threats reflects the fact that other materials do not operate as close substitutes for mass and suspension PVC homopolymer.

485. Mass and suspension PVC homopolymer producers pay little attention to the prices of other materials in setting their prices for mass and suspension PVC homopolymer resin (McMath DKt. 9159, 1913, 1926-27, 1930-35; Arp Dkt. 9159, 3558-59; Weber Dkt. 9159, 1810-11). The analysis of other materials that does take place is primarily in the nature of market research, used to identify potential new applications and project long-term demand growth. [##] (See, e.g., DiLiddo Dkt. 9159, 3123-24, 3259-62; Dkt. 9159 RX 145A-Z62 In Camera; Dkt. 9159 RX 166A-R In Camera). 486. [##] (Schaefer Dkt. 9159, 1143; Disch Dkt. 9159, 714; Liao Dkt. 9159, 1544; See Dkt. 9159 CX 35A; Dkt. 9159 CX 575 In Camera; Dkt. 9159 RX 1015 In Camera). Overall, customers of mass and suspension PVC homopolymer are not significantly concerned about competition from other materials (Weber Dkt. 9159, 1810-11). This attitude reflects not only a lack of concern about competition from other materials but also indicates that demand for mass and suspension PVC homopolymer is inelastic. 487. Based upon his review of the record of Dkt. 9159 and the record compiled in the Commission's investigation of Occidental's acquisition of Tenneco Polymers up until April 1986, Dr. Kaserman Initial Decision 115 F.T.C.

concluded that the demand for mass and suspension PVC homopolymer is inelastic (Kaserman Dkt. 9159, 2373-74; Kaserman JX 1, 254-70; cf: Klass Dkt. 9159, 4267). 3. Suspension PVC copolymer a. Introduction 488. As demonstrated, infra, the fact that suspension PVC copolymer is a product market means that demand for suspension PVC copolymer is sufficiently inelastic so that firms could profit if they coordinated their actions and engaged in collusion. In other words, if suspension PVC copolymer firms increased price by a small but significant and nontransitory amount, the increase in profits due to the higher price would more than offset the decrease in profits due to lower sales. However, demand for suspension PVC copolymer is more inelastic than is sufficient for a finding that suspension PVC copolymer is a product market. Demand for suspension PVC copolymer is inelastic with respect to changes in price (Kaserman JX 1, 345 In. 2-6; Kaserman Dkt. 9159, 2381). And respondents’ economic expert, Dr. Barry Harris agrees with the assessment that the demand for suspension PVC copolymer is inelastic (Harris JX 1, 858 In. 19-24).

489. On analysis, it is seen that the price elasticity of demand for suspension PVC copolymer is very low. First, there is very limited substitutability between suspension PVC copolymer and other input products, including suspension PVC homopolymer, in the manufacture of final products normally made from suspension PVC copolymer (Kaserman Dkt. 9159, 2376-77; Kaserman JX 1, 258 In. 2-13). Second, the cost share of suspension PVC copolymer resin is only a portion of the cost of suspension PVC copolymer end-use products, and very often the proportion is low (Kaserman Dkt. 9159, 2375). Third, the elasticity of demand for final products made from suspension PVC copolymer is low (Kaserman Dkt. 9159, 2373-75). Because there is very limited substitutability between suspension PVC copolymer and other input products in the manufacture of final products, the price elasticity of demand for suspension PVC copolymer is necessarily lower than the price elasticity of demand for OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1141 1010 Initial Decision the final products (Kaserman Dkt. 9159, 2377; See Klass Dkt. 9159, 4267). The price elasticity of demand for suspension PVC copolymer resin is significantly less than the price elasticity of demand for the final products because of the low cost share of suspension PVC copolymer in many final products.

b. There is limited substitutability of other inputs for suspension PVC copolymer 490. There is very limited substitution for suspension PVC copolymer resin in its major end-use applications, vinyl floor tile and records (See Goodrich, slip op. at 72; Kaserman Dkt. 9159, 2376-77). Generally, suspension PVC copolymer resin is the primary raw material input and imparts essential properties to the product (See Goodrich, slip op. at 72). [##] (See Goodrich, slip op. at 72; Weimar CX 192C J 5 In Camera; Silver CX 190B In Camera; Marcus CX 209B J 4 Jn Camera). Thus, substitution to either non-PVC materials or to PVC resins other than suspension copolymer . resins in these end-use applications is limited. c. The cost share of suspension PVC copolymer in its end-use products is low 491. Suspension PVC copolymer resins account for only a small portion of the cost of the finished products made from these resins (See Goodrich, slip op. at 72-74, 73 n.164). Value is added to the PVC resin at several stages in the production of the final PVC end product. First, all suspension PVC copolymer resins are compounded before they are processed (Disch Dkt. 9159, 655-56). Compounding involves mixing the resin with various additives, which may include heat and light stabilizers, impact modifiers, plasticizers, and pigments (Disch Dkt. 9159, 656-57). Second, suspension PVC copolymer compounds are converted into fabricated products through either a calendering or compression-molding production process (Disch DKt. 9159, 661-662). Once again, the value added varies with each of the copolymer products. The low cost share of suspension PVC copolymer resin in PVC end use products means that the demand for suspension PVC copolymer resin is significantly less elastic than the Initial Decision 115 F.T.C.

demand for the products themselves (See Kaserman Dkt. 9159, 2375-78).

d. The price elasticity of demand for suspension PVC copolymer end-use products is low 492. As shown in the record, suspension PVC copolymer resin is used to make primarily two different major end-use products, vinyl floor tile and long-playing (LP) phonograph records. To a lesser degree, it is used in some calendered sheet applications, although this is a small and declining end-use application. 493. Suspension PVC copolymer products have specific properties that distinguish them from products made from other materials. As a result, suspension PVC copolymer products are often chosen on the basis of their properties, and not on the basis of changes in the price of the product. Second, where suspension PVC copolymer products are chosen because they offer a cost savings to the purchaser, the cost savings are often so substantial that the PVC product would still be far less expensive than alternative products, even if suspension PVC copolymer resin prices rose by a small but significant amount. Thus, customers would likely continue to purchase the PVC product even if suspension PVC copolymer resin prices would rise by a small but significant amount. e. The price elasticity of demand for suspension PVC copolymer in vinyl floor tile is low 494. [##] (See Dkt. 9159 RX 145Z51 In Camera; Dkt. 9159 RX 90Z73 In Camera; Dkt. 9159 CX 591I In Camera; Dkt. 9159 CX 45P;: See also Disch 672). [##] (Dkt. 9159 CX 300Z9 In Camera; Dkt. 9159 CX 450; See Commission Physical Exhibit 8). 495. [##] (Weimar CX 192B 4 In Camera; JX 3, PX 9 at 34 In. 9-35 In. 23; JX 3, PX 136 at 57 In. 2-7). Copolymer resin, which can be blended with other ingredients and melts at relatively low temperatures, wets5 1 7 2 4 3 1072 2590 79 35 94.631393 out the filler material (Weimar JX 1, 31 In. 21-32 In. 1; Barlet JX 1, 56 In. 22-57 In. 7). Suspension PVC copolymer resin is thus a necessary raw material in the manufacture of vinyl composition tile.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1143 1010 Initial Decision 496. Suspension PVC homopolymer does not melt as easily as does copolymer. At lower temperatures, therefore, it does not wet4 1 3 1 3 0 535 742 1334 51 -1 5 1 3 1 3 1 535 753 76 35 95.682144 out the filler, and thus does not provide the same binding properties. As a result, the substitution of more than small amounts of homopolymer for copolymer in the viny] composition tile production process would require that more PVC and less filler be used, or that the PVC be blended for longer periods of time at substantially higher temperatures. In either case, the manufacturing cost of the tile is likely to be substantially higher (Weimar JX 1, 32 In. 9-33 In. 9; Barlet JX 1, 58 In. 13-59 In. 2; See JX 3, PX 136 at 57 In, 23-58 In. 10; JX 3, JX 9 at 35 In. 24-36 In. 17; JX 3, PX 8 at 24 In. 6-25 In. 5). 497. Some vinyl composition or resilient tile manufacturers use small amounts of homopolymer in their products. Armstrong, the largest manufacturer of vinyl composition or resilient tile, uses some homopolymer in its flooring products. It uses a much more significant amount of copolymer (Barlet JX 1, 58 In. 5-12). Armstrong has added homopolymer to its tile products in order to obtain certain desirable properties in the tile, not to obtain a lower production cost (Barlet JX 1, 77 In. 15-18). Indeed, because using homopolymer resin would require more production effort, in terms of the amount of heat required and the length of the mixing times, it would slow down the production process and reduce the rate of output of the flooring plant, potentially resulting in significantly higher overall production costs (Barlet JX 1, 58 In. 5 - 59 In. 2, 62 In. 7-21; See JX 3, PX 136 57 In. 23 - 58 In. 10). Thus, Armstrong is at the limit in terms of the amount of suspension PVC homopolymer that it can use in its production of vinyl composition tile (Barlet JX 1, 58 In. 5-19). [##] (Barlet JX 1, 62 In. 22-25, 73 In. 7-13 In Camera). 498. [##] (Marcus CX 209B 4 Jn Camera).

499. [##] (Rawlins CX 197B-C ] 4 In Camera; Rawlins RX 248B-C J 5 In Camera). [##] (Rawlins CX 197B J 4 Jn Camera; Rawlins RX 248B-C { 5 Jn Camera). [##] (Rawlins CX 197B-C J 4 In Camera).

500. [##] (Rawlins RX 248C ] 6-7 In Camera). Mr. Barlet similarly testified that Armstrong has done and continues to do research regarding its tile products, and that, among the many possible developments in its products, there could one day be changes in the composition of its tile products (Barlet JX 1, 78 In. Initial Decision 115 F.T.C.

5-19-In. 1). [##] (Weimar CX 192B ] 4 In Camera; Barlet JX 1, 62 In. 22-25; Rawlins CX 197B { 3 Jn Camera).

501. [##] (Weimar JX 1, 32 In. 3-5; Weimar CX 192C ¥ 5 In Camera; Barlet JX 1, 62 In. 22-25, 73 In. 7-13 In Camera; Rawlins CX 197B-C 4 In Camera; JX 3, PX 136 at 60 In. 21-61 In. 10). 502. Today, nearly all floor tiles are made out of vinyl, although a small amount of asphalt tile is still produced (Goodrich F 165; Disch Dkt. 9159, 673; Dkt. 9159 CX 450). [##] (Goodrich F 166; Disch Dkt. 9159, 673; Dkt. 9159 CX 300Z9 In Camera), [##] (JX 3, PX 4 F 166; Weimar CX 192F-G { 15 In Camera, CX 192G-H 17 In Camera; Dkt. 9159 CX 300Z9 In Camera; Dkt. 9159 RX 51C In Camera). [##] (compare JX 1, Barlet 66 In. 15-21 with Barlet JX 1, 60 In. 7-14), [##] (Weimar CX 192G-H ] 17 In Camera). [##] (Weimar CX 192G-H J 17 In Camera).

503. [##] (Goodrich F 167). [##] (Goodrich F 167; Dkt. 9159 CX 450P; Dkt. 9159 CX 756Z76; Dkt. 9159 RX 51C In Camera; JX 3, PX 136 at 105 In. 13-22). [##] (Disch Dkt. 9159, 673; Dkt. 9159 RX 145ZA49 In Camera; Dkt. 9159 CX 300Z9 In Camera). [##] (Weimar CX 192F-H J 15-17 In Camera). [##] (Dkt. 9159 CX 300Z9 In Camera). While carpeting has aesthetic advantages over viny] tile, it is not as good a product for kitchens, bathrooms, and other hard use areas in the home (Goodrich F 167; Dkt. 9159 CX 756Z76). 504. The price of suspension PVC copolymer resin as a component of the cost of a finished floor tile is relatively small. About 15% to 20% of the composition of a vinyl floor tile is accounted for by PVC resin content. The rest of the tile consists of fillers, calcium carbonate, and other ingredients (Goodrich F 168; Disch Dkt. 9159, 672). Colors are added, and designs and patterns are embossed or engraved on the tile, which further increases the value of the tile product relative to the cost of PVC resin (Disch Dkt. 9159, 672-73). As explained by Mr. Disch: Thes 1 3 5 9 9 1656 2382 97 46 96.615753 prices 1 3 5 9 10 1768 2383 43 36 96.615753 of5 1 3 5 9 11 1822 2384 58 35 96.946228 thes 1 3 5 9 12 1896 2384 94 35 96.957581 resin4 1 3 5 10 0 652 2435 1338 52 -1 5 1 3 5 10 1 652 2435 111 46 96.919853 going5 1 3 5 10 2 783 2436 77 34 96.879845 into5 1 3 5 10 3 880 2437 58 34 96.933090 thes 1 3 5 10 4 958 2437 61 34 96.785400 tiles 1 3 5 10 5 1039 2437 31 35 96.694321 is5 1 3 5 10 6 1091 2438 108 35 96.694321 about5 1 3 5 10 7 1218 2438 48 35 96.965469 405 1 3 5 10 8 1285 2445 100 29 96.845772 cents5 1 3 5 10 9 1406 2450 19 24 96.147308 a5 1 3 5 10 10 1444 2440 133 45 96.543129 pound.5 1 3 5 10 11 1599 2441 29 35 96.443909 It5 1 3 5 10 12 1648 2440 29 36 96.586967 is5 1 3 5 10 13 1703 2442 40 34 96.796257 155 1 3 5 10 14 1765 2448 156 39 96.352150 percent,5 1 3 5 10 15 1943 2443 47 35 96.833244 204 1 3 5 11 0 650 2496 1337 46 -1 5 1 3 5 11 1 650 2500 154 40 96.345497 percent,5 1 3 5 11 2 820 2506 71 35 96.541840 you5 1 3 5 11 3 907 2506 57 24 96.225906 ares 1 3 5 11 4 978 2496 134 46 96.950836 talking5 1 3 5 11 5 1127 2497 21 34 96.345985 65 1 3 5 11 6 1164 2503 35 29 96.345985 to5 1 3 5 11 7 1216 2497 18 35 96.729630 85 1 3 5 11 8 1250 2504 98 29 96.999413 cents5 1 3 5 11 9 1363 2497 43 36 97.001015 of5 1 3 5 11 10 1416 2498 92 36 96.968605 resins 1 3 5 11 11 1525 2499 121 36 96.518303 within5 1 3 5 11 12 1662 2511 19 25 96.677467 a5 1 3 5 11 13 1696 2500 144 36 96.929062 volumes 1 3 5 11 14 1855 2501 43 35 96.281288 of5 1 3 5 11 15 1909 2501 78 35 96.721725 tile (Disch Dkt. 9159, 673; Barlet JX 1, 60 In. 7-23; Weimar JX 1, 35 In. 3-16).

505. Because of the limited potential for substitution of suspension PVC homopolymer for suspension PVC copolymer in viny] floor tiles, because vinyl floor tiles are selected primarily on the basis of OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1145 1010 Initial Decision individual tastes and preferences, and because the cost of PVC resin is a small factor in the price of a finished vinyl tile product, the demand for suspension PVC copolymer resin in floor tiles is inelastic (See Goodrich, slip op. at 74; Weimar JX 1, 42 In. 1-4; JX 3, PX 8 at 29 In. 7-In. 14; JX 3, PX 136 at 75 In. 23 - 76 In. 3). f. The price elasticity of demand for suspension PVC copolymer in LP records is low 506. Phonograph records account for a large percentage of United States suspension PVC copolymer consumption (JX 3, PX 8 at 18 In. 1-5). Phonograph records are produced by the compressionmolding of suspension PVC copolymer resin (Disch Dkt. 9159, 678; See Dkt. 9159 Commission Physical Exhibit 13). 507. [##] (Goodrich F 186; Hill CX 183E J 13 In Camera; Dkt. 9159 CX 45Z4). [##] (Goodrich F 186, 187; Hill CX 183E J 13 In Camera JX 3, PX 8 at 13 In. 6-21; JX 3, JX 9 at 33 In. 15-22; JX 3, PX 11 at 678 In. 2-16; JX 3, PX 136 at 56 In. 18-23; Disch Dkt. 9159, 678; Dkt. 9159 CX 300Z10 In Camera). [##] (Hill CX 183E J 14 Jn Camera; JX 3, PX 8 at 13 In. 6-21; JX 3, JX 9 at 37 In. 25-38 In. 7; JX 3, PX 11 at 678 In. 17-679 In. 1; JX 3, PX 136 at 56 In. 24 - 57 In. 1; See also CX 119S-T In Camera; Silver CX 190B In Camera). Polystyrene has sometimes been used in low-priced applications, such as children's records, where sound quality is not an important factor (Goodrich F 187; Disch Dkt. 9159, 678; Dkt. 9159 CX 45Z4). [##] (Goodrich F 187; CX 119S-T In Camera; Hill CX 183E J 14 In Camera). Thus, for example, Mr. Schaefer of Occidental has testified that, to his knowledge, there are no substitutes for suspension PVC copolymer resin in record-pressing (JX 3, PX 136 at 56 In. 24 - 57 In. 1).

508. Because of the need to use suspension PVC copolymer resin in the manufacture of records, significant increases in the price of copolymer resin would not cause record pressers to shift, in their production processes, from copolymer to either homopolymer or polystyrene (JX 3, PX 136 at 56 In. 24-57 In. 1; JX 3, PX 8 at 22 In. 25-23 In. 25; JX 3, JX 9 at 42 In. 17-25). 509. [##] (JX 3, PX 8 at 26 In. 15-27 In. 11; JX 3, JX 9 at 40 In. 20-41 In. 8; Schaefer JX 3, PX 11 at 678 In. 10-16; JX 3, PX 136 at Initial Decision 115 F.T.C.

65 In. 25-66 In. 9; Disch Dkt. 9159, 678). [##] (Hill CX 183E-F] 15 In Camera; JX 3, PX 8 at 27 In. 1-7). [##] (Hill CX 183E-F] 15 In Camera; JX 3, PX 8 at 27 In. 1-11). [##] (Hill CX 183E-F J 15 In Camera).

510. [##] (Hill CX 183F ¥ 16 Jn Camera; JX 3, PX 8 at 18 In. 16-22; JX 3, FX 9 at 43 In. 1-7). [##] (Hill CX 183F 16 In Camera). Because it is such a small component of the cost of a record, however, an increase in the price of copolymer resin would not have any substantial effect on the demand for records relative to other PVC sound reproduction products (JX 3, PX 8 at 28 In. 21-29 In. 6; IX 3, JX 9 at 42 In. 12-43 In. 11; Schaefer JX 3, PX 11 at 679 In. 2-5; JX 3, PX 136 at 75 In. 23-76 In. 3; Disch Dkt. 9159, 679). Thus, as the Commission concluded in Goodrich, the demand for suspension PVC copolymer resin in records is definitely inelastic (See Goodrich, slip op. at 74), g. Summary of the elasticity of suspension PVC copolymer end products 511. In the two major applications in which it is used, suspension PVC copolymer resin provides distinct performance properties that are important factors affecting its selection as a material, and that tend to make demand for copolymer in these end-use products relatively price inelastic (Kaserman Dkt. 9159, 2373-74: See Goodrich, slip op. at 72). The record also shows that purchasers of the finished products in which suspension PVC copolymer is used tend to select products largely on the basis of non-price considerations such as individual tastes and preferences. In applications where finished products are selected largely on the basis of considerations other than price, changes in suspension PVC copolymer resin prices do not impact the volume of suspension PVC copolymer consumed, and demand for suspension PVC copolymer in these applications is therefore price inelastic. Finally, in records and floor tile, copolymer resin provides such a substantial cost advantage over alternative materials and the cost of the resin is such a small component of the total finished product price, that changes in the price of the resin have little or no impact on the volume of finished products. As a result, the price of suspension PVC copolymer resin can be raised significantly with no resulting substantial threat of OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1147 1010 Initial Decision substitution. Thus, demand for end-use products made from suspension PVC copolymer resin is relatively price inelastic (Kaserman Dkt. 9159, 2313-75).

h. The record shows that overall demand for suspension PVC copolymer is inelastic 512. The record shows that the demand for suspension PVC copolymer overall is inelastic with respect to changes in price. Both complaint counsel's and respondents’ economic experts have so concluded (Kaserman JX 1, 261 In. 21 - 262 In. 2; Harris JX 1, 858 In. 19 - 859 In. 2).

513. Industry members recognize that the existence of alternative materials does place a substantial constraint on the price of suspension PVC copolymer resin.

514. Occidental recognized, at the time of the acquisition, that the reduction in the number of suppliers of suspension PVC copolymer resin had the potential to significantly increase profits (JX 3, PX 12).

515. [##] CH. Wheeler Dkt. 9159, 1753-54; DiLiddo Dkt. 9159, 3255; Dkt. 9159 CX 297Z1-Z2 In Camera; Dkt. 9159 CX 298P; Dkt. 9159 CX 147B).

516. Suspension PVC copolymer producers pay little attention to the prices of other materials in setting their prices for suspension PVC copolymer resin (JX 3, PX 8 at 31 In. 21 - 32 In. 2; JX 3, IX 9 at 26 In. 14-20; Flammer CX 184E J 9).

i. Conclusion 517. Accordingly, it must be found that the demand for suspension PVC copolymer is inelastic. Because suspension PVC copolymer is an intermediate product, the elasticity of demand is a function of: (1) the ability of users of the PVC resin (i.e., fabricators) to substitute other inputs for PVC; (2) the cost share of suspension PVC copolymer resin in the end products in which it is used; and (3) the extent to which users of suspension PVC copolymer products switch to products made from alternative materials in response to changes in the price of PVC copolymer products. The record shows that: (1) Initial Decision 115 F.T.C.

there is no ability of suspension PVC copolymer resin users to employ other materials as an input; (2) the cost share of suspension PVC copolymer is only a relatively small portion of the cost of the products in which it is used; and (3) products made of alternative materials are not close substitutes for suspension PVC copolymer end-use products. As a result of (3), the demand for suspension PVC copolymer end-use products is inelastic. As a result of (1) and (2), the demand for suspension PVC copolymer resin is even less elastic than its end-use products.

518. The fact that demand for suspension PVC copolymer is highly inelastic means that, if industry members collude and raise prices, they would substantially increase their level of profitability. Accordingly, the low price elasticity of demand for suspension PVC copolymer provides producers with both the incentive and the ability to exercise market power.

519. As the record demonstrates, suspension PVC copolymer firms could exercise market power in various ways without significantly affecting the demand for suspension PVC copolymer. Firms could raise prices by a small but significant amount (5-10%) above prices presently in effect, with essentially no product substitutions occurring. And, in fact, firms could raise prices substantially higher than that, before the degree of substitution would make further price increases unprofitable. 4. Dispersion PVC resin a. Introduction 520. [##] (Kaserman JX 1, 345; JX 3, PX 136 at 67, 75-76; van Haaren CX 187E { 15 Jn Camera; Boulay CX 189D J 10-11 Jn Camera JX 3, PX 8 at 38-39; JX 3, JX 9 at 55). The price inelasticity of dispersion PVC resin demand provides further incentive for producers to collude (Kaserman JX 1, 260, 270, 345; Kaserman Dkt. 9159, 2353-55, 2381).

521. Because dispersion PVC is an intermediate (or input) product, the price elasticity of demand for dispersion PVC may be assessed by examining: (1) the ease of substitutability between dispersion PVC and other inputs in the production of the final OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1149 1010 Initial Decision products; (2) the cost share of dispersion PVC in the production of the final products; and (3) the price elasticity of demand for the final products produced from dispersion PVC (See Kaserman JX 1, 260, 270; Goodrich slip op. at 72; Kaserman Dkt. 9159, 2370-71). b. There is limited substitutability of other inputs for dispersion PVC 522. [##] IX 3, PX 8 at 33, 39-40; Boulay CX 189B-C 93-5 In Camera; van Haaren CX 187B-C { 6-7 In Camera). 523. [##] (Id.). [##] (See, e.g., Hill CX 183F-G J 17 In Camera: Flammer CX 184B-F; 74-8, 10; Boyer CX 185B-F J 3-9, 11). Thus, substitution of other materials, including PVC resins other than dispersion PVC in most end-use applications is severely limited. ¢. The cost share of dispersion PVC in its end-use products is low 524. [##] (See Lore JX 1, 180, 183-84: Mason JX 1, 194-95; Boulay CX 189B {[ 3-5 In Camera; JX 3, PX 8 at 39-40, 95-96; JX 3, PX 136 67, 75-76).

525. Value is added to the dispersion PVC resin by the addition of blending PVC resin, plasticizers, stabilizers, and additives before processing (See, e.g., Boyer CX 185B-D ] 3-8). [##] (Lore JX 1, 177, 179; Mason JX 1, 192; Barlet JX 1, 62-64; JX 3, IX 9 at 15, 97-98, 104-05. See Hill CX 183F-G In Camera J 17). 526. Generally, the dispersion PVC resin is blended with a small portion of blending PVC resin, a specialty suspension PVC resin, to impart the necessary properties for each end-use product. 527. Various methods of applying dispersion PVC resin to an end product add further value to the end product. For instance, dispersion PVC resin can be applied to sheet floors and vinyl backed carpet tile by knife coating or reverse roll coating (See JX 3, PX 9 at 97-98; Mason JX 1, 192). Reverse roll coating is generally the preferred method for applying vinyl dispersion PVC to cans and sealants (See Lore JX 1, 177, 179). Molding applications, including dip molding or rotational molding, use a dispersion PVC paste plastisol or organisol to produce products such as beach balls, tool handles, and dish drainers. Slush molding is also a method of applying a dispersion PVC resin formulation to a molded form (See Initial Decision 115 F.T.C.

Lore JX 1, 179; JX 3, JX 9 at 104-05). Each of these dispersion PVC fabrication processes adds value to the final product. These necessary steps for processing dispersion PVC pastes or emulsions insure that the cost share of the dispersion PVC in the final product remains low.

528. The low cost share of dispersion PVC resin in dispersion PVC end use products means that the demand for dispersion PVC resin is significantly less elastic than the demand for the end products themselves (See Kaserman Dkt. 9159, 2375-78). d. The price elasticity of demand for dispersion PVC resin end products is low 529. [##] (See, e.g., JX 3, PX 138; Baker CX 205A-B {[ 1-2; van Haaren CX 187A-B J 2 Jn Camera; JX 3, PX 8 at 38-45; Barlet JX 1, 66 In.22-67 1n.10; Beveridge JX 1, 80-81; Lore JX 1, 177-80; Mason JX 1, 192, 194-95; Boulay CX 189A-B 7 1-3 In Camera). 530. Dispersion PVC products generally have specific properties that distinguish them from products made from other materials. As a result, dispersion PVC products are often chosen on the basis of their properties and not on the basis of changes in the price of the product. Second, where dispersion PVC products are chosen because they offer a cost savings to the purchaser, the cost savings are sufficiently substantial that the dispersion PVC product would still be less expensive than alternative products, even if dispersion PVC resin prices rose by a small but significant amount. And the record shows that customers would continue to purchase dispersion PVC products even if dispersion PVC prices would rise by a small but significant amount.

e. Vinyl resilient sheet flooring 531. Consumers choose flooring for kitchens based on personal preferences. One of the more widely used coverings in a kitchen is viny] resilient sheet flooring, made with dispersion PVC resin. Vinyl resilient sheet flooring accounts for about 33% to 40% of the consumption of dispersion PVC resin (JX 3, PX 138; Kaserman JX 1, 268; JX 3, PX 8 at 39-40).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1151 1010 Initial Decision 532. [##] (See van Haaren CX 187C {7 In Camera). A 5-percent increase in the price of dispersion PVC resin would not lead consumers to substitute other flooring products or purchase fewer sheet floors (JX 3, PX 8 at 39). Therefore, the elasticity of demand for vinyl resilient sheet flooring remains low because consumers choose it because of superior properties and personal preference. 533. Additionally, the vinyl dispersion PVC sheet floor is sold to wholesalers at a cost of approximately $3.50 to $9.50 a square yard (Barlet JX 1, 66). The value of the dispersion PVC in this formulation accounts for no more than 10% of the value of the vinyl sheet floor. Many sheet floors sell for a price of between $12 and $25 a square yard (JX 3, PX 8, 38-40). [##] (See Barlet JX 1, 66 In. 22-67 In. 8, 68; Kaserman JX 1, 268 In. 15-20; JX 3, PX 8 at 38 In. 10-39 In. 14; van Haaren CX 187C-D { 7, 9-10 Jn Camera; Beveridge JX 1, 80-81). Therefore, a 5-percent increase in the price of dispersion PVC would increase the cost of a viny] sheet floor by far less than 0.5%, and have essentially no effect on the level of consumption of dispersion PVC in vinyl sheet floors (JX 3, PX 8 at 39). f. Molding end-use segments 534. Major molding end-use segments for dispersion PVC face a low elasticity of demand (Kaserman JX 1, 266 In. 19-267 In. 15; 268 In. 15-20). Can coatings, seals, bottlecap closures, and adhesives and sealants account for about 50% of the dispersion PVC consumed in molding applications, or about 16% of all dispersion PVC consumed in the United States. Vinyl automotive products account for about 7% of all dispersion PVC consumed in the United States (Kaserman JX 1, 266 In. 19-267 In. 15; 268 In. 15-20; See JX 3, PX 6 at 44 In. 2-18, 45 In. 18-21; JX 3, JX 9 at 95 In. 8-10; JX 3, PX 138).

(1) Automotive applications 535. [##] (Boulay CX 189B-C J 3-5 Jn Camera). [##] (Boulay CX 189D { 11 Jn Camera; Goodrich F 192; Becker 1267-68). 536. [##] (Boulay CX 189D {11 In Camera). [##] (/d.). [##] (Boulay CX 189D { 11 Jn Camera).

Initial Decision 115 F.T.C.

537. [##] (Boulay CX 189B ¥ 3 In Camera). [##] (/d.). [##] (Ud.). [##] (Boulay CX 1898, C, D { 3, 6, 11 In Camera; See Kaserman JX 1, 268 In. 15-20).

(2) Vinyl dispersion coating 538. Vinyl dispersion coating principally consists of dispersion PVC resin, but contains additives such as pigments, stabilizers, and solvents (Lore JX 1, 177, 179-80). Vinyl dispersion coating, used for coating cans or sealing gaskets inside bottlecaps, offers the attractive feature of costing less money than substitute plastic resins, and creating less air pollution than potential substitute materials (Lore JX 1, 180, 183-84; See JX 3, JX 9 at 103-04). 539. Vinyl dispersion coating costs approximately $12 a gallon, of which only $3 to $4 consists of the cost of dispersion PVC resin (Lore JX 1, 183-84). Vinyl dispersion coating has found a niche where it is strongly preferred by purchasers (Lore JX 1, 180). 540. Therefore, a 5-percent increase in the price of dispersion PVC resin would lead to a price increase of between $.15 and $.20 a gallon for vinyl dispersion PVC coating (Lore JX 1, 183 In. 16-184 In. 4, 184 In. 24-185 In. 14). This small increase is not likely to affect the amount of finished cans or sealants or vinyl coated bottlecaps sold, and will not affect the level of demand for dispersion PVC in vinyl dispersion coatings (Lore JX 1, 180, 182, 183 In. 16-184 In. 4, 184 In. 24-185 In. 14; See Kaserman JX 1, 268 In. 13-20.). g. Vinyl backed carpet tile 541. Vinyl backed carpet tile, produced through a roll coating process, accounts for consumption of about 14 million pounds of dispersion PVC annually, or over 10 percent of dispersion PVC resin used in all coating applications (JX 3, PX 138; Mason JX 1, 192). Vinyl backing for carpet tiles, accounts for approximately 3.2% of all dispersion PVC consumed in the United States (JX 3, PX 138, Kaserman JX 1, 268).

542. Vinyl backed carpet tile is used in commercial applications, such as the flooring for offices. The unique physical properties of vinyl-backed carpet tile allow it to retain a stable share of the OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1153 1010 Initial Decision commercial flooring market (Mason JX 1, 192; JX 3, JX 9 at 95; JX 3, PX 8 at 35). The dispersion PVC resin accounts for about 20% of the cost of the vinyl-backing used for carpet tile (Mason JX 1, 194-95). Fixed proportions of the dispersion PVC resin formulation are required to maintain the essential properties needed for dispersion PVC-based carpet tiles.

543. Because vinyl backing costs about $3.50 to $4.75 a square yard, a 10-percent increase in the price of dispersion PVC resin would raise costs only 3.5 cents to 5 cents a square yard (Mason JX 1, 194-95). Because of the additional value added in transforming the vinyl-backing into finished carpet tile, the corresponding increase in the price of finished vinyl-backed carpet tile would proportionately be substantially less than the increase in the vinyl-backing. 544. Consequently, a 10-percent increase in the price of dispersion PVC would lead to very little loss of sales to alternative carpet tiles, because of the preferred physical characteristics and the low cost share accounted for by dispersion PVC resin in viny]-backed carpet tile. Therefore, demand in this end-use segment would be relatively insensitive to price changes (Mason JX 1, 192-94, 195 In. 23-196 In. 1; Kaserman 268 In. 13-20).

h. Coated fabrics 545. Coated fabrics accounted for almost 25% of dispersion PVC resin consumption prior to the acquisition (Kaserman JX 1, 266 In. 19-267 In. 15; JX 3, PX 8 at 43 In. 16-23). The coated fabric business in the United States has been declining, however, due to a shift away from coated fabrics in automobiles and to imports of apparel products (Goodrich F 192; Becker Dkt. 9159, 1267-68; JX 3, PX 8 at 39-40, 95). Therefore, less dispersion PVC is presently being used in fabric coating (JX 3, PX 8 at 39-40, 95; JX 3, PX 9 at 94). The market for vinyl-backed carpet tile coating applications previously discussed, has not declined.

546, Industry observers acknowledge that the price of dispersion PVC resin has had no impact on the level of imports of finished apparel goods entering this country from the Far East (JX 3, PX 8 at 95; JX 3, JX 9 at 94), and has had no impact on customers' selection of cloth seats over vinyl in new automobiles (Goodrich F 192; Becker Initial Decision 115 F.T.C.

Dkt. 9159, 1267-68). Mr. Disch observed that large5 1 3 1 1 9 1815 613 150 35 96.691406 modern4 1 3 1 2 0 628 671 1338 48 -1 5 1 3 1 2 1 628 674 163 45 96.430283 capacity5 1 3 1 2 2 807 673 62 34 96.982010 has5 1 3 1 2 3 885 673 91 34 96.832176 been5 1 3 1 2 4 991 672 90 35 96.870987 built5 1 3 1 2 5 1096 682 166 25 96.249199 overseas5 1 3 1 2 6 1279 678 34 29 96.954956 to5 1 3 1 2 7 1328 672 158 44 96.900177 produces 1 3 1 2 8 1501 671 126 35 95.968056 coated5 1 3 1 2 9 1642 671 145 41 96.857597 fabrics,5 1 3 1 2 10 1801 671 67 35 96.426636 Far5 1 3 1 2 11 1881 672 85 34 96.573524 East4 1 3 1 3 0 629 729 1336 48 -1 5 1 3 1 3 1 629 732 67 35 96.199043 ands 1 3 1 3 2 710 731 99 36 96.932144 others 1 3 1 3 3 821 731 130 46 96.897049 places,5 1 3 1 3 4 967 741 40 25 96.938644 so5 1 3 1 3 5 1021 731 13 34 95.894287 I5 1 3 1 3 6 1048 730 98 36 96.472992 thinks 1 3 1 3 7 1159 731 96 34 96.564095 there5 1 3 1 3 8 1267 729 29 36 96.564095 is5 1 3 1 3 9 1310 730 72 35 96.988411 that5 1 3 1 3 10 1395 740 153 36 96.774879 urgency5 1 3 1 3 11 1562 735 35 30 96.025238 to5 1 3 1 3 12 1611 740 106 25 96.491547 moves 1 3 1 3 13 1730 729 25 35 96.944458 it5 1 3 1 3 14 1769 729 99 35 94.634521 here (JX 3, PX 8 at 95). Therefore, a 10-percent increase or decrease in the price of dispersion PVC would not likely affect the level of imports of finished, imported goods (JX 3, PX 8 at 95, 39-40; See JX 3, JX9 at 103).

i. Overall assessment 547. Dr. Kaserman observed that: (1) Customers of dispersion PVC cannot vary the proportions of dispersion PVC resin or substitute other raw materials for dispersion PVC; (2) there are few fabricated substitute products to make significant inroads into the use of dispersion PVC-based products; and (3) the cost share of dispersion PVC resin does not account for more than 30% of the cost of any of the dispersion PVC end-uses (Kaserman JX 1, 267 In. 16-269 In. 18). Therefore, Dr. Kaserman concluded, a small but sustained nontransitory price increase of 5-percent will probably not affect the demand for dispersion PVC based end products (Kaserman JX 1, 267 In. 16-269 In. 18).

548. Due to the inability of most users of dispersion PVC resin to substitute other raw materials for dispersion PVC, the low elasticity of demand for dispersion PVC based finished goods, the inability of other fabricated products to make significant inroads into the sale of dispersion based PVC end products, and the small cost share of finished dispersion based PVC end products accounted for by dispersion PVC resin, a 5-percent price increase is unlikely to significantly affect the level of demand for dispersion PVC finished products, and would have little effect on the level of demand for dispersion PVC (JX 3, PX 136 at 67, 75-76; Kaserman JX 1, 267 In. 16-269 In. 18; See JX 3, JX 9 at 103).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1155 1010 Initial Decision B. The Homogeneity of PVC Resins Facilitates Price Coordination in Each of the Relevant PVC Markets 549. In Goodrich, the Commission found, in contrast.to VCM, that mass and suspension PVC resins are relatively5 1 4 1 2 9 1557 827 328 53 75.440758 heterogeneous™ (Goodrich, slip op. at 113). The Commission concluded, on the basis of the record in Goodrich, that the higher degree of heterogeneity of PVC, together with other factors, could make collusion more difficult at the marginal level of moderate concentration presented in Goodrich.

550. Economists generally classify products as either homogeneous or differentiated (Kaserman Dkt. 9159, 2410). If a product is relatively homogeneous, the purchasers of the product view the output of the different firms as being equivalent (Kaserman Dkt. 9159, 2410). They do not value the output of one firm much higher than they value the output of another firm. If the product is differentiated, one firm's output has a much higher value to the consumer than another firm's output (Kaserman Dkt. 9159, 2410). Product homogeneity may also be affected by the extent to which products change over time, the degree to which pricing is complicated by different transportation charges to customers, or the degree to which production is customized (See Scherer, Industrial Market Structure and Economic Performance, 200-01 (1980)). 551. It is easier for firms to coordinate their actions when a homogeneous product is involved. If a product is relatively homogeneous, suppliers need to coordinate on fewer dimensions. Because all firms’ products are alike, it would be easier to reach agreement on a collusive price. Furthermore, by simplifying coordination, product homogeneity contributes to the likelihood that 4 Two Commissioners agreed with the Initial Decision's finding, however, that, within well recognized grades, mass and suspension PVC is a homogeneous product, noting: PVC5 1 7 1 2 4 927 2492 25 29 92.832565 is5 1 7 1 2 5 964 2492 139 38 92.415359 boringly5 1 7 1 2 6 1115 2493 252 37 93.555595 homogeneous. Goodrich, separate statement of Commissioners Azcuenaga and Bailey, concurring in part and dissenting in part, at 7. That mass and suspension PVC was found by the Commission to be “considerably more heterogeneous" than VCM (Goodrich, slip op. at 66; See concurring & dissenting statement at 7), is hardly surprising given the extraordinarily degree of homogeneity of VCM. Dr. Kaserman observed that VCM is the quintessential homogeneous product (Kasserman Dkt. 9159, 2413-18). Initial Decision 115 F.T.C, firms will be able to maintain a collusive arrangement (Kaserman Dkt. 9159, 2411-12). As the Commission noted in Goodrich, maintaining5 1 3 1 3 2 925 737 20 25 95.794090 a5 1 3 1 3 3 957 737 197 25 95.794090 consensus5 1 3 1 3 4 1167 726 169 36 96.488838 becomes5 1 3 1 3 5 1350 737 98 25 96.488838 more5 1 3 1 3 6 1460 726 156 36 95.739609 difficult5 1 3 1 3 7 1629 728 104 34 96.684021 when5 1 3 1 3 8 1745 727 26 35 96.859955 it5 1 3 1 3 9 1784 734 93 28 96.631775 must5 1 3 1 3 10 1890 738 109 24 96.474869 cover4 1 3 1 4 0 660 785 1337 46 -1 5 1 3 1 4 1 660 785 64 36 94.412888 full5 1 3 1 4 2 738 785 89 36 96.996643 lines5 1 3 1 4 3 841 785 42 36 97.005219 of5 1 3 1 4 4 892 785 164 46 96.879601 products5 1 3 1 4 5 1071 785 42 36 96.949738 of5 1 3 1 4 6 1123 785 145 46 96.566277 varying5 1 3 1 4 7 1282 785 172 46 96.805107 qualities,5 1 3 1 4 8 1468 785 151 36 96.624886 because5 1 3 1 4 9 1633 796 19 25 96.909943 a5 1 3 1 4 10 1666 785 81 36 96.756721 firms 1 3 1 4 11 1760 796 66 25 96.913673 cans 1 3 1 4 12 1840 785 157 46 96.818375 disguise4 1 3 1 5 0 659 844 1155 47 -1 5 1 3 1 5 1 659 845 44 35 96.778549 its5 1 3 1 5 2 718 844 127 36 96.252510 efforts5 1 3 1 5 3 861 850 36 29 96.387878 to5 1 3 1 5 4 912 845 103 34 96.705887 cheat5 1 3 1 5 5 1030 854 99 25 96.959373 more5 1 3 1 5 6 1144 844 132 46 94.078018 easily (Goodrich, slip op. at 65).

552. No product is perfectly homogeneous in all respects (Kaserman Dkt. 9159, 2412-13). And, a product does not have to be perfectly homogeneous for collusion to occur (Kaserman Dkt. 9159, 2412). The issue is whether the product is relatively homogeneous on the continuum from perfect homogeneity to complete heterogeneity (Kaserman Dkt. 9159, 2412-13). 553. The DOJ Merger Guidelines note that there is no objective index or empirical basis for drawing fine distinctions among cases (DOJ Merger Guidelines J 4493.411 at 6879-16). Accordingly, except in extreme instances, the factor of product homogeneity or relative heterogeneity is accorded little weight under the Guidelines (Id.).

554. Mass and suspension PVC resins are sold in different well-established grades, distinguished by recognized differences in particle size, molecular weight, and purity (Goodrich F 85; Disch Dkt. 9159, 632, 634-35; Becker Dkt. 9159, 1255-57). In the purchase of mass and suspension PVC resins, buyers select the grade of resin appropriate to specific production processes and end-use products (Goodrich F 85; Goodrich, slip op. at 67; Disch Dkt. 9159, 634; DS Admission 166, Dkt. 9159 CX 6H).

555. The fact that PVC resins may be sold in a number of grades does not, however, significantly reduce its homogeneity (Kaserman Dkt. 9159, 2415-17). The use of grades has less significance for heterogeneity when, as in the mass and suspension PVC market, they arise from differing requirements by classes of buyers, rather than differences among sellers for the business of any particular buyer (Kaserman Dkt. 9159, 2415-17).

556. Within grades, mass and suspension PVC resins are relatively homogeneous products (Kaserman Dkt. 9159, 2413-17). Mr. Schaefer explained that customers mainly purchased on the basis of price:

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1157 1010 Initial Decision JUDGE HOWDER: Are sales made solely on the basis of price? Are there any other considerations such as delivery or some type of customer loyalty? THE WITNESS: There isn't much of it, ] am afraid. There is a price for a quality and that is why we talk about the pipe price for that quality. For general purpose quality or film quality, the prices are different, but it is difficult, let's say, to get any kind of a premium at a given quality level. Now, other things, terms and conditions they are a factor to my mind. They are really just another form of price because there is a cost of money there you can relate right back to the selling price. JUDGE HOWDER: For example, you have your salesmen making these calls. Do they do so on a regular basis to regular customers? THE WITNESS: Yes, they do.

JUDGE HOWDER: For example, promise to keep their inventories filled with the proper pipe sizes, this kind of thing and sort of look after their interests? THE WITNESS: They do. And there is a degree of customer loyalty in this business but I would characterize it more as one that will give you an opportunity to meet the price in most cases rather than a willingness to pay a premium.

(Schaefer Dkt. 9159, 1202-03).

557. As the Commission recognized in Goodrich, most mass and suspension PVC resin grades, such as pipe and general purpose grades, are considered “commodity” products (Goodrich, slip op. at 66; Goodrich F 87; Dkt. 9159, 725; Dkt. 9159 CX 406Z6). Commodity grade resins amount to approximately 75 percent or more of mass and suspension PVC sales (Goodrich, slip op. at 66-67; Goodrich F 87; compare Weber Dkt. 9159, 1795 (75%) and Klass Dkt. 9159, 4055 (increasing dependence on pipe)). The commodity grades are considered to be me-too products, with no real claims that one supplier's resin is better than another supplier’s resin (Goodrich slip op. at 67; Goodrich F 87; Disch Dkt. 9159, 719, 725; See also Becker Dkt. 9159, 1331). Customers will switch suppliers because of small differences in price (Goodrich F87, See Disch Dkt. 9159, 707). No supplier can maintain a premium price for its grade over those of other suppliers (Goodrich, slip op. at 67; Goodrich F87; JX 3, PX 6 at 105 In. 1-13; Becker Dkt. 9159, 1264-65; Schaefer Dkt. 9159, 1139, 1202-03). Occidental recognizes that “[p]rice is the Initial Decision 115 F.T.C.

primary selling tool for suspension resins” (JX 3, PX 13 at 452734). Even Dr. Klass, respondents’ economic expert in Goodrich, concluded that commodity grade resins are close to being physically homogeneous (Klass Dkt. 9159, 5363).

558. Some mass and suspension PVC resin grades, such as medical grade resins, are called specialty grades in the industry (Goodrich F 88; Becker Dkt. 9159, 1263; H. Wheeler Dkt. 9159, 1750-51). [##] JX 3, PX 47; JX 3, PX 48; See DiLiddo Dkt. 9159, 3374-75; Dkt. 9159 RX 152Z6 In Camera). [##] (DiLiddo Dkt. 9159, 3374-75; See also Dkt. 9159 RX 152Z6 In Camera). ("Specialty" PVC resins are specialty chemicals in a limited sense"). Suppliers are not able to maintain a price premium over the price of a similar grade resin of competing suppliers (Goodrich F 88; JX 3, PX 8, 118 In. 25-119 In. 2; Becker Dkt. 9159, 1264-65; H. Wheeler Dkt. 9159, 1750-51).

559. Moreover, mass and suspension PVC resins have become more homogeneous since the close of the record in Goodrich, and are becoming increasingly homogeneous over time. There has been a trend for mass and suspension PVC producers to reduce the number of grades they offer for sale (JX 3, PX 11 635 In. 10 - 636 In. 1, 647 In. 15 - 648 In. 4). Some firms produce only one grade (JX 3, PX 11, 635 In. 10-20).

560. Suspension PVC copolymer resins are sold in primarily two grades for its major end-use markets, i.e. record grade and flooring grade. Record grade copolymer resin commands a premium over flooring grade (JX 3, PX 9 at 23 In. 14-24, 18 In. 15-22). This premium is based primarily on the more stringent quality requirements of purchasers of record grade resin (/d.). 561. Suspension PVC copolymer resin is considered to be a commodity product, because there are little differences among competitive products, and because products are available from a number of different suppliers (Beveridge JX 1, 85 In. 8-10; JX 3, PX 6, 104 In. 14 - 105 In. 13; JX 3, PX 7, 13 In. 7 - 14 In. 15; JX 3, PX 9, 32 In. 15-21; JX 3, PX 8, 10 In. 24 - 11 In. 12; JX 3, PX 48). Although copolymer resin is sold in two different grades, there is, within grade, little difference among the products offered by different producers in terms of price, and in terms of physical and chemical properties (JX 3, PX 6, 105 In. 1-6; JX 3, PX 8, 10 In. 24 - 11 In. 12, OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1159 1010 Initial Decision 118 In. 12-17; JX 3, PX 48). No supplier can maintain a price premium for its grade over an equivalent grade from competing suppliers (JX 3, PX 6 at 105 In. 7-13; JX 3, PX 9 at 32 In. 15-21; JX 3, PX 8 at 10 In. 24 - 11 In. 12; JX 3, PX 7 at 14 In. 1-5). 562. Dispersion PVC resins are sold in a number of grades, depending primarily on the requirements needed for various production processes and end-use products (JX 3, PX 9 at 88 In. 3-15; JX 3, PX 32). General purpose grade dispersion PVC resin accounts for approximately half of all dispersion resin sales (JX 3, PX 7 at 13 In. 7-18), and the other grades will differ depending upon the end-use in which they are needed (/d.). 563. Dispersion PVC resins have also been characterized as commodity products (JX 3, PX 6 at 104 In. 14 - 105 In. 13; JX 3, PX 7, 13 In. 7 - 14 In. 15). As in the case of mass and suspension PVC resins and suspension PVC copolymer resins, dispersion PVC resin, although it is sold in different grades, is relatively homogeneous within grade (JX 3, PX 32). There is little difference among the products offered by different producers in terms of price, and in terms of chemical and physical properties. No supplier can command a price premium for its dispersion PVC resin over an equivalent grade product of another supplier (Beveridge JX 1, 89 In. 24 - 90 In. 2; JX 3, PX 6 at 41 In. 21 - 42 In. 7; IX 3, PX 8 at 10 In. 24 - 11 In. 12; IX 3, PX 7 at 14 In. 1-5). Producers selling dispersion PVC for use in a particular end-use application generally charge the same price (JX 3, PX 6 at- 41 In. 21 - 42 In. 7; JX 3, PX 32). Within an end-use, customers will tend to switch among approved suppliers in response to small differences in price (Mason JX 1, 202 In. 25 - 203 In. 4). Thus, although dispersion PVC resins are less homogeneous in nature than mass and suspension PVC resins or suspension PVC copolymer resins, dispersion PVC resin is itself a relatively homogeneous product (JX 3, PX 8 at 10 In. 24 - 11 In. 12). In any event, to the extent that dispersion PVC resin is the least homogeneous product among the three relevant product markets, it is likely that, because of the highly concentrated nature of this market, producers would have little trouble overcoming obstacles to coordination that product variations may present (cf. Goodrich, slip op. at 77). 564. In Goodrich, the Commission stated that the crucial5 1 3 4 1 10 1764 2725 101 46 96.661446 point4 1 3 4 2 0 528 2781 1335 47 -1 5 1 3 4 2 1 528 2781 108 35 96.713814 about5 1 3 4 2 2 651 2782 268 45 96.366638 heterogeneity5 1 3 4 2 3 936 2782 29 35 96.981522 is5 1 3 4 2 4 982 2782 72 35 96.688805 that5 1 3 4 2 5 1070 2782 25 35 96.888184 it5 1 3 4 2 6 1111 2782 247 46 96.262947 substantially5 1 3 4 2 7 1374 2783 233 45 96.675705 complicates5 1 3 4 2 8 1624 2783 58 35 93.301445 thes 1 3 4 2 9 1698 2783 165 35 92.387665 determi- Initial Decision 115 F.T.C.

nation and enforcement of consensus prices" (Goodrich, slip op. at 68, n.151). As the Commission noted [i]nstead5 1 3 1 2 8 1664 675 42 35 96.698128 of5 1 3 1 2 9 1721 676 236 46 95.921463 establishing5 1 3 1 2 10 1977 687 19 24 96.702499 a4 1 3 1 3 0 660 732 1334 47 -1 5 1 3 1 3 1 660 733 113 44 96.985748 singles 1 3 1 3 2 788 732 96 45 96.928856 prices 1 3 1 3 3 898 732 57 35 96.934891 for5 1 3 1 3 4 969 743 19 24 96.998962 a5 1 3 1 3 5 1004 732 115 45 96.867210 singles 1 3 1 3 6 1134 733 271 45 96.412994 homogeneous5 1 3 1 3 7 1420 734 160 45 96.943741 product,5 1 3 1 3 8 1597 734 101 34 96.873833 firms5 1 3 1 3 9 1714 740 95 29 96.459885 must5 1 3 1 3 10 1823 734 171 35 96.786263 establish4 1 3 1 4 0 659 791 1336 47 -1 5 1 3 1 4 1 659 791 68 35 96.665596 ands 1 3 1 4 2 745 791 169 35 95.380165 maintains 1 3 1 4 3 933 801 19 25 96.664360 a5 1 3 1 4 4 969 791 118 34 96.844078 whole5 1 3 1 4 5 1105 791 109 35 96.430489 series5 1 3 1 4 6 1232 791 42 35 96.736588 of5 1 3 1 4 7 1286 791 115 45 96.483223 prices5 1 3 1 4 8 1419 791 56 35 96.483223 for5 1 3 1 4 9 1491 802 19 25 96.892082 a5 1 3 1 4 10 1527 792 118 35 96.715370 whole5 1 3 1 4 11 1663 792 109 35 96.557129 series5 1 3 1 4 12 1790 792 42 35 96.765350 of5 1 3 1 4 13 1845 793 150 45 96.778725 product4 1 3 1 5 0 658 849 1321 46 -1 5 1 3 1 5 1 658 850 145 45 87.976273 grades (/d.; See DOJ Merger Guidelines J 4493.411, at 6879-16). 565. As the Commission has stated, however, anticompetitive4 1 3 2 2 0 657 966 1335 47 -1 5 1 3 2 2 1 657 967 157 35 95.705391 conducts 1 3 2 2 2 829 977 65 25 95.705391 cans 1 3 2 2 3 910 967 69 35 96.416107 ands 1 3 2 2 4 995 967 63 35 96.416107 has5 1 3 2 2 5 1074 967 171 35 96.413788 occurred5 1 3 2 2 6 1261 966 84 36 96.844009 with5 1 3 2 2 7 1361 974 138 39 96.778725 respects 1 3 2 2 8 1514 974 36 28 96.988808 to5 1 3 2 2 9 1567 968 84 45 95.926949 only5 1 3 2 2 10 1667 968 132 35 96.745949 certain5 1 3 2 2 11 1816 968 176 35 96.450829 variables4 1 3 2 3 0 657 1024 1335 47 -1 5 1 3 2 3 1 657 1025 35 34 96.979134 in5 1 3 2 3 2 706 1025 58 34 96.979134 thes 1 3 2 3 3 778 1025 133 34 96.470467 overall5 1 3 2 3 4 925 1024 229 47 95.997452 competitive5 1 3 2 3 5 1168 1025 190 46 95.997452 landscape5 1 3 2 3 6 1372 1035 90 25 96.347633 even5 1 3 2 3 7 1476 1025 104 35 96.668091 when5 1 3 2 3 8 1594 1025 232 46 96.752945 competitions 1 3 2 3 9 1840 1025 152 36 96.780289 remains4 1 3 2 4 0 657 1083 1335 45 -1 5 1 3 2 4 1 657 1083 83 36 96.900093 with5 1 3 2 4 2 754 1090 135 38 96.832611 respects 1 3 2 4 3 902 1089 35 29 96.889435 to5 1 3 2 4 4 951 1083 98 36 96.846748 others 1 3 2 4 5 1062 1083 190 36 95.669617 variables (Hospital Corp. of America, 106 FTC 361, 508 (1985)). In HCA, the Commission noted that competitors could collude on different aspects of the hospital services market such as, for example, radiology, or could collude to restrict credit terms (HCA, 106 FTC at 507-08).

566. Similarly, within each of the relevant markets, producers could collude on certain grades of resin, or could collude on other aspects of competition, such as plant expansions, credit terms or service levels. The Commission therefore, reaffirmed in Goodrich that 'agreements5 1 3 3 5 3 1013 1620 37 24 96.916603 as5 1 3 3 5 4 1068 1616 36 28 96.896240 to5 1 3 3 5 5 1122 1609 45 35 96.721352 all5 1 3 3 5 6 1185 1616 139 39 96.604004 aspects5 1 3 3 5 7 1342 1608 41 36 96.913139 of5 1 3 3 5 8 1396 1609 233 46 96.343735 competitions 1 3 3 5 9 1648 1620 57 24 96.768654 ares 1 3 3 5 10 1721 1617 62 27 96.396393 not5 1 3 3 5 11 1799 1620 191 35 96.818977 necessary4 1 3 3 6 0 655 1668 1334 45 -1 5 1 3 3 6 1 655 1669 55 35 96.615555 for5 1 3 3 6 2 722 1668 169 36 96.839943 effective5 1 3 3 6 3 904 1668 178 36 96.792824 collusion5 1 3 3 6 4 1096 1674 36 29 97.005783 to5 1 3 3 6 5 1145 1668 80 35 96.602951 takes 1 3 3 6 6 1238 1668 101 45 96.867447 places 1 3 3 6 7 1354 1668 66 35 96.379234 ands 1 3 3 6 8 1435 1674 35 29 96.379234 to5 1 3 3 6 9 1483 1668 90 35 96.822929 have5 1 3 3 6 10 1588 1679 19 24 96.425934 a5 1 3 3 6 11 1620 1668 164 45 96.372139 negatives 1 3 3 6 12 1798 1668 132 45 96.834496 impacts 1 3 3 6 13 1944 1679 45 23 96.796379 on4 1 3 3 7 0 654 1725 1337 47 -1 5 1 3 3 7 1 654 1726 251 46 57.990715 competition.’5 1 3 3 7 2 919 1726 107 40 95.980705 HCA,5 1 3 3 7 3 1047 1725 65 36 95.980705 1065 1 3 3 7 4 1127 1725 87 36 96.136024 FTC5 1 3 3 7 5 1229 1732 33 28 96.934746 at5 1 3 3 7 6 1276 1725 82 41 96.488243 508;5 1 3 3 7 7 1373 1725 137 35 96.488243 accords 1 3 3 7 8 1524 1725 185 40 96.632187 Catalano,5 1 3 3 7 9 1727 1726 69 34 93.249298 Inc.5 1 3 3 7 10 1816 1737 26 23 93.221336 v.5 1 3 3 7 11 1863 1726 128 44 96.877876 Target4 1 3 3 8 0 653 1783 1336 45 -1 5 1 3 3 8 1 653 1785 109 38 93.190277 Sales,5 1 3 3 8 2 780 1785 84 39 90.937256 Inc.,5 1 3 3 8 3 879 1784 71 34 96.402283 4465 1 3 3 8 4 965 1784 83 34 95.935081 U.S.5 1 3 3 8 5 1065 1783 161 35 95.935081 648-6505 1 3 3 8 6 1242 1783 125 43 95.306580 (1980)5 1 3 3 8 7 1396 1784 217 44 96.677193 (agreements 1 3 3 8 8 1627 1790 35 28 96.381729 to5 1 3 3 8 9 1677 1783 118 35 96.381729 refuses 1 3 3 8 10 1810 1790 35 28 96.828400 to5 1 3 3 8 11 1861 1783 128 35 96.445549 extend4 1 3 3 9 0 653 1841 1064 46 -1 5 1 3 3 9 1 653 1842 111 34 96.388458 credits 1 3 3 9 2 775 1854 70 33 96.758331 pers 1 3 3 9 3 856 1853 39 23 96.928490 se5 1 3 3 9 4 910 1842 157 44 96.454430 illegal) (Goodrich, slip op. at 70 n.155).

567. [##] (Alberti CX 199B J 2 Jn Camera). [##] (Disch RX 258D-E J 11 Jn Camera; Disch RX 258I-J J 23 In Camera; Disch RX 262B 7 5 In Camera). [##] (RX 258Z83 In Camera). [##] (Clark RX 254A-C J 5-8 In Camera).

568. Moreover, there are indications in the record that collusion as to certain grades of resin could well be successful in the relevant markets. Mass and suspension PVC resin is primarily sold as pipe-grade, and as a limited number of other commodity grades (CX 85; CX 86; CX 87; CX 88; CX 89; CX 90; CX 92; CX 93A). These resin grades, which together account for the large majority of mass and suspension PVC resin sales, are each sold at one market price (See, e.g., CX 92). Because these resin grades account for the large majority of mass and suspension PVC resin sales, public price announcements are generally limited to the price of these grades (Id.). As a result, mass and suspension PVC producers need not regularly maintain and coordinate a schedule of several different OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1161 1010 Initial Decision prices for different grades. Instead, producers need only coordinate on the pricing of a limited number of commodity grade resins. Indeed, coordination on the price of only one grade of mass and suspension PVC resin, i.e., pipe-grade resin, would be quite profitable for mass and suspension PVC producers, given that this end-use application is the single largest end use of mass and suspension PVC resin, accounting for over 40% of mass and suspension PVC demand (Goodrich, slip op. at 18; CX 43E). These factors facilitate the coordination of pricing among mass and suspension PVC producers.

569. [##] (RX 95 In Camera; JX 3, PX 9, 26 In. 14-20). As Mr. Stevens, Director of Marketing for Tenneco, testified, thea 1 3 2 3 0 525 1320 1337 58 -1 5 1 3 2 3 1 525 1331 213 47 96.389084 suspension5 1 3 2 3 2 752 1331 135 35 96.915939 markets 1 3 2 3 3 899 1329 30 36 94.118866 is5 1 3 2 3 4 944 1328 123 36 94.118866 driven5 1 3 2 3 5 1081 1327 133 44 96.898918 strictly5 1 3 2 3 6 1228 1326 47 45 96.886810 by5 1 3 2 3 7 1289 1325 84 46 96.831680 pipes 1 3 2 3 8 1386 1323 170 37 95.602386 demand (JX 3, PX 9 at 26 In. 19-20; accord Klass Dkt. 9159, 4062-63). As the price of pipegrade resin increases, the prices of other grades of resin increase to a level incrementally greater than the price of pipe-grade resin (See CX 92; CX 93A; RX 293B; RX 297B; RX 300B; RX 301B; RX 303C, RX 305B-C, RX 306C; RX 310D).

570. Thus, mass and suspension PVC producers need not maintain a complicated schedule of prices for their resins. For example, Georgia-Pacific (now Georgia-Gulf) issued a schedule of prices for 18 different numbered mass and suspension PVC resins, with the distinct numbers designating resins with specified inherent viscosities (CX 93B). The company maintained a total of only three different prices for the 18 different resins, however, with pipe-grade resin the lowest priced resin, general purpose-grade resin priced one cent higher and film-grade priced an additional one cent above (See also JX 3, PX 27; CX 217A; JX 3, PX 26; JX 3, PX 37). [##] (See, e.g., Dkt. 9159 RX 922A In Camera; Dkt. 9159 RX 924A In Camera, Dkt. 9159 RX 925A In Camera; Dkt. 9159 RX 926A In Camera).

571. [##] (RX 197M In Camera). [##] (RX 197M In Camera). (##] (RX 1S Jn Camera), [##] (RX IT, 1V In Camera). Moreover, the higher profits associated with coordinated pricing across the commodity segment of the overall mass and suspension PVC market would not, because of the higher cost of producing specialty resins in small reactors, be defeated through competition from specialty resins (See HCA, 106 FTC at 508).

Initial Decision 115 F.T.C.

572. [##] (See CX 4A-Z518 In Camera) [##] This situation is directly analogous to the situation in HCA, where the Commission found that, because of limited gains in areas other than the area affected by the collusive agreement, such cheating would not dissolve the profits to be garnered from collusion (HCA, 106 FTC at 507-08). Here, because the pipe customer would be distinct from the specialty grade customer, there would be no increased sales to pipe-grade customers through offering a lower price for specialty resins, while at the same time colluding on pipe-grade prices. 573. [##] (Troug CX 202A-B { 1-3 In Camera). 574. Suppliers sometimes provide technical service in conjunction with the sale of PVC (Goodrich F 89; Becker Dkt. 9159, 1331-32). Service is relatively more significant in the sale of specialty grades than commodity grades (Goodrich F89; Goodrich, slip op. at 66-67; Becker Dkt. 9159, 1330-31; Weber Dkt. 9159, 1794-96). For the mass and suspension PVC market and suspension PVC copolymer markets as a whole, service is relatively unimportant (Goodrich F89; Schaefer Dkt. 9159, 1202-03; Kaserman Dkt. 9159, 2413-14; Dkt. 9159 CX 199U). It is likely that relatively more service is provided in the sale of dispersion PVC, but even in that market, the provision of service is relatively unimportant and does not allow for one supplier to maintain a premium for its products (JX 3, PX 13 at 452717; Beveridge JX 1, 89 In. 24 - 90 In. 2; JX 3, PX 6 at 41 In. 21 - 42 In. 7; IX 3, PX 8 at 10 In. 24 - 11 In. 12; JX 3, PX 7 at 14 In. 1-5). The providing of service has only a minor effect on differentiating among suppliers in the United States. It may cause a customer to prefer to continue with its regular supplier and give that supplier a chance to meet competitve offers (Goodrich F 89; Becker Dkt. 9159, 1330-32; Schaefer Dkt. 9159, 1202-03). However, a customer will still switch suppliers for relatively small differences in price (Becker Dkt. 9159, 1330-32; Schaefer Dkt. 9159, 1202-03). 575. The Commission expressly rejected the respondents’ “commercial heterogeneity” argument, observing that factors such as differences in sales terms among producers, including, price, credit terms, method of delivery, and contract length relate to industry performance rather than structure (Goodrich, slip op. at 70 n.155). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1163 1010 Initial Decision 576. The PVC industry is not undergoing significant process or product technological change. Thus, there is no basis for concluding that it is heterogeneous in this fashion (See Goodrich, slip op. at 69). 577. [##] (See, e.g., Dkt 9159 RX 243A In Camera), [##] (See, e.g., Dkt 9159 CX 578A-C In Camera; Dkt. 9159 RX 914; Dkt. 9159 RX 915 In Camera; Dkt. 9159 RX 916 In Camera; Dkt. 9159 RX 926 In Camera) [##] (See, e.g., Dkt. 9159 RX 244 In Camera, Dkt. 9159 CX 184). [##] (Heath CX 178D J 6 In Camera; JX 3, PX 7 at 153 In. 23 - 154 In. 14; See JX 3, PX 62-PX 75). 578. The Commission in Goodrich stated that transportation cost differences could make mass and suspension PVC resins a more heterogeneous product (Goodrich, slip op. at 68). As noted by the Commission, PVC resins are generally sold on a delivered price basis, although it is not clear whether the delivered prices are uniform (Goodrich, slip op. at 80; DS Admission 475; Dkt. 9159 CX 6T; Goodrich Admission 432 Dkt. 9159 CX 4Z28). 579. [##] (See Dkt. 9159 RX 922A In Camera; Dkt. 9159 RX 924A In Camera; Dkt. 9159 RX 925A In Camera; Dkt. 9159 RX 926A In Camera).

580. In any event, to the extent that firms have different costs in transporting resin to customers, these costs are relatively small as a percentage of the delivered price of PVC resins in each of the relevant markets, and therefore would not have a significant effect on the ability of producers in these markets to coordinate pricing (See Scherer, /ndustrial Market Structure and Economic Performance 201). Moreover, as discussed, infra, overall transportation cost differences among mass and suspension PVC producers have narrowed substantially since the time of the Goodrich case, as PVC producers have closed West Coast and North East PVC plants and concentrated capacity expansions in the Gulf Coast. 581. [##] (Dkt. 9159 CX 304G In Camera; Dkt. 9159 CX 317G In Camera; Dkt. 9159 CX 182Z9-10 In Camera; Dkt. 9159 CX 301E In Camera; Dkt. 9159 CX 318H Jn Camera; Dkt. 9159 CX 320D In Camera; Dkt. 9159 RX 15; Dkt. 9159 CX 4Z106-27). PVC resins are also sold through brokers (See H. Wheeler Dkt. 9159, 1758-59; Dkt. 9159 CX 536A). These transactions include specialty grades (Dkt. 9159 RX 15). These kinds of transactions are possible only where differences among suppliers’ products are minimal and, therefore, Initial Decision 115 F.T.C.

show that mass and suspension PVC is a relatively homogeneous product. These arrangements show that neither producers nor consumers consider the differences among products of different producers to be important.

582. [##] (Goodrich F90; Eades Dkt. 9159 1461; Dkt. 9159 CX 518F In Camera; Dkt. 9159 RX 34T; Dkt. 9159 RX 501A; Dkt. 9159 RX 54B Jn Camera), [##] (Dkt. 9159 CX 519F In Camera; Dkt. 9159 RX 54B In Camera), where buyers will switch suppliers over small differences in prices (DiLiddo Dkt. 9159, 3372 [one fourth of a cent]). Mr. Bailey, PVC Product Manager for Occidental, testified that he would5 1 3 2 7 4 957 1206 233 36 96.548042 characterizes 1 3 2 7 5 1204 1206 127 36 96.700462 almost5 1 3 2 7 6 1344 1205 44 36 96.566315 all5 1 3 2 7 7 1403 1205 123 46 96.566315 grades5 1 3 2 7 8 1541 1205 42 35 96.698898 of5 1 3 2 7 9 1592 1205 93 35 95.642883 PVC5 1 3 2 7 10 1699 1215 37 25 96.650154 as5 1 3 2 7 11 1750 1203 250 36 96.334435 commodities4 1 3 2 8 0 663 1262 1339 47 -1 5 1 3 2 8 1 663 1267 68 35 96.573746 ands 1 3 2 8 2 768 1267 73 35 96.470581 that5 1 3 2 8 3 877 1265 121 35 96.219353 would5 1 3 2 8 4 1035 1265 143 34 96.219353 includes 1 3 2 8 5 1214 1263 276 46 96.593132 homopolymer5 1 3 2 8 6 1526 1262 226 46 96.376801 suspension,5 1 3 2 8 7 1790 1262 212 46 96.639076 copolymer4 1 3 2 9 0 664 1320 1335 52 -1 5 1 3 2 9 1 664 1325 212 47 96.604630 suspension5 1 3 2 9 2 890 1324 69 36 96.994308 ands 1 3 2 9 3 972 1323 218 47 92.924011 dispersion (JX 3, PX 6 at 104 In. 14-25). Similarly, Goodrich recognizes the PVC industry to be a commodity business. Purchasers of PVC resins in each of the relevant markets generally select the lowest priced resin grade suitable for a particular processing or end-use requirement (Goodrich F 90; DS Admission 177, Dkt. 9159 CX 6H).

583. Thus, the variations discussed above would not, in any of the relevant markets, prevent coordinated, collusive pricing by producers that would result in the accumulation of substantial profits. C. The Similar Costs of PVC Producers Facilitate Anticompetitive Conduct In Each of the Relevant Markets 584. On the basis of the record in Goodrich, the Commission concluded that PVC5 1 5 1 2 4 1126 2166 214 46 96.304214 productions 1 5 1 2 5 1364 2172 96 29 96.304214 costs5 1 5 1 2 6 1486 2175 85 35 96.797821 vary5 1 5 1 2 7 1597 2163 246 47 96.394928 significantly5 1 5 1 2 8 1868 2173 132 35 96.224686 among4 1 5 1 3 0 663 2221 1337 54 -1 5 1 5 1 3 1 663 2228 221 47 92.617165 producers. The Commission agreed with the findings in the Initial Decision, but concluded that the presence of a substantial amount of small reactor capacity in the mass and suspension PVC market, as well as differences in PVC transportation costs among firms located in different parts of the country, resulted in cost differences among mass and suspension PVC producers that would tend to make it more difficult to reach a collusive consensus price, at least at the existing level of industry concentration (Goodrich, slip op. at 77-81). Thus, given the weak presumption of anticompetitive effects based upon the concentration data, the Commission found the evidence of cost OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1165 1010 Initial Decision differences, together with other factors, sufficient to rebut the presumption (Goodrich, slip op. at 112-13). 585. If firms in a market have similar costs they will be more likely to be able to agree on and maintain a profit maximizing collusive price (Kaserman Dkt. 9159, 2404-05). As the Commission noted in Goodrich, differences in cost functions can make it more difficult to develops 1 3 2 5 4 951 986 20 24 96.680191 a5 1 3 2 5 5 983 974 175 36 96.680191 collusive5 1 3 2 5 6 1170 986 197 25 96.601257 consensus5 1 3 2 5 7 1379 975 126 46 93.443893 price, (Goodrich, slip op. at 77), although at increased levels of concentration, costs 1 3 2 6 10 1672 1034 214 35 96.762047 differences4 1 3 2 7 0 547 1091 1339 49 -1 5 1 3 2 7 1 547 1091 244 36 95.994125 nevertheless5 1 3 2 7 2 810 1102 83 35 96.834526 may5 1 3 2 7 3 910 1098 61 29 96.589752 not5 1 3 2 7 4 988 1097 148 41 96.589752 prevents 1 3 2 7 5 1152 1091 101 37 96.843292 firms5 1 3 2 7 6 1272 1092 93 36 96.383919 from5 1 3 2 7 7 1384 1092 187 48 96.209015 accepting5 1 3 2 7 8 1588 1093 97 47 96.440186 prices 1 3 2 7 9 1704 1103 40 26 97.017700 or5 1 3 2 7 10 1761 1099 125 41 96.662300 output4 1 3 2 8 0 547 1150 1144 47 -1 5 1 3 2 8 1 547 1150 112 35 96.270996 levels5 1 3 2 8 2 676 1151 199 34 96.653275 somewhat5 1 3 2 8 3 889 1150 169 35 96.666405 different5 1 3 2 8 4 1072 1151 94 35 96.014084 from5 1 3 2 8 5 1181 1151 90 34 96.681908 theirs 1 3 2 8 6 1285 1151 148 46 96.073082 optimal5 1 3 2 8 7 1449 1152 131 35 93.148796 levels (/d.).

586. Firms in a market need not have identical costs for collusion to become likely (Kaserman Dkt. 9159, 2405). The question is whether firms' costs are similar (Kaserman Dkt. 9159, 2405). 587. A firm's costs are a function of the technology it uses, the price the firm pays for its inputs and the cost of transporting PVC to purchasers (Goodrich, slip op. at 77-78; See Kaserman Dkt. 9159, 2405-06). The technology determines the relationship between input quantities and output quantities; it determines the quantities of inputs necessary to produce a given amount of output (Kaserman Dkt. 9159, 2406). Total cost is a function of the quantities of inputs and the price of those inputs (Kaserman Dkt. 9159, 2406). 588. [##] (See Dkt. 9159 CX 246 In Camera). 589. In each of the relevant PVC markets, firms today have similar costs of converting VCM into mass or suspension PVC. Firms also have similar costs for VCM (Goodrich, slip op. at 78, n.174). 590. In addition, as the Commission recognized in Goodrich, differences in the cost of transporting PVC to customers would be a factor that could contribute to differences in production costs among PVC producers (Goodrich, slip op. at 80-81). 591. As discussed infra, the record developed since the Goodrich case reveals that transportation costs are in fact only a small part of the cost of the delivered price of PVC, so that differences in the cost of transporting PVC do not result in significant cost differences among PVC producers.

592. As recognized in Goodrich, firms in the mass and suspension PVC market have access to similar PVC manufacturing technology (Goodrich F 195; Jd. at 93; Goodrich, slip op. at 78; Kaserman Dkt. 9159, 2406, 2409). The technology is available, there Initial Decision 115 F.T.C.

are no Significant patents that would give one firm a significant cost advantage over another (Goodrich F 195; Goodrich, slip op. at 78; Klass Dkt. 9159, 4074-75; Kaserman Dkt. 9159, 2409; Schaefer Dkt. 9159, 1212; DiLiddo Dkt. 9159, 3288-89). Thus, PVC5 1 3 1 4 9 1779 797 102 36 96.686188 firms5 1 3 1 4 10 1897 797 91 35 96.673790 have4 1 3 1 5 0 652 856 1335 50 -1 5 1 3 1 5 1 652 872 122 26 96.860779 access5 1 3 1 5 2 797 868 35 29 96.028389 to5 1 3 1 5 3 855 860 136 37 96.520073 similar5 1 3 1 5 4 1010 866 78 30 96.987846 costs 1 3 1 5 5 1108 859 178 47 96.580643 positions5 1 3 1 5 6 1308 858 68 36 96.671394 ands 1 3 1 5 7 1396 857 208 47 91.066612 potentials (Klass Dkt. 9159, 5488-89).

593. [##] (Goodrich F 196; cf. Dkt. 9159 CX 54Z10 In Camera). [##] (Goodrich F 197; DiLiddo Dkt. 9159, 3395; Dkt. 9159 CX 54Z10 In Camera). VCM is used in a fixed proportion to the amount of PVC produced (Disch Dkt. 9159, 643).

594. PVC is manufactured in the United States today in both large and small reactor plants (Disch Dkt. 9159, 638-640). Small reactors range in size from 2,000 to 5,000 gallons (Schaefer Dkt. 9159, 1213). Large reactors range in size from approximately 18,000 to 40,000 gallons (Disch Dkt. 9159, 638-40; Schaefer Dkt. 9159, 1213-1214). Firms have been building large reactor plants in the United States since the early, 1970's (Goodrich F 198; Disch Dkt. 9159, 641). As the Commission recognized in Goodrich, today large reactor plants are the dominant technology, particularly for mass and suspension PVC (Goodrich, slip op. at 78-79). 595. The Commission found, on the basis of the record in Goodrich, that about two-thirds of mass and suspension PVC capacity was large reactor capacity (Goodrich, slip op. at 79). This estimate is likely to be low today. Many of the small reactor plants identified by the Commission in Goodrich have been shut down, indeed because of their high operating costs relative to large reactor plants. As the Commission noted in Goodrich, Diamond Shamrock closed its Deer Park plants after the acquisition (Goodrich, slip op. at 54).

596. Since the close of the record in Goodrich, the Goodrich Long Beach, California, plant has been shut down, as has Borden's Leominster, Massachusetts, plant and Tenneco's Flemington, New Jersey, plant. Formosa is replacing its small reactor capacity at Delaware City, Delaware, with large reactor capacity at Baton Rouge, Louisiana (CX 165A). [##] (JX 3, PX 13 at 452733; RX 197M Jn Camera). Similarly, the Commission recognized in Goodrich that (njo5 1 3 5 8 2 772 2740 81 24 96.975441 news 1 3 5 8 3 872 2728 103 35 95.812180 small5 1 3 5 8 4 993 2733 137 28 96.855476 reactors 1 3 5 8 5 1145 2725 116 46 96.673645 plants5 1 3 5 8 6 1279 2725 91 34 96.575150 have5 1 3 5 8 7 1386 2724 91 34 96.375000 been5 1 3 5 8 8 1493 2722 89 35 96.154602 built5 1 3 5 8 9 1599 2722 35 34 96.975845 in5 1 3 5 8 10 1651 2722 58 33 96.014259 thes 1 3 5 8 11 1726 2719 132 36 96.866104 United5 1 3 5 8 12 1877 2719 114 35 97.003517 States4 1 3 5 9 0 656 2779 1090 48 -1 5 1 3 5 9 1 656 2788 99 35 96.983986 since5 1 3 5 9 2 770 2787 58 34 96.951462 thes 1 3 5 9 3 844 2787 69 34 96.829727 lates 1 3 5 9 4 933 2785 138 36 95.471359 1960's (Goodrich, slip op. at 79, n.178).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1167 1010 Initial Decision 597. Large reactor plants generally are used for commodity grades of mass and suspension PVC (Goodrich, slip op. at 79; Disch Dkt. 9159, 638-40; cf, DiLiddo Dkt. 9159, 3397-98). The use of small reactor plants is confined to making special purpose grades of mass and suspension PVC resin, and to making suspension PVC copolymer resin and dispersion PVC resin (Goodrich, slip op. at 79). Within the spectrum of large reactor plants, costs are similar (Goodrich F 199; JX 3, PX 8 at 77 In. 7-10; Disch Dkt. 9159, 645, Schaefer Dkt. 9159, 1149). [##] (Goodrich F 199; CX 52N Jn Camera; Klass Dkt. 9159, 4212, 5488-89).

598. Similarly, the wide use of similar small reactor technology among firms in the suspension PVC copolymer market and the dispersion PVC market, respectively, increases the similarity of costs among firms in those markets (cf. JX 3, PX 8 at 73 In. 22 - 74 In. 6, 77 In. 7-10).

599. [##] (RX 197M In Camera). As a result, [t]hose5 1 3 3 1 11 1750 1494 70 36 96.188606 still5 1 3 3 1 12 1840 1494 35 35 96.188606 in4 1 3 3 2 0 540 1553 1337 47 -1 5 1 3 3 2 1 540 1555 185 45 96.219383 operations 1 3 3 2 2 745 1566 57 24 96.406624 ares 1 3 3 2 3 820 1554 207 46 96.149925 competing5 1 3 3 2 4 1046 1554 84 45 96.541969 only5 1 3 3 2 5 1150 1554 35 35 96.834801 in5 1 3 3 2 6 1204 1554 172 45 96.699501 specialty5 1 3 3 2 7 1395 1553 142 35 90.147110 niches (JX 3, PX 13 at 452734). [##] (RX 197M In Camera [7-12 cents higher]). 600. [##] (RX 143Q-R In Camera, CX 3B, 3D, 3J, 3K In Camera; RX 177Z9 In Camera; RX 144H-J In Camera). As discussed supra, suspension PVC copolymer does not, as a rule, compete in end-use applications with suspension PVC homopolymer. It is therefore, on the demand side, a separate product market. 601. [##] (RX 197M In Camera).

602. [##] (Dkt. 9159 RX 1168 In Camera; See also CX 52N In Camera).

603. Because there are currently no rapid advances in PVC manufacturing technology, it is unlikely that one firm has a significant technological advantage over another. 604. Because VCM is a highly homogeneous product (Goodrich, slip op. at 68-69), it is likely that VCM purchasers pay similar prices for VCM (Goodrich F 203; cf. Kaserman Dkt. 9159, 2410). 605. As the Commission discussed in Goodrich, PVC producers have similar costs for acquiring and transporting VCM (Goodrich, slip op. at 78, n.174).

606. If one appropriately values the costs of VCM for firms that are integrated backward from PVC into VCM, then it is clear that all PVC firms pay similar prices for their VCM feedstock (Goodrich F Initial Decision 115 F.T.C.

203; Kaserman Dkt. 9159, 2406-08). The appropriate economic value for the integrated firm to transfer VCM is the firm's opportunity costs (Goodrich F 203; Kaserman Dkt. 9159, 2407). While firms may expectedly keep their books using accounting costs (Kaserman Dkt. 9159, 2807-08), in making economic decisions they presumably take into account the opportunity costs of those decisions (Klass Dkt. 9159, 4559-61, 5319). Opportunity cost is the value of the product in the next best alternative use (Kaserman Dkt. 9159, 2407). The appropriate economic value of VCM for an integrated firm is, therefore, the amount at which the firm could sell it if it did not consume it internally (Kaserman Dkt. 9159, 2407). Thus, firms vertically integrated into VCM should have no product cost advantage over nonintegrated firms.

607. If vertically integrated firms have access to lower cost VCM, one would expect that integrated firms would drive nonintegrated firms out of business during a time of excess capacity (Kaserman Dkt. 9159, 2815). If5 1 3 2 4 6 1402 1581 95 29 96.145836 costs5 1 3 2 4 7 1525 1586 93 24 96.283775 were5 1 3 2 4 8 1645 1575 133 45 96.549728 clearly5 1 3 2 4 9 1805 1576 112 35 96.800217 lowers 1 3 2 4 10 1942 1575 57 36 96.971382 fora 1 3 2 5 0 661 1632 1335 48 -1 5 1 3 2 5 1 661 1634 182 45 96.826172 vertically5 1 3 2 5 2 857 1633 193 46 96.876770 integrated5 1 3 2 5 3 1063 1632 100 36 96.851524 firms5 1 3 2 5 4 1177 1644 68 24 96.475044 ones 1 3 2 5 5 1259 1633 119 35 96.076218 would5 1 3 2 5 6 1391 1640 126 39 96.076218 expects 1 3 2 5 7 1530 1634 71 34 93.306198 that5 1 3 2 5 8 1614 1634 269 46 91.685310 nonintegrated5 1 3 2 5 9 1896 1634 100 35 96.376251 firms4 1 3 2 6 0 660 1692 1336 46 -1 5 1 3 2 6 1 660 1693 122 35 96.520164 would5 1 3 2 6 2 797 1693 91 35 96.553307 have5 1 3 2 6 3 903 1692 97 46 96.492691 quite5 1 3 2 6 4 1015 1703 20 25 96.078529 a5 1 3 2 6 5 1050 1692 86 35 96.417809 times 1 3 2 6 6 1151 1692 201 45 93.857475 surviving (Klass Dkt. 9159, 5337). However, this has not been shown to have occurred. 608. Thus, in the mass and suspension PVC market, integrated and nonintegrated firms have similar costs for their VCM feedstocks (Goodrich, slip op. at 78, n.174).

609. [##] (Dkt. 9159 RX 57Z128), [##] (Disch Dkt. 9159, 701-02; Dkt. 9159 CX 199Z34), [##] (Disch Dkt. 9159, 645; Schaefer Dkt. 9159, 1149; Dkt. 9159 RX 57Z128 In Camera). 610. Thus, because PVC producers in each of the relevant markets have access to similar technology and similar raw materials, they have manufacturing costs that tend to be similar (Goodrich ID at 93; JX 3, PX 8 at 77 In. 2-10).

611. The Commission also cited possible differences in transportation costs for shipping PVC resin to customers as a factor that would lead to differences in costs among PVC producers, and would therefore complicate efforts at coordinated pricing (Goodrich, slip op. at 80-81). The Commission noted that, although PVC resin is generally sold on a delivered price basis, which would eliminate price differences based on location, it was unclear from the record whether the delivered prices were actually uniform (Goodrich, slip op. at 80). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1169 1010 Initial Decision 612. [##] (CX 54 In Camera). [##] (Id.). [##] (CX 54 In Camera). 613. [##] (CX 137Z45 In Camera). [##] (/d.). This pattern is not surprising, given the need for a greater level of customer service associated with specialty resin sales, so that producers of these resins locate close to the fabricator customers (Goodrich, slip op. at 67, n.49). High-volume commodity resins, in contrast, are sold with little other service provided, so that producers locate these plants close to the raw material supply (Goodrich, slip op. at 67). Consequently, costs are similar among commodity grade mass and suspension PVC producers, and costs are similar among specialty grade PVC producers.

614. [##] (See Dkt. 9159 RX 1204G In Camera), [##] 615. [##] (See CX 54 In Camera).

616. [##] (CX 137Z45 In Camera). [##] (Id.). [##] (Dkt. 9159 RX 924A In Camera; Dkt. 9159 RX 925A In Camera; Dkt. 9159 RX 926A In Camera).

617. Because of the higher prices prevailing in the dispersion PVC and suspension PVC copolymer markets, transportation costs account for an even smaller percentage of these relatively high priced products than for mass and suspension PVC homopolymer. Moreover, the high level of concentration in both of these markets, Suggests that transportation cost differences would not affect the ability of dispersion PVC producers or suspension PVC copolymer producers to develop a price consensus (See Goodrich, slip op. at 77). 618. Thus, examination of the issues raised by the Commission in Goodrich, in light of subsequent developments and new evidence in this record, indicates that production costs among producers in each of the relevant markets are in fact relatively similar and are becoming increasingly so, and that whatever cost differences do exist would not be sufficient to prevent a collusive arrangement among producers.

D. Numerous Small Buyers in Each of the Relevant Markets Increase the Likelihood of Collusion 619. As the Commission found in Goodrich, mass and suspension PVC purchasers could not constrain the exercise of market power by mass and suspension PVC producers (Goodrich, slip op. Initial Decision 115 F.T.C.

at 84). There are a large number of small buyers who make regular, frequent and small purchases in the mass and suspension PVC market (Goodrich, slip op. at 84-85; Goodrich F 216; Goodrich, ID at 93), and in the dispersion PVC market (JX 3, PX 6 at 63 In. 4-6; JX 3, PX 8 at 111 In. 19-200; JX 3, PX 9 at 51 In. 4-21; JX 3, PX 28 at 1-5). And in the suspension PVC copolymer market, where there are fewer buyers, the buyers have no leverage (JX 3, PX 136 at 119 In. 12-24; Schaefer 595 In. 4 - 596 In. 12). The concentration level among suspension PVC copolymer producers, relative to purchasers, is substantially higher than it was in the VCM market in Goodrich (See Goodrich, slip op. at 85). The large number of buyers relative to sellers in each of these PVC markets facilitates the likelihood of collusion (Kaserman Dkt. 9159, 2419-21).

620. In addition, buyers in each of the relevant markets tend to purchase from more than one supplier at any given time, which increases the ability of suppliers to monitor competitive activity (JX 3, PX 6 at 62 In. 15-24; JX 3, PX 11 at 728 In. 7-22; JX 3, PX 10 at 1140 In. 21-24; JX 3, PX 8 at 112 In. 9-15, 116 In. 6 - 118 In. 11; IX 3, PX 9 at 86 In. 20 - 88 In. 1). Finally, buyers in each of the relevant markets tend to order resin relatively frequently, i.e., on a weekly or monthly basis, in volumes that tend to be regular and small (Goodrich, slip op. at 86-87; Goodrich F 218, n.47; Beveridge JX 1, 93 In. 4-6; JX 3, PX 11 at 684 In. 25 - 685 In. 10; JX 3, PX 9 at 47 In. 9 - 48 In. 4; Goodrich F 218 & n.47). Accordingly, the number and size of buyers, and the frequency and regularity of small orders in the relevant markets, reduces the incentives and ability of the remaining firms in the markets to cheat on a collusive arrangement (Goodrich, slip op. at 88).

621. The number and size distribution of buyers and orders in a market influence the incentives to cheat on a collusive agreement (Kaserman Dkt. 9159, 2418-19). If a market is characterized by a large number of small buyers or by a large number of small orders, then the incentive for a seller involved in a collusive agreement to discount the price on a given order is not great, because the increment to total sales is relatively small. Conversely, a seller would have to discount secretly to a large number of buyers or on a large number of orders to increase sales by a significant amount, thus increasing the likelihood that its cheating would be detected by the other firms in OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1171 1010 Initial Decision the collusive group. Therefore, the larger the number of buyers or the larger the number of orders in a market, the less likely it is that firms in a collusive group will be tempted to cheat, as it is more likely the cheating will be detected (Goodrich, slip op. at 85-86; Kaserman Dkt. 9159, 2419).

622. Currently there are over 2,000 buyers of mass and suspension PVC resin in the United States (Goodrich F 216; Disch Dkt. 9159, 681; See also Eades Dkt. 9159, 1505; Dkt. 9159 CX 53J-K; Dkt. 9159 CX 64 P, 5). In contrast, there are only eleven active producers of mass and suspension PVC resin. The number of buyers of mass and suspension PVC resin is thus considerably larger than the number of sellers in the market. 623. The majority of mass and suspension PVC resin buyers are relatively small in terms of annual volume purchased as a percentage of the total domestic PVC market (Goodrich, slip op. at 86-87; See Dkt. 9159 CX 53J-K; Disch Dkt. 9159, 681). [##] (Dkt. 9159 CX 58K In Camera; Goodrich F 216 ); [##] (Goodrich, slip op. at 84; Dkt. 9159 CX 64S; Goodrich F 216). [##] (Goodrich, slip op. at 84-85; Dkt. 9159 CX 58K Jn Camera; Dkt. 9159 CX 64S; Goodrich F 216). While the respective percentages of the total mass and suspension PVC market accounted for by resin sales into the various end-use applications has changed slightly over time (Goodrich, slip op. at 85; See, e.g., Disch Dkt. 9159, 663-64), the annual volumes purchased by the majority of mass and suspension PVC resin buyers still account for only a fraction of the total PVC market. Approximately 40% of mass and suspension PVC resins are sold into pipe applications (Goodrich, slip op. at 85; Disch Dkt. 9159, 663). There are over 100 PVC pipe producers in the United States today (Goodrich, slip op. at 85; See Disch Dkt. 9159, 683; Yu Dkt. 9159, 2091-92, 2161-62).

624. The top four buyers of mass and suspension PVC resin today are PVC pipe producers, and have been identified as Carlon (a Division of Indian Head Corporation), Certain Teed Corporation, Formosa Plastics Corporation U.S.A. (J-M Manufacturing Co.), and Simpson Timber Co. (Goodrich F 217; Disch Dkt. 9159, 682; Yu Dkt. 9159, 2089, 2092; See also Dkt. 9159 CX 53J). It is estimated that these top four companies consume 60% of the total amount of PVC resin used annually in PVC pipe production (Disch Dkt. 9159, Initial Decision 115 F.T.C.

683; Goodrich F 217; See also Goodrich, slip op. at 85; Dkt. 9159 CX 756Z40-Z41). The annual volumes purchased by the remaining PVC pipe producers range downward from these four top firms to companies that consume at the 10 million pound level annually, and to regional PVC pipe producers (See Disch Dkt. 9159, 683; Yu Dkt. 9159, 2160-62; See also Dkt. 9159 CX 756Z40). 625. The annual volume purchased by the firm that is probably the largest single PVC resin buyer, Carlon, is estimated at 250 to 300 million pounds per year (Disch Dkt. 9159, 682; See also Dkt. 9159 CX 53)J). [##] (See JX 3, PX 140 Tables 1 3 2 4 10 1482 1168 64 35 95.803185 22 In Camera). 626. [##] (Dkt. 9159 682), [##] (See JX 3, PX 140 Tables 1 3 3 1 13 1888 1227 65 35 95.634186 22 In Camera).

627. [##] (Dkt. 9159 CX 303J In Camera; Dkt. 9159 CX 308H-I, In Camera; See also Belt 1991-93 In Camera; Yu Dkt. 9159, 2171; Disch Dkt. 9159, 682). [##] (Dkt. 9159 CX 303J In Camera), [##] 628. Total consumption of mass and suspension PVC resin by J-M Manufacturing Co., the pipe producing affiliate of Formosa Plastics (Yu Dkt. 9159, 2089), can be estimated at approximately 189 million pounds in 1983 (Yu Dkt. 9159, 2091: 80%, by PVC resin content, of 231 million pounds of domestic PVC pipe sales plus 5 million pounds in export sales), amounting to approximately 3% of the total mass and suspension PVC market. However, actual external purchases are lower, since Formosa Plastics produces some of the PVC consumed by J-M (Liao Dkt. 9159, 1535; Yu Dkt. 9159, 2171). 629. It is estimated that there are close to 200 buyers of dispersion PVC resin in the United States (JX 3, PX 8 at 111 In. 19-20; JX 3, PX 6 at 63 In. 4-6). [##] (IX 3, PX140 Tables 1 3 6 3 13 1640 2159 60 35 96.728783 12 In Camera). 630. It has been estimated that the five or six largest dispersion PVC customers combined account for approximately 50% of the total purchases of dispersion PVC (JX 3, PX 8 at 112, 114). The largest of these companies, Armstrong, accounts for approximately 15% of total industry purchases. The smallest, Becton Dickinson, accounts for approximately 3% (Id.).

631. The number of suspension PVC copolymer purchasers is estimated at 20, five times the number of producers (JX 3, PX 8 at 111 In. 16-18; JX 3, PX 6 at 62 In. 8-11; JX 3, PX 28). [##] (See IX 3, PX 140, Tables 1 3 8 4 5 1081 2744 61 35 95.314171 17 In Camera). The ratio of purchasers to OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1173 1010 Initial Decision producers is higher in this case than it was in the VCM market in Goodrich (compare Goodrich, slip op. at 85). 632. [##] (Disch CX 219F In Camera; Disch JX 3, PX 8 at 114). [##] (Disch CX 219F In Camera). [##] (Id.). [##] (JX 3, PX 8 114 In. 1; See CX 219C-F In Camera).

633. Individual mass and suspension PVC resin suppliers have many customers (See, e.g., Disch Dkt. 9159, 681 -- Tenneco has 100 to 150 suspension PVC customers; Weber Dkt. 9159, 1787-88 -- Diamond Shamrock had approximately 100; DiLiddo Dkt. 9159, 3371 -- Goodrich has several hundred). [##] (Dkt. 9159 CX 474A- Z60 In Camera).

634. Similarly, dispersion PVC suppliers generally have many customers. Occidental customer files indicate that Occidental sells dispersion resin to approximately 80 customers per month (JX 3, PX 28). Mr. Stevens of Tenneco noted that the company had 25-30 active5 1 3 4 5 2 691 1491 106 36 94.224266 term customers (JX 3, PX 9 at 51). Similarly, Occidental files show that Occidental has at least 15 customers for suspension PVC copolymer resin (JX 3, PX 28).

635. Mass and suspension PVC resin buyers typically split their total purchases among two or more sellers (Goodrich F 218, n.46; See Disch Dkt. 9159, 728; Schaefer Dkt. 9159, 1140; Becker DKt. 9159, 1336-37; McMath 1897-98; Yu Dkt. 9159, 2171; DiLiddo Dkt. 9159, 3371-72). [##] (Dkt. 9159 CX 68 In Camera). J-M Manufacturing Co., Inc., the PVC pipe producing affiliate of Formosa Plastics, has also had up to five PVC resin suppliers (Yu Dkt. 9159, 2171).

636. [##] (IX 3, PX 6 at 62; JX 3, PX 8 at 112; See CX 4F In Camera; CX 4N In Camera; CX 4Z In Camera; CX 4Z14 In Camera; CX 4Z15 In Camera; CX 4Z38 In Camera; CX 4Z55 In Camera; CX 4Z59 In Camera; CX 4Z60 In Camera; CX 4Z63 In Camera, CX 4Z81 In Camera; CX 4Z85 In Camera; CX 4Z94 In Camera).

637. As a result, a seller that might be engaging in a collusive agreement in either the mass and suspension PVC market, the dispersion PVC market, or the suspension PVC copolymer market would only have a fraction of a given buyer's business on which to cheat in order to gain additional sales. To the extent that the potential increment to total sales would thus be relatively small, this factor Initial Decision 115 F.T.C.

tends to diminish the incentive to cheat on a collusive agreement (Kaserman Dkt. 9159, 2419-20).

638. Mass and suspension PVC resin orders are not usually placed for annual volumes. Rather, orders are generally placed on a monthly, and sometimes daily, basis (Goodrich, slip op. at 86-87; Goodrich F 218, n.47; Weber Dkt. 9159, 1803-04; Disch Dkt. 9159, 683-85; DiLiddo Dkt. 9159, 3371-72). Similarly, many dispersion PVC resin orders are placed on a monthly or weekly basis (Beveridge JX 1, 93 In. 4-6; JX 3, PX 28). [##] (Dkt. 9159 RX 945A-O In Camera). These factors further diminish the incentive to cheat on a given order (Kaserman Dkt. 9159, 2420-21). 639. [##] (Beveridge JX 1, 93 In. 4-6; JX 3, PX 9 at 47 In. 9 - 48 In. 4; Weimar CX 192F J 14 In Camera). [##] (Weimar CX 192F J 14 In Camera). Mr. Beveridge testified similarly as to Armstrong's purchases of dispersion PVC resin and suspension PVC copolymer (Beveridge JX 1, 93 In. 4-6).

640. Even if a seller would be tempted to cheat on a given PVC resin order by cutting price, there is substantial uncertainty that the seller will invariably gain additional sales and thereby profit by cheating, due to the ongoing customer-supplier relationships that characterize the PVC markets. The buyer to which a discounted price might be offered would be likely to contact a current seller and offer that seller an opportunity to meet the competing offer (Goodrich, slip op. at 87-88; See, e.g., Weber Dkt. 9159, 1798-99; Schaefer Dkt. 9159, 1203). Thus, a seller tempted to cheat on a collusive agreement would risk detection for potential gain that is substantially uncertain, and the collusive group as a whole would lose to the extent that the price of PVC resin in the marketplace is subsequently lowered because the collusive agreement falls apart (Goodrich, slip op. at 85-86; Kaserman Dkt. 9159, 2774-80).

641. Asa result, in order to gain a given increment in sales by cheating, a seller would have to discount secretly to a large number of buyers which would increase the likelihood that the cheating would be detected by the other firms in the collusive group (Kaserman Dkt. 9159, 2419). Thus, the large number of buyers in each of the relevant markets facilitates the detection of cheating by increasing the flow of information in the marketplace regarding competitive activity (Goodrich, slip op. at 86). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1175 1010 Initial Decision 642. It is recognized in the PVC industry that the large number of small buyers reduces customer leverage. Dr. DiLiddo of Goodrich observed that buyer concentration in the mass and suspension PVC resin market is low enough that buyers have little leverage over price: We also looked at the [PVC resin] customer base and found that it was very attractive. This customer base is attractive because it is readily identifiable, small enough to be reached by a manageable and economic sales force, yet not so concentrated that one or two customers can put enormous pressure on the suppliers to lower price. The biggest customer in the PVC business (Carlon) accounts for less than 7 percent of the total market. Yet three hundred customers account for some 80 percent of the total market. There are only about 1,000 customers in the United States that buy a carload or more of PVC per year. (Dkt. 9159 CX 53J-K; Goodrich F 216). Mr. Schaefer of Occidental testified similarly that purchasers of suspension PVC copolymer resin have little leverage (JX 3, PX 136 In. 12-24; Schaefer JX 1, 595 In. 4-596 In. 12).

E. The High Degree of Repeat Sales in Each of the Relevant Markets Facilitates the Detection of Cheating 643. The relevant PVC markets are all characterized by a high degree of repeat sales (Goodrich, slip op. at 87-88; Goodrich F 216, F 219; Goodrich ID at 94; Kaserman Dkt. 9159, 2422-23; Kaserman JX 1, 347-348; Friedman JX 1, 132 In. 2-8; Beveridge JX 1, 91 In. 2-7; JX 3, PX 8 at 116 In. 6 - 118 In. 11; JX 3, PX 9 at 86 In. 20 - 87 In. 1; See also Klass Dkt. 9159, 4389). The high degree of repeat sales in each of the relevant markets makes collusion more likely in each of these markets (Kaserman Dkt. 9159, 2421-22; Kaserman JX 1, 347-348).

644. Collusion is more likely in markets where customers tend to purchase from the same suppliers over the course of time. If firms in an industry, characterized by a high probability of repeat sales, are engaging in a collusive agreement, and if a firm cheats on the agreement by cutting price to gain sales, other firms can infer from an a normal loss of long-standing customers that someone is cheating. A high probability of repeat sales thus facilitates the policing of a collusive agreement, thereby increasing its stability and the Initial Decision 115 F.T.C.

likelihood of its occurrence (Kaserman Dkt. 9159, 2421-22: Kaserman JX 1, 347-48; See also Klass Dkt. 9159, 4389). 645. [###] (Goodrich, slip op. at 86; Goodrich F 219; DiLiddo Dkt. 9159, 3253; Weber Dkt. 9159, 1790; Disch Dkt. 9159, 683-85: See, e.g., Dkt. 9159 CX 151A In Camera; Dkt. 9159 CX 152A In Camera; Dkt. 9159 CX 156B In Camera; Dkt. 9159 CX 72A In Camera; Dkt. 9159 CX 73F In Camera; Dkt. 9159 CX 76A In Camera; Dkt. 9159 CX 77A In Camera; Dkt. 9159 CX 80A Jn Camera; Dkt. 9159 CX 81A-D Jn Camera; Dkt. 9159 CX 85A In Camera; Dkt. 9159 CX 89A In Camera; Dkt. 9159 RX 53B In Camera).

646. [##] (Goodrich, slip op. at 88; Goodrich F 219; DiLiddo Dkt. 9159, 3253-54; Disch Dkt. 9159, 685-86; Dkt. 9159 RX 53B Jn Camera).* These ongoing, noncontractual customer relationships, described by Dr. DiLiddo of Goodrich as a5 1 3 3 4 9 1631 1449 209 37 96.840332 handshake5 1 3 3 4 10 1864 1458 84 39 96.969093 types 1 3 3 4 11 1972 1453 43 35 96.843315 of4 1 3 3 5 0 673 1497 1338 52 -1 5 1 3 3 5 1 673 1497 244 47 96.973305 relationship,5 1 3 3 5 2 936 1509 68 24 96.311531 ones 1 3 3 5 3 1021 1500 36 34 96.470474 in5 1 3 3 5 4 1075 1500 117 36 96.962036 which5 1 3 3 5 5 1210 1512 54 24 96.487389 we5 1 3 3 5 6 1281 1503 170 46 96.607849 typically5 1 3 3 5 7 1468 1506 120 35 96.918671 would5 1 3 3 5 8 1606 1506 64 36 95.994881 sells 1 3 3 5 9 1689 1514 35 28 96.972191 to5 1 3 3 5 10 1741 1509 72 35 96.660927 that5 1 3 3 5 11 1829 1516 182 29 96.699371 customer4 1 3 3 6 0 673 1556 1336 51 -1 5 1 3 3 6 1 673 1556 69 34 96.860550 ands 1 3 3 6 2 763 1556 58 35 96.372536 thes 1 3 3 6 3 843 1563 180 30 96.068298 customers 1 3 3 6 4 1042 1559 121 35 96.878647 would5 1 3 3 6 5 1183 1560 171 47 96.194328 typically5 1 3 3 6 6 1375 1563 103 35 96.758072 orders 1 3 3 6 7 1496 1563 94 36 94.845589 from5 1 3 3 6 8 1610 1576 40 24 94.845589 us5 1 3 3 6 9 1671 1566 111 36 96.713989 based5 1 3 3 6 10 1802 1578 48 24 96.713989 on5 1 3 3 6 11 1870 1575 139 29 96.291389 current4 1 3 3 7 0 671 1614 1336 51 -1 5 1 3 3 7 1 671 1614 137 36 96.834770 markets 1 3 3 7 2 825 1615 234 42 90.581818 conditions, operate in a way that, when5 1 3 3 7 9 1665 1635 19 24 95.800468 a5 1 3 3 7 10 1701 1631 181 30 96.517906 customers 1 3 3 7 11 1898 1628 109 34 96.575798 needs4 1 3 3 8 0 670 1673 1342 57 -1 5 1 3 3 8 1 670 1673 103 40 96.939644 resin,5 1 3 3 8 2 788 1674 81 45 96.611542 they5 1 3 3 8 3 883 1675 120 35 96.981995 would5 1 3 3 8 4 1016 1677 173 44 96.140724 normally5 1 3 3 8 5 1202 1678 100 44 96.910385 places 1 3 3 8 6 1317 1679 87 34 96.981880 theirs 1 3 3 8 7 1416 1680 101 35 96.960617 orders 1 3 3 8 8 1530 1681 82 35 96.675034 with5 1 3 3 8 9 1627 1693 40 23 96.921959 us5 1 3 3 8 10 1681 1693 40 24 95.469368 or5 1 3 3 8 11 1734 1690 32 28 95.469368 at5 1 3 3 8 12 1780 1684 88 35 95.993698 least5 1 3 3 8 13 1881 1692 74 38 96.517342 parts 1 3 3 8 14 1969 1686 43 34 96.961594 of4 1 3 3 9 0 670 1730 1336 55 -1 5 1 3 3 9 1 670 1730 88 35 96.849350 theirs 1 3 3 9 2 770 1731 164 36 96.654671 business5 1 3 3 9 3 949 1733 119 35 97.012955 would5 1 3 3 9 4 1081 1734 175 46 96.440651 normally5 1 3 3 9 5 1270 1746 103 25 96.952354 comes 1 3 3 9 6 1386 1743 35 29 96.768761 to5 1 3 3 9 7 1435 1748 40 24 95.876160 us5 1 3 3 9 8 1489 1749 90 24 96.973877 even5 1 3 3 9 9 1593 1739 133 46 96.908722 though5 1 3 3 9 10 1740 1752 55 24 96.362839 we5 1 3 3 9 11 1808 1742 95 35 96.362839 don't5 1 3 3 9 12 1915 1743 91 35 96.956398 have4 1 3 3 10 0 669 1790 770 47 -1 5 1 3 3 10 1 669 1799 19 24 93.927757 a5 1 3 3 10 2 703 1790 176 34 93.252769 contract (DiLiddo Dkt. 9159, 3254).

647. A large percentage of suspension PVC copolymer and dispersion PVC resin sales are also made under contract or in the context of ongoing customer-supplier relationships (Beveridge JX 1, 91 In. 8-16; JX 3, PX 8 at 115 In. 2-10, 116 In. 12-19; JX 3, PX 9 at 79 In. 14-24, 86 In. 20 - 87 In. 13).

648. [##] (Goodrich, slip op. at 88; Yu Dkt. 9159, 2159; DiLiddo Dkt. 9159, 3371-72; H. Wheeler Dkt. 9159, 1747-48; Beveridge JX 1, 84 In. 16-25, 88 In. 24 - 89 In. 10; van Haaren CX 187D J 14 In Camera, Dellevigne CX 188C-D J 10 In Camera; Boulay CX 189C {7 In Camera). Thus, there would be hesitancy on the part of a customer to switch suppliers if competitive prices were the same (Goodrich, slip op. at 88).

*5 Noncontractual PVC resin sales can occur as ongoing relationships, or as spot sales (See, e.g., DiLiddo Dkt. 9159, 3253-54). To the extent that export sales tend to be spot sales (See DiLiddo 3274), an even greater percentage of domestic sales are characterized by ongoing relationships. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1177 1010 Initial Decision 649. [##] (Goodrich, slip op. at 87-88; Goodrich F 237; Friedman JX 1, 134 In. 1-8; IX 3, PX 6 at 150 In. 16 - 151 In. 3; JX 3, PX 8 at 114 In. 22 - 116 In. 11; JX 3, PX 9 at 82 In. 1-25; Disch Dkt. 9159, 683-85; Schaefer Dkt. 9159, 1136-37, 1203; Weber Dkt. 9159, 1790, 1791-94; H. Wheeler Dkt. 9159, 1749; DiLiddo Dkt. 9159, 3254-55; Dkt. 9159 CX 464; Dkt. 9159 CX 466; See JX 3, PX 61; JX 3, PX 62: JX 3, PX 64; JX 3, PX 70; JX 3, PX 111; JX 3, PX 112; JX 3, PX 114; JX 3, PX 93 at 103582; JX 3, PX 94 at 226942; Dkt. 9159 CX 29B In Camera; Dkt. 9159 CX 84C, E, G In Camera). [##] (See CX 112A-B In Camera; CX 113A-B In Camera; Dkt. 9159 CX 78B-C, G, K In Camera; Dkt. 9159 CX 80B In Camera; Dkt. 9159 CX 73G In Camera).

650. The fact that buyers give their PVC suppliers the opportunity to meet competing offers is another indication that they would prefer to continue to purchase the resin from a given supplier (Kaserman Dkt. 9159, 2423), 651. [##] JX 3, PX 8 at 116 In. 20-22; JX 3, PX 6 at 62 In. 25 - 63 In. 3; Schaefer Dkt. 9159, 1135; Becker Dkt. 9159, 1248-49; H. Wheeler Dkt. 9159, 1747-48; McMath Dkt. 9159, 1897-98, 1901-02 In Camera; DiLiddo Dkt. 9159, 3124-28: See generally CX 4 In Camera). PVC salesmen frequently have access to their customers’ facilities, can observe competitors' railcars at the site, and have knowledge of the customers' level of business (Weber Dkt. 9159, 1797-98; Becker Dkt. 9159, 1248-49). This information assists suppliers in detecting the competitive activity of other PVC resin suppliers.

F. The Ready Availability of Price Information Facilitates Collusion in the Relevant Markets 652. The Commission found in Goodrich that the transaction characteristics of the mass and suspension PVC market increases 1 5 1 2 10 1784 2420 57 35 96.952560 thea 1 5 1 3 0 505 2470 1336 52 -1 5 1 5 1 3 1 505 2470 199 36 95.793243 likelihood5 1 5 1 3 2 727 2471 43 35 96.783424 of5 1 5 1 3 3 790 2472 305 46 96.405006 anticompetitive5 1 5 1 3 4 1119 2473 128 36 96.983200 effects5 1 5 1 3 5 1271 2475 93 35 96.894630 from5 1 5 1 3 6 1388 2476 58 34 96.858826 thes 1 5 1 3 7 1470 2477 215 45 96.732803 acquisitions 1 5 1 3 8 1709 2478 36 34 95.341507 in5 1 5 1 3 9 1769 2479 72 34 95.341507 that4 1 5 1 4 0 505 2528 691 48 -1 5 1 5 1 4 1 505 2528 152 35 95.933258 market (Goodrich, slip op. at 88).

653. In particular, the Commission found that contract clauses and ongoing customer-supplier relationships, together with the frequency and size of most transactions, allowed suppliers regularly Initial Decision 115 F.T.C.

to obtain reliable price information in the market (Goodrich, slip op. at 87-88; Goodrich F 211-15, 219-21; Goodrich ID at 93-94), 654. Record evidence in this case, as discussed infra, confirms that reliable price information is available to PVC producers in each of the relevant markets.

G. Price Protection Classes in Each of the Relevant PVC Markets Reduce the Incentive To Cheat on a Collusive Agreement 655. Most contracts in each of the relevant PVC markets contain two forms of price protection clauses: meeting competition clauses and clauses requiring advance notice of price increases (Goodrich, slip op. at 86; Goodrich F 237-38; Goodrich ID at 94). These clauses facilitate collusion by reducing the incentive to cheat on a collusive agreement (Goodrich, slip op. at 86).

656. Prices 1 5 2 1 3 1026 1479 218 45 95.332016 protection clauses include most-favored-nations clauses, and meeting competition clauses (also known as meet-orrelease clauses) (Goodrich F 237; See Klass Dkt. 9159, 5695, 5704). They also include clauses requiring advance notice of price changes. As a matter of economic theory, these price protection clauses can facilitate collusion by reducing the potential gain from cheating on a collusive arrangement (See Klass Dkt. 9159, 5695-5704). 657. Most contracts in the PVC industry contain meeting competition clauses (Goodrich, slip op. at 87; Goodrich F 211, F 237). Furthermore, in most supplier-customer relationships without written contracts, customers bring competitive offers to other suppliers in the same way as would occur under a meeting competition clause (Goodrich, slip op. at 87-88; Goodrich F 237). 658. The existence of meeting competition clauses deters cheating because it encourages the customer to transmit information regarding a competitive offer to its regular supplier. Thus, the clause leads to detection of discounts (Goodrich, slip op. at 87; See Kaserman Dkt. 9159, 2394-96; See also Hirschleifer, Price Theory and Applications, 309-311 (1984); Salop, Practices5 1 5 4 6 7 1714 2526 89 34 93.275742 That5 1 5 4 6 8 1818 2524 200 45 92.876503 (Credibly)4 1 5 4 7 0 682 2583 1337 49 -1 5 1 5 4 7 1 682 2588 184 35 95.658356 Facilitates 1 5 4 7 2 901 2587 198 45 95.658356 Oligopoly5 1 5 4 7 3 1134 2586 289 40 93.225418 Coordination, New Developments in the Analysis of Market Structure 280 (Stiglitz, ed. 1986). 659. Most contracts in the PVC industry contain clauses requiring advance notice of price increases (e.g., 30 days) (Goodrich Initial Decision 115 F,T.C.

to obtain reliable price information in the market (Goodrich, slip op. at 87-88; Goodrich F 211-15, 219-21; Goodrich ID at 93-94). 654. Record evidence in this case, as discussed infra, confirms that reliable price information is available to PVC producers in each of the relevant markets.

G. Price Protection Classes in Each of the Relevant PVC Markets Reduce the Incentive To Cheat on a Collusive Agreement 655. Most contracts in each of the relevant PVC markets contain two forms of price protection clauses: meeting competition clauses and clauses requiring advance notice of price increases (Goodrich, slip op. at 86; Goodrich F 237-38; Goodrich ID at 94). These clauses facilitate collusion by reducing the incentive to cheat on a collusive agreement (Goodrich, slip op. at 86 ) .

656. Prices 1 5 2 1 3 1024 1479 217 45 93.791489 protection clauses include most-favored-nations clauses, and meeting competition clauses (also known as meet-orrelease clauses) (Goodrich F 237; See Klass Dkt. 9159, 5695, 5704). They also include clauses requiring advance notice of price changes. As a matter of economic theory, these price protection clauses can facilitate collusion by reducing the potential gain from cheating on a collusive arrangement (See Klass Dkt. 9159, 5695-5704). 657. Most contracts in the PVC industry contain meeting competition clauses (Goodrich, slip op. at 87; Goodrich F 211, F 237). Furthermore, in most supplier-customer relationships without written contracts, customers bring competitive offers to other suppliers in the same way as would occur under a meeting competition clause (Goodrich, slip op. at 87-88; Goodrich F 237). 658. The existence of meeting competition clauses deters cheating because it encourages the customer to transmit information regarding a competitive offer to its regular supplier. Thus, the clause leads to detection of discounts (Goodrich, slip op. at 87; See Kaserman Dkt. 9159, 2394-96; See also Hirschleifer, Price Theory and Applications, 309-311 (1984); Salop, Practices5 1 5 4 6 7 1713 2525 89 35 93.277267 That5 1 5 4 6 8 1817 2524 201 45 92.626770 (Credibly)4 1 5 4 7 0 681 2582 1337 50 -1 5 1 5 4 7 1 681 2589 184 35 93.338326 Facilitates 1 5 4 7 2 899 2587 198 45 95.762123 Oligopoly5 1 5 4 7 3 1132 2586 289 40 94.408340 Coordination, New Developments in the Analysis of Market Structure 280 (Stiglitz, ed. 1986). 659. Most contracts in the PVC industry contain clauses requiring advance notice of price increases (e.g., 30 days) (Goodrich OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1179 1010 Initial Decision F 238). These clauses formalize the practice of giving advance notice of price increases. By giving advance notice, a supplier is able to ascertain whether its competitors are following a price increase prior to its effective date. Absent the advance notice, a period of time is necessary for other firms to discover and react to the price increase. During this lag time, the supplier that initiates a price increase may lose sales to those suppliers who have yet to react and raise prices. Thus, absent advance notice, there is an incentive not to be the first supplier to raise price and, therefore, an incentive against price increases occurring (See Areeda, Antitrust Analysis 274 (1981); Posner, Antitrust Law: An Economic Perspective 61 (1976); Stigler, The Organization of Industry 42-43 (1976); F.M. Scherer, /ndustrial Market Structure and Economic Performance 222-25 (2d ed. 1981); J. Bain, Price Theory 273-283 (1952)).

H. Anticompetitive Conduct in the Relevant PVC Markets Would Not Be Threatened By Rapid Technological Change 660. Market power may be harder to exercise or less likely to endure in the face of rapid technological change. New technology may signal that the market is being transformed, which may result in new entry, declining concentration, or unstable market shares.°° Conversely, the absence of rapid technological change in a market may decrease the threats to the maintenance of a collusive agreement, and may thereby increase the likelihood that collusion will endure should it occur (See Klass Dkt. 9159, 5426-29). 661. None of the relevant PVC markets is currently undergoing rapid technological change (Goodrich ID at 94; Goodrich F 232; JX 3, PX 8 at 86 In. 24 - 87 In. 7; CPF 719-720). [##] (Goodrich F 223-226; See H. Wheeler Dkt. 9159, 734-35; Dkt. 9159 CX 515G; Dkt. 9159 RX 639H, R Jn Camera), and the development and implementation of vinyl chloride emission contro] technology to comply with newly-instituted environmental and worker safety regulations (Goodrich F 227-231; See Dkt. 9159 CX 642 U-V; Dkt. 9159 CX 597 A-E). Today, these changes have been largely implemented (Goodrich F 232).

36 ETC Merger Statement, (CCH) { 4,516 at 6,901-3. Initial Decision 115 F.T.C.

662. The initial growth and development of mass and suspension PVC as a product in the 1950's and 1960's occurred as flexible (plasticized) PVC resin found markets in wire and cabie, calendered sheet, and specialty applications (Goodrich F 222; See DiLiddo Dkt. 9159, 3106-08; Dkt. 9159 CX 53D). [##] (Goodrich F 222; Dkt. 9159 RX 639H Jn Camera).

663. [##] (Goodrich F 223; Dkt. 9159 RX 639H In Camera; See Eades Dkt. 9159, 1464-65; McMath Dkt. 9159, 1893, 1922; Dkt. 9159 RX 639H Jn Camera). [##] (Goodrich F 223; Dkt. 9159 RX 639H, P In Camera). As demand for mass and suspension PVC resin shifted toward large volume, commodity grade end-use applications, PVC producers began to install large reactors of 18,000-35,000 gallon capacity to serve this demand; accompanying technology, such as computerization to ensure consistency in resin quality and efficiency in resin production using large-batch processes, was also developed (Goodrich F 223; Dkt. 9159 Disch 641, 648-53). 664. [##] (See Dkt. 9159 CX 42A-Z64 In Camera; Dkt. 9159 RX 639H, In Camera). [##] (Eades Dkt. 9159, 1464-65; Dkt. 9159 RX 639H In Camera).

665. Large reactors in use in the United States today range in size from 18,000 gallons to about 40,000 gallons in capacity; reactors of 50,000 gallon capacity are in use in Europe (Goodrich F 224; See Disch Dkt. 9159, 638-40; Schaefer Dkt. 9159, 1213-14). Small reactors range in size from 2,000 to 5,000 gallons in capacity (Goodrich F 229; Schaefer Dkt. 9159, 1213), 666. Large reactor technology increased the efficiency of PVC production, reduced labor costs, and provided economies of scale above that available from small reactor technology (Goodrich F 225; Disch Dkt. 9159, 643; Schaefer Dkt. 9159, 1140; See Dkt. 9159 CX 515G). The cost disadvantage of using a small reactor production configuration compared to that of a large reactor production configuration can be quite significant for commodity applications (Goodrich F 225; See, e.g., H. Wheeler Dkt. 9159, 1734; Eades Dkt. 9159, 1463-65).

667. [##] (Goodrich F 226; See H. Wheeler Dkt. 9159, 1720-21, 1725; Dkt. 9159 RX 639D, H In Camera; Dkt. 9159 CX 515G; See also Eades Dkt. 9159, 1479-80). Many of the remaining small reactor PVC plants are still used to manufacture specialty PVC resin OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1181 1010 Initial Decision grades (H. Wheeler Dkt. 9159, 1757-58; Schaefer Dkt. 9159, 1078-79; Becker Dkt. 9159, 1263- 64). However, it is unlikely that new small reactor capacity would be built by a producer today (Goodrich, slip op. at 79, n.178; Goodrich F 226; H. Wheeler Dkt. 9159, 1758; Disch Dkt. 9159, 640).

668. [##] (Schaefer Dkt. 9159, 1212; H. Wheeler Dkt. 9159, 1735-36; Dkt. 9159 RX 531 In Camera).

669. The mid-to-late 1970's were also a period of fundamental changes in the regulatory environment facing the PVC and VCM industries, a factor which had a profound effect on the technological design, siting, and operation of plants, capital costs, and the structure of the markets (Goodrich F 227; See Dkt. 9159 CX 642Z5-Z6; Dkt. 9159 CX 504D-O; Dkt. 9159 CX 597A-E; Dkt. 9159 CX 505S-U). While regulations promulgated by both federal and state agencies during this period affected all aspects of the PVC and VCM businesses, environmental regulations had the greatest overall impact (Goodrich F 227; See Dkt. 9159 CX 597C). Following the finding that VCM was a specific cause of liver cancer, the Occupational Health and Safety Administration (OSHA) promulgated a standard in 1975 to reduce occupational exposure to VCM; in 1976, the Environmental Protection Agency (EPA) promulgated a standard to reduce atmospheric VCM emissions (Goodrich F 227; See Dkt. 9159 CX 642U). Additional environmental regulations affecting other aspects of PVC and VCM/EDC production facilities were subsequently promulgated, (Goodrich F 227; Dkt. 9159 CX 597C-D: Dkt. 9159 CX 642Z164-Z177).

670. [##] (Goodrich F 228; Dkt. 9159 CX 200L Jn Camera; Dkt. 9159 CX 642Z5). Most of the requirements regarding VCM control technology pertain to PVC plants because these facilities contribute proportionately more emissions than VCM/EDC plants as a result of characteristics inherent in the batch process (Goodrich F 228; Dkt. 9159 CX 842).

671. Changes brought about by the promulgation of the VCM emissions standard were felt most acutely by the older PVC plants that had to retrofit their processes with new controls (Goodrich F 229; Dkt. 9159 CX 642Z5). As a result of the stringent requirements, seven PVC plants were forced to close down, three on a permanent basis (Goodrich F 229; Dkt. 9159 CX 642Z6). [##] (CX 5D-E In Initial Decision 115 F.T.C.

Camera). Several PVC and VCM/EDC plants were still in the design phase during development of the regulation, and the engineering had to be altered to accommodate the new requirements (Goodrich F 229; Dkt. 9159 CX 642Z5; See, e.g., Dkt. 9159 CX 505 S-U; Dkt. 9159 CX 504D-O). PVC producers also noted a 10% to 12% average loss in capacity as a result of compliance requirements (Goodrich F 229; Dkt. 9159 CX 642Z5; See e.g., Dkt. 9159 CX 447J). This capacity loss was mainly due to the time needed to clean reactors and purge systems after each batch in an effort to reduce VCM emissions (Goodrich F 229; Dkt. 9159 CX 642Z5 - Z6). 672. The total cost of compliance for producers affected by the federal VCM atmospheric emissions standard alone for the 10-year period 1977 to 1986 is estimated to be $765.7 million (in 1977 dollars), including investments, capital, operating, and maintenance costs for new and existing plants (Goodrich F 230; Dkt. 9159 CX 642Z5).

673. The technological trend in the PVC industry throughout the 1970's toward large reactors, automation, computerized control of production, and decreased emphasis on the production of specialty PVC resins was partly promoted by, and greatly facilitated compliance with, the various environmental regulations (Goodrich F 231; Dkt. 9159 CX 642Z6, Z49-Z137). Current technology is well-established and stable (Goodrich F 232; Dkt. 9159 CX 642Z50- Z51). At the present time, nearly all PVC plants have completed the modifications necessary for compliance (Goodrich F 232; Dkt. 9159 CX 64226).

674. Thus, product and process technology is now considered to be stable and unlikely to undergo any significant change in the mass and suspension PVC market, the suspension PVC copolymer market and the dispersion PVC market (JX 3, PX 8 at 86 In. 24 - 87 In. 7; See Goodrich, slip op. at 78).

675. Because rapid change in process, environmental, or product technology in each of the relevant markets is unlikely to occur in the foreseeable future (See Klass Dkt. 9159, 5427-29), collusive behavior is less likely to be threatened by new entry and therefore more likely to endure should it arise.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1183 1010 Initial Decision I. The Declining Rate of Growth in Demand for Each of the Relevant Products Facilitates Anticompetitive Pricing 676. In markets where demand growth is rapid, a firm can cheat on a collusive agreement by discounting price to capture the new orders and new customers, made available as demand increases, without signaling this fact to other members of the collusive group, because they will not detect a loss of existing customers (Kaserman Dkt. 9159, 2424). In markets where demand growth has slowed, however, there will no longer be a large inflow of new buyers to which secret discounting can be directed. Additional sales must be gained at the expense of other firms in the market, thus making it easier for members of a collusive group to detect cheating. A slower rate of growth in demand facilitates the monitoring of cheating on a collusive agreement, and thus contributes to its stability (Xaserman Dkt. 9159, 2424), 677. A slower rate of growth in demand can also operate to change the expectations of incumbent firms with respect to new entry. If demand growth has slowed, is stable, or is declining, incumbent firms may be less concerned with the threat of entry of new firms than if demand growth were rapid, and may therefore be more inclined to engage in anticompetitive behavior (Kaserman DKt. 9159, 2425, 2429-30).

678. Thus, a slower rate of growth in demand in a market tends to promote the formation and maintenance of collusive agreements (Kaserman Dkt. 9159, 2425, 2429-30).

679. The overall rate of growth in demand for mass and suspension PVC resin is expected to be much lower in the 1980's and in the future than it was in the 1960's and 1970's (Goodrich slip op. at 90, 94: Goodrich F 233; Goodrich ID at 94; DiLiddo Dkt. 9159, 3107-14, 3119; Disch Dkt. 9159, 691-92; Schaefer Dkt. 9159, 1122 Becker Dkt. 9159, 1265-68; Dkt. 9159 CX 64U; See also Liao DKt. 9159, 1518-19).

680. [##] (Goodrich, slip op. at 90; Goodrich F 234; See Dkt. 9159 CX 64U; Dkt. 9159 CX 185D In Camera). [##] (Goodrich, slip op. at 90; Goodrich F 234; See DiLiddo Dkt. 9159, 3110; Becker Dkt. 9159, 1265-66; Dkt. 9159 CX 14F In Camera; Dkt. 9159 CX 67Z8 In Camera). {##] (Goodrich F 234; See Dkt. 9159 RX 639H In Initial Decision 115 F.T.C, Camera). [##] (Goodrich, slip op. at 90; Goodrich F 234; See DiLiddo Dkt. 9159, 3109-10; Dkt. 9159 CX 67Z8, In Camera). Rapid growth through the 1960's and early 1970’s was sustained as more and more uses were found for PVC. Its versatility as a product also enabled PVC to replace traditional materials in a multitude of applications (Goodrich F 234; Disch Dkt. 9159, 719; Schaefer Dkt. 9159, 1154-55; DiLiddo Dkt. 9159, 3108; Becker Dkt. 9159, 1268- 70; Dkt. 9159 CX 53D). Beginning in 1979, however, actual average growth rates declined to the 3%-4% range (Goodrich, slip op. at 90; Goodrich F 234; See H. Wheeler Dkt. 9159, 1731-32; Becker Dkt. 9159, 1265-66; See also Eades Dkt. 9159 1471). 681. [##] (Goodrich, slip op. at 90; Goodrich F 235; Goodrich, ID at 94: Becker Dkt. 9159, 1266-67 Eades Dkt. 9159, 1470; L. Wheeler Dkt. 9159, 941; DiLiddo Dkt. 9159, 3112-14, 3324-25; Dkt. 9159 CX 16Z11 In Camera; Dkt. 9159 CX 513C In Camera; Dkt. 9159 CX 374E-G, L In Camera; Schaefer FX 1, 585 In. 2 -587 In. 20; JX 3, PX 8 at 18 In. 7-15, 80 In. 20-24, 89 In. 1-5; JX 3, PX 9 at 100 In. 24 - 101 In. 8; 125 In. 15-17; JX 3, PX 6 at 82 In. 11-23; JX 3, PX 10 at 1154 In. 18 - 1157 In. 8; JX 3, PX 11 at 691 In. 15-23; JX 3, PX 13 at 452726 ). As observed by Dr. DiLiddo of Goodrich, Thes 1 3 2 9 12 1896 1731 113 35 96.859962 world4 1 3 2 10 0 672 1788 1336 47 -1 5 1 3 2 10 1 672 1791 29 34 96.536697 is5 1 3 2 10 2 715 1789 190 46 96.289925 changing,5 1 3 2 10 3 920 1790 57 35 96.813202 thes 1 3 2 10 4 990 1789 94 35 96.195061 PVC5 1 3 2 10 5 1097 1789 164 35 96.195061 business5 1 3 2 10 6 1274 1789 30 35 96.965431 is5 1 3 2 10 7 1318 1788 186 46 96.317352 maturing,5 1 3 2 10 8 1518 1790 58 34 96.976685 thes 1 3 2 10 9 1590 1789 255 45 96.431381 opportunities5 1 3 2 10 10 1860 1788 56 36 96.742760 for5 1 3 2 10 11 1930 1800 78 24 96.681831 new4 1 3 2 11 0 672 1846 1338 47 -1 5 1 3 2 11 1 672 1848 153 35 92.956245 markets5 1 3 2 11 2 844 1876 31 7 48.557701 ..5 1 3 2 11 3 895 1876 5 7 48.557701 .5 1 3 2 11 4 917 1848 91 34 96.189667 have5 1 3 2 11 5 1023 1848 91 34 96.189667 been5 1 3 2 11 6 1130 1847 146 35 96.772713 defined5 1 3 2 11 7 1292 1853 35 29 95.762329 to5 1 3 2 11 8 1343 1857 19 24 96.973091 a5 1 3 2 11 9 1377 1857 85 35 96.856407 very5 1 3 2 11 10 1478 1847 95 46 96.622681 large5 1 3 2 11 11 1588 1847 148 45 91.789650 degree (Goodrich F 235; DiLiddo Dkt. 9159, 3324-25).

682. [##] (CX 43E; RX 1L In Camera). [##] (CX 43L; CX 166; RX IL Jn Camera; RX 300B; RX 307A; RX 312J; Donnelly CX 176D J 4 In Camera; Heath CX 178E { 8 In Camera). Demand for both suspension PVC copolymer and dispersion PVC is expected to grow at a slower rate than growth in demand for mass and suspension PVC (JX 3, PX 6 at 82 In. 11-23; JX 3, PX 8 at 89 In. 1-10; JX 3, PX 9 at 100 In. 24 - 101 In. 8).

683. [##] (RX IL Jn Camera; CX 43G-I). This does not suggest, however, that demand for PVC resin in the relevant markets will grow in the future at a rate close to the rate at which it grew in the 1960's and 1970's. On the contrary, the rate of growth in demand for PVC resin in the relevant markets for the decade and beyond is, as Mr. Disch and others have testified, likely to be much closer to GNP than it is to a much higher level (Disch Dkt. 9159, 691; See CPF 725).

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1185 1010 Initial Decision 684. Increases in demand observed in recent years in the relevant markets reflect recovery of the PVC industry from the recession of the early 1980's. Also, the PVC industry has benefitted from strength in particular segments of the economy. While, in addition, PVC has grown in a limited number of newer applications, this growth is clearly of a much lesser magnitude than the type of explosive growth that the PVC industry enjoyed in the 1960's and 1970's, as noted in the Goodrich proceeding (Goodrich F 234). 685. From 1979 to 1987, aggregate PVC demand grew at a compound annual rate of 3.4 percent (compare CX 213C and Dkt. 9159 CX 672Z5). [##] (See RX 1L, RX 1V In Camera; RX 43C, RX 43E In Camera).

686. (Goodrich F 236; See Liao Dkt. 9159, 1517-19; Dkt. 9159 RX 639H In Camera). The slower rate of growth since 1979 discouraged entry into the relevant markets (Goodrich F 236; See Eades Dkt. 9159, 1468-69).

687. Moreover, the perception by PVC producers that demand for PVC will grow only slowly in each of the relevant PVC markets is acknowledged by producers in the industry to have an impact on their expectations regarding new entry (Goodrich F 236; See, e.g., Schaefer JX 1, 585 In. 2 - 587 In. 20; Schaefer Dkt. 9159, 1133; H. Wheeler Dkt. 9159, 1736; See also Eades Dkt. 9159, 1486-87). 688. Thus, a slower rate of growth in demand in the future for PVC resin in each of the relevant markets will make entry less likely to occur, affects the expectations of incumbent firms regarding new entry, and thereby tends to increase the likelihood of collusion (Kaserman JX 1, 322 In. 20 - 323 In. 10; Kaserman Dkt. 9159, 2429-30).

Ix. MARKET CONDUCT A. Monitoring Activity 689. [##] (Goodrich F 215; Klass Dkt. 9159, 4358; See also Weber Dkt. 9159, 1791-1803; Becker Dkt. 9159, 1246-48; Dkt. 9159 CX 138; Dkt. 9159 CX 141; Dkt. 9159 CX 143; Dkt. 9159 CX 148; Dkt. 9159 CX 163 In Camera; Dkt. 9159 CX 1691; Dkt. 9159 CX 228; Dkt. 9159 CX 234; Dkt. 9159 CX 238; Dkt. 9159 CX 239; Dkt. Initial Decision 115 F.T.C.

9159 CX 241; Dkt. 9159 CX 242; Dkt. 9159 CX 243). As a result, these producers have a working knowledge of competitors’ prices and price changes, and are aware of price changes in the industry (Goodrich F 215; JX 3, PX 136 at 116 In. 17 - 117 In. 4; JX 3, PX 10 at 1199 In. 5-11, 1135 In. 5 - 1137 In. 18; JX 3, PX 8 at 116 In. 8 - 118 In. 11; JX 3, PX 7 at 157 In. 10 - 160 In. 23; JX 3, PX 9 at 77 In. 5 - 79 In. 73, 84 In. 2 - 85 In. 1; H. Wheeler Dkt. 9159, 1749-50, 1768; Schaefer Dkt. 9159, 1199; Becker Dkt. 9159, 1338). Producers obtain competitive price information quickly (H. Wheeler Dkt. 9159, 1749; Weber Dkt. 9159, 1799). [##] (Goodrich F 215; Becker Dkt. 9159, 1248-49; Schaefer Dkt. 9159, 1135-37; H. Wheeler Dkt. 9159, 1747-48; McMath Dkt. 9159, 1897-98, 1901-09 In Camera; DiLiddo Dkt. 9159, 3124-27, 3128 In Camera).

690. Knowledge that a competitor is reducing price would facilitate collusive behavior in each of the relevant markets, by allowing rivals to detect and discipline any cheating on a collusive agreement, thus discouraging such cheating (Goodrich F 204; Kaserman JX 1, 346 In. 15 - 347 In. 14). [##] (See, e.g., CX 67A In Camera; CX 66A-B In Camera; CX 62 In Camera; CX 133 In Camera; CX 134 In Camera; CX 68B In Camera). 691. [##] (See CX 4A-Z518 In Camera; Goodrich F 215; JX 3, PX 136 at 119 In. 25 - 120 In. 9; JX 3, PX 9 at 78 In. 12 - 79 In. 13; JX 3, PX 10 at 1135 In. 8 - 1137 In. 18; JX 3, PX 8 at 117 In. 9 - 118 In. 11; JX 3, PX 7 at 160 In. 7-22; See, e.g., JX 3, PX 58; JX 3, PX 59; JX 3, PX 60; JX 3, PX 62; JX 3, PX 72; JX 3, PX 122; JX 3, PX 21; JX 3, PX 63; JX 3, PX 65; JX 3, PX 66; JX 3, PX 67; JX 3, PX 73; JX 3, PX 74; JX 3, PX 75; JX 3, PX 117; JX 3, PX 119; JX 3, PX 120; JX 3, PX 124). [##] (Kulkaski RX 255C 6 Jn Camera). By bringing competitive offers to their regular suppliers, pursuant to meeting competition clauses or in non-contract situations, buyers provide information about the prices of competitors (Goodrich F 212; Disch Dkt. 9159, 728; Becker Dkt. 9159, 1246-48: Weber Dkt. 9159, 1798-99; Schaefer Dkt. 9159, 1136-37; H. Wheeler Dkt. 9159, 1747-48).

692. [##] (See, e.g., Goodrich F 213; RX 106 In Camera; RX 111B In Camera; RX 100 B In Camera; RX 105A In Camera; RX 139B In Camera; RX 141A In Camera; RX 169B In Camera; RX 216D In Camera; RX 216F In Camera), [##] (See CX 85; CX 86; CX OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1187 1010 Initial Decision 87; CX 88; CX 89; CX 90; CX 91; CX 92; CX 93; Goodrich F 213; Wheeler 1800; Dkt. 9159 CX 3027; Dkt. 9159 CX 32V-X; Dkt. 9159 CX 99 In Camera; Dkt. 9159 CX 124; Dkt. 9159 CX 127; Dkt. 9159 CX 131C-D; Dkt. 9159 CX 140; Dkt. 9159 CX 142C; Dkt. 9159 CX 144; Dkt. 9159 CX 145; Dkt. 9159 CX 128B-E; Dkt. 9159 CX 149; Dkt. 9159 CX 231; Dkt. 9159 CX 463; Dkt. 9159 CX 464; Dkt. 9159 CX 470; Dkt. 9159 CX 578 In Camera). [##] (Stuart CX 201C ] 6 In Camera).

693. [##] (Goodrich F 211, F 238; See, e.g., Dkt. 9159 CX 73H In Camera; Dkt. 9159 CX 76C In Camera; Dkt. 9159 CX 78B In Camera; Dkt. 9159 CX 84E In Camera; Dkt. 9159 CX 89C In Camera; Dkt. 9159 CX 152B In Camera). Suppliers usually give advance notice of price increases (Goodrich F 211). This practice permits rivals to determine, prior to the effective date, whether competitors are following the proposed increase, thereby reducing the risk of losing sales as a result of increasing prices. Although the information obtained from customers is not perfect, most information is considered to be reliable (Goodrich F 215; Becker Dkt. 9159, 1338; H. Wheeler Dkt. 9159, 1749-50, 1768). Sales and marketing personnel are trained to probe and check to improve the accuracy of the information received (Goodrich F 215; Schaefer Dkt. 9159, 1136-37; Weber Dkt. 9159, 1797-98; Becker Dkt. 9159, 1246-47). The incentive for a customer to provide inaccurate information is tempered by the fact that the customer risks its relationship with a supplier if caught (DiLiddo Dkt. 9159, 3258-59). Because of the large number of buyers and the regularity and frequency of transactions, suppliers are able to gauge the accuracy of particular items of information to spot trends in prices and the behavior of particular rivals (H. Wheeler Dkt. 9159, 1749-50, 1768; Schaefer Dkt. 9159, 1135-37).

694. PVC producers in each of the relevant markets monitor the trade press for price information. Price increases are routinely announced in the trade press one or two months in advance of their effective date, allowing rivals an opportunity to react to such increases, and to make similar announcements to their customers (CX 8; CX 9A; CX 168; Goodrich F 214; Dkt. 9159 Weber Dkt. 9159, 1799-1800; Dkt. 9159 Becker Dkt. 9159, 1248; Dkt. 9159 CX 98; Dkt. 9159 CX 131; Dkt. 9159 CX 139E; Dkt. 9159 CX 409; Dkt. Initial Decision 115 F.T.C.

9159 CX 410; Dkt. 9159 CX 411; Dkt. 9159 CX 413: Dkt. 9159 CX 436; Dkt. 9159 CX 532; Dkt. 9159 CX 563; Dkt. 9159 CX 711; Dkt. 9159 CX 714; Dkt. 9159 CX 715; Dkt. 9159 CX 718; Dkt. 9159 CX TI9A).

695. Monthly trade reports often report on market pricing, and, based on discussions with PVC producers, forecast prices into the near future, providing an effective vehicle which producers in each of the relevant markets can use as a basis for communication and possible agreement (See CX 45A; CX 46A; CX 18G; CX 21G; CX 22G; CX 23G; CX 24G; CX 25G; CX 26G; CX 27G; CX 28G; CX 29G; CX 30G; CX 31G; CX 32G; CX 33H; CX 34G; CX 35G),. 696. Industry consultants are also a mechanism through which PVC producers in each of the relevant markets obtain price information. Producers regularly tell such consultants what they believe the market price is or should be, or whether the price should increase, and consultants, in turn, report this information to other producers (JX 3, PX 45; JX 3, PX 81).

697. [##] (See CX 95B In Camera). A Vista call report recounts a meeting between a Vista salesman and an Occidental salesman, in which the Occidental salesman called5 1 3 4 3 6 1480 1752 64 35 96.555031 on a customer while the Vista salesman was there. At this meeting, the Occidental salesman confirmed5 1 3 4 5 2 892 1863 107 46 91.139114 Oxy's5 1 3 4 5 3 1014 1862 107 40 96.033554 $0.325 1 3 4 5 4 1134 1864 35 36 89.463715 lb5 1 3 4 5 5 1182 1865 133 35 96.781120 markets 1 3 4 5 6 1327 1866 96 45 96.913193 prices 1 3 4 5 7 1436 1876 279 28 96.439163 announcements 1 3 4 5 8 1729 1869 55 36 96.908203 for5 1 3 4 5 9 1796 1869 83 47 96.998634 pipes 1 3 4 5 10 1892 1872 106 44 96.512260 grade4 1 3 4 6 0 659 1920 1338 52 -1 5 1 3 4 6 1 659 1920 95 36 96.937325 resins 1 3 4 6 2 776 1921 173 36 96.676384 effective5 1 3 4 6 3 969 1923 128 35 96.928741 March5 1 3 4 6 4 1123 1923 34 35 93.807526 1 and related5 1 3 4 6 7 1444 1926 71 35 93.301125 that5 1 3 4 6 8 1537 1926 109 46 91.026215 Oxy's5 1 3 4 6 9 1667 1927 194 37 96.435547 intentions5 1 3 4 6 10 1883 1940 58 25 96.879799 ares 1 3 4 6 11 1962 1936 35 29 96.879799 to4 1 3 4 7 0 660 1977 1337 53 -1 5 1 3 4 7 1 660 1989 106 25 96.594650 moves 1 3 4 7 2 779 1985 36 29 96.462158 to5 1 3 4 7 3 829 1989 20 25 96.325813 a5 1 3 4 7 4 862 1977 106 40 96.325813 $0.345 1 3 4 7 5 983 1980 35 34 93.671959 Ib5 1 3 4 7 6 1031 1981 134 35 95.862885 markets 1 3 4 7 7 1177 1981 96 45 97.017075 prices 1 3 4 7 8 1286 1981 56 36 96.864120 for5 1 3 4 7 9 1354 1982 81 46 96.911400 pipes 1 3 4 7 10 1449 1984 104 44 96.993256 grades 1 3 4 7 11 1567 1984 91 35 96.611473 resins 1 3 4 7 12 1672 1995 46 25 96.611473 on5 1 3 4 7 13 1733 1986 99 44 96.339157 April5 1 3 4 7 14 1852 1986 36 34 95.940971 1 (CX 129A-B).

698. A Formosa call report recounts a meeting among sales and management personnel from a number of PVC producers at a golf outing held by one PVC customer. One subject of discussion at this meeting was the share of the customer's business held by each supplier (CX 123A). This particular gathering of PVC producers is an annual one (CX 123B).

699. In addition, vertically integrated PVC producers also exchange price information, which is routinely communicated to marketing management (JX 3, PX 53; JX 3, PX 55; JX 3, PX 56; JX 3, PX 57).

700. In addition, as the Commission demonstrated in Goodrich, PVC producers in the relevant markets may be able to obtain price information through their VCM supply5 1 3 7 3 6 1514 2798 360 47 91.868988 interrelationships with OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1189 1010 Initial Decision integrated PVC producers (Goodrich, slip op. 107).*” (DiLiddo Dkt. 9159, 3310, 3315-16 In Camera; Schaefer Dkt. 9159, 1223 In Camera). [##] (DiLiddo Dkt. 9159, 3316 Jn Camera; See Schaefer 1223 In Camera).

701. In determining the price of VCM, Goodrich and Occidental must first agree on the appropriate reference price for PVC. Indeed, as witnesses in Goodrich testified, the price of PVC is thea 1 3 2 4 0 543 1019 1334 49 -1 5 1 3 2 4 1 543 1019 230 37 96.659630 determinant5 1 3 2 4 2 787 1020 42 36 96.825676 of5 1 3 2 4 3 838 1021 93 36 96.944717 what5 1 3 2 4 4 944 1022 58 35 96.984261 thes 1 3 2 4 5 1017 1022 125 46 97.005898 selling5 1 3 2 4 6 1156 1022 95 46 96.680069 prices 1 3 2 4 7 1265 1022 55 37 92.973228 for5 1 3 2 4 8 1333 1023 109 36 92.094124 VCM5 1 3 2 4 9 1456 1023 131 37 56.942314 is... (DiLiddo Dkt.

9159, 3308, 3309 ("So, the price of PVC is driving the price of VCM")). [##] (See CX 79A In Camera).

702. These raw material supply relationships between the principal competitors in the mass and suspension PVC market, coupled with the agreement by producers to link higher VCM prices to higher PVC prices, increase the likelihood of coordinated price increases. As the Commission recognized in Goodrich, vertically integrated VCM/PVC producers could5 1 3 3 6 5 1306 1497 112 28 96.766235 creates 1 3 3 6 6 1431 1501 120 35 96.995125 powers 1 3 3 6 7 1564 1502 84 25 96.975174 overs 1 3 3 6 8 1659 1492 95 46 96.630714 prices 1 3 3 6 9 1768 1492 34 35 96.542870 in5 1 3 3 6 10 1816 1494 57 33 96.574341 thea 1 3 3 7 0 535 1545 1336 49 -1 5 1 3 3 7 1 535 1545 94 35 96.574989 PVC5 1 3 3 7 2 643 1546 135 35 96.606888 markets 1 3 3 7 3 792 1546 46 45 96.603416 by5 1 3 3 7 4 854 1546 35 35 96.779366 in5 1 3 3 7 5 904 1546 109 35 96.686249 effects 1 3 3 7 6 1027 1547 156 46 96.091721 creating5 1 3 3 7 7 1198 1559 43 24 96.718796 an5 1 3 3 7 8 1255 1548 226 46 96.771492 involuntary5 1 3 3 7 9 1496 1550 93 35 96.011147 PVC5 1 3 3 7 10 1605 1551 120 41 96.038116 cartel;5 1 3 3 7 11 1742 1552 73 35 96.934029 that5 1 3 3 7 12 1829 1552 42 41 96.997711 is,4 1 3 3 8 0 535 1602 1338 49 -1 5 1 3 3 8 1 535 1603 46 44 96.785400 by5 1 3 3 8 2 595 1602 140 47 96.732071 forcing5 1 3 3 8 3 758 1604 191 45 96.732071 producers5 1 3 3 8 4 963 1611 36 29 96.883003 to5 1 3 3 8 5 1011 1605 91 35 96.913368 raises 1 3 3 8 6 1114 1605 96 46 96.821823 prices 1 3 3 8 7 1224 1605 35 36 93.185547 in5 1 3 3 8 8 1273 1617 20 24 93.185547 a5 1 3 3 8 9 1306 1607 228 36 96.732033 coordinated5 1 3 3 8 10 1548 1608 152 41 96.319786 fashion,5 1 3 3 8 11 1716 1609 157 35 96.794189 whether4 1 3 3 9 0 535 1662 1333 51 -1 5 1 3 3 9 1 535 1672 39 24 95.423462 or5 1 3 3 9 2 586 1668 59 28 94.481415 not5 1 3 3 9 3 659 1673 19 23 94.481415 a5 1 3 3 9 4 691 1662 182 46 96.686241 voluntary5 1 3 3 9 5 887 1663 92 35 96.979118 PVC5 1 3 3 9 6 993 1664 103 34 96.756676 cartel5 1 3 3 9 7 1110 1665 104 34 96.826668 could5 1 3 3 9 8 1229 1665 87 35 96.793961 have5 1 3 3 9 9 1330 1665 154 36 96.664314 formed (Goodrich, slip op.

at 104 n.220, 111-12 n.241).

703. Indeed, historical price data shows that, since the acquisition, PVC producers have succeeded in raising mass and suspension PVC prices by approximately twice the increase in VCM prices (CX 45A; CX 46A; CX 175). This suggests that the formula regarding VCM and PVC pricing (i.e., the Dow5 1 3 4 5 9 1587 2016 65 34 96.394478 Air5 1 3 4 5 10 1675 2017 190 35 96.038147 Products formula) has not broken down.

704. [##] (Dkt. 9159 CX 252 In Camera; Dkt. 9159 CX 474 In Camera; Dkt. 9159 RX 35 In Camera), [##] (CX 54 In Camera), [##] (RX 258Z83 In Camera), [##] (CX 118 In Camera), [##] (CX 134 In Camera; CX 62 In Camera), [##] (RX 290B; RX 299B) [##] (CX 107 In Camera, Dkt. 9159 CX 30; Dkt. 9159 CX 31; Dkt. 9159 CX 32; Dkt. 9159 CX 215; Dkt. 9159 CX 424; Dkt. 9159 RX 296; Dkt. 9159 RX 297; Dkt. 9159 RX 298; Dkt. 9159 RX 299; Dkt. 9159 RX 302; Dkt. 9159 RX 303; Dkt. 9159 RX 304; Dkt. 9159 RX 311; Dkt. °7 See Motion and Supporting Arguments of Occidental Petroleum Corporation and Occidental Chemical Corporation for Reconsideration of Intent to Release Jn Camera Information, filed in Goodrich, Dkt. 9159, February 17, 1988. Initial Decision 115 F.T.C.

9159 RX 314). The availability of this non-price market information enables competitors in each of the relevant markets to assess and predict the competitive strategies of their rivals, and facilitates the reaching and maintaining of an industry consensus with regard to market activities.

B. Signaling Activity 705. [##] (CX 66B In Camera). [##] (CX 67A In Camera). [##] (RX 93A In Camera).

706. [##] (Goldstein CX 180C J 4 In Camera: Clark CX 193C-D q 4 In Camera; Bendavid CX 194B-C J 4 In Camera; Kulkaski CX 195B J 3 In Camera; Alberti CX 199B ] 3 In Camera: Donnelly CX 176C J 4 In Camera; Gmach CX 200C { 3 In Camera). [##] (CX 133 In Camera).

707. In addition, PVC producers are quoted in the trade press or in monthly consultants’ reports regarding their beliefs as to the likelihood that PVC prices will increase in coming months, thus signaling to their rivals their intention to maintain current prices or to support increased prices (CX 9; CX 18G-H; CX 27G-H). One Contacts 1 5 3 6 2 850 1792 164 45 90.351387 Report, received by Occidental from an industry consultant, reported on a meeting between the consultant and Conoco Chemicals' General Manager for Plastics: Conoco5 1 5 3 8 7 1688 1914 160 36 96.576721 believes5 1 5 3 8 8 1866 1926 19 24 96.095573 a5 1 5 3 8 9 1900 1915 97 45 96.095573 price4 1 5 3 9 0 660 1965 1337 52 -1 5 1 5 3 9 1 660 1965 42 35 97.002258 of5 1 5 3 9 2 710 1965 42 34 96.786659 415 1 5 3 9 3 770 1972 97 28 96.979462 cents5 1 5 3 9 4 880 1977 63 34 96.930992 pers 1 5 3 9 5 953 1967 120 44 96.305496 pounds 1 5 3 9 6 1087 1966 56 36 96.127731 for5 1 5 3 9 7 1153 1967 82 46 96.127731 pipes 1 5 3 9 8 1247 1968 92 35 96.567978 resins 1 5 3 9 9 1354 1968 28 36 96.885452 is5 1 5 3 9 10 1396 1975 59 29 96.258804 too5 1 5 3 9 11 1468 1970 83 45 96.258804 high5 1 5 3 9 12 1565 1970 56 35 96.302933 for5 1 5 3 9 13 1633 1971 103 36 96.339867 C9005 1 5 3 9 14 1748 1971 83 46 96.914612 pipes 1 5 3 9 15 1845 1973 67 35 96.919891 ands 1 5 3 9 16 1926 1974 71 34 96.622208 that4 1 5 3 10 0 661 2024 1335 51 -1 5 1 5 3 10 1 661 2024 44 35 96.742882 375 1 5 3 10 2 726 2030 99 29 96.546814 cents5 1 5 3 10 3 844 2024 30 35 96.546814 is5 1 5 3 10 4 895 2035 43 24 97.003181 an5 1 5 3 10 5 958 2025 208 45 96.642014 acceptable5 1 5 3 10 6 1184 2026 93 36 96.566734 levels 1 5 3 10 7 1297 2026 55 36 96.564079 for5 1 5 3 10 8 1370 2028 68 34 96.886162 this5 1 5 3 10 9 1458 2035 82 39 96.961502 types 1 5 3 10 10 1559 2029 43 35 96.990273 of5 1 5 3 10 11 1616 2030 84 45 97.003532 pipes 1 5 3 10 12 1719 2030 35 35 96.961617 in5 1 5 3 10 13 1774 2030 22 35 96.398247 65 1 5 3 10 14 1816 2037 36 29 96.524368 to5 1 5 3 10 15 1873 2031 19 36 96.648270 85 1 5 3 10 16 1913 2031 83 36 96.648270 inch4 1 5 3 11 0 659 2081 1336 50 -1 5 1 5 3 11 1 659 2081 209 36 93.572441 diameters (JX 3, PX 82). The report goes on to note that Conoco4 1 5 3 12 0 658 2139 1336 52 -1 5 1 5 3 12 1 658 2139 157 36 96.847191 believes5 1 5 3 12 2 831 2140 93 36 96.828018 PVC5 1 5 3 12 3 939 2142 145 34 96.236580 volumes 1 5 3 12 4 1099 2142 67 35 96.917900 ands 1 5 3 12 5 1180 2142 115 46 96.964539 prices5 1 5 3 12 6 1311 2143 71 36 96.180687 will5 1 5 3 12 7 1397 2144 45 35 96.498665 be5 1 5 3 12 8 1456 2145 70 35 96.237587 less5 1 5 3 12 9 1542 2146 191 45 96.951553 depressed5 1 5 3 12 10 1748 2147 35 35 96.929077 in5 1 5 3 12 11 1804 2147 92 35 96.577408 19845 1 5 3 12 12 1912 2148 82 35 96.468964 than4 1 5 3 13 0 657 2197 467 46 -1 5 1 5 3 13 1 657 2197 36 36 94.870087 in5 1 5 3 13 2 713 2197 111 36 94.870087 1983 (JX 3, PX 82).

708. The President of Occidental Chemical, Mr. J. Roger Hirl, has been quoted in the trade press as stating that We're5 1 5 4 2 12 1777 2328 61 28 96.871407 not5 1 5 4 2 13 1854 2322 138 46 96.836952 willing4 1 5 4 3 0 655 2372 1336 51 -1 5 1 5 4 3 1 655 2378 36 29 94.928955 to5 1 5 4 3 2 721 2372 98 46 94.928955 prices 1 5 4 3 3 849 2373 118 35 96.093964 below5 1 5 4 3 4 997 2374 59 35 96.730919 thes 1 5 4 3 5 1086 2375 190 44 95.960159 perceived5 1 5 4 3 6 1306 2376 135 36 96.866234 markets 1 5 4 3 7 1469 2383 36 30 96.343628 to5 1 5 4 3 8 1536 2385 57 38 96.931343 gets 1 5 4 3 9 1624 2379 112 40 96.280891 share,5 1 5 4 3 10 1768 2379 61 36 96.433540 but5 1 5 4 3 11 1860 2391 55 24 96.627937 we5 1 5 4 3 12 1945 2381 46 35 96.099754 do4 1 5 4 4 0 655 2430 1335 49 -1 5 1 5 4 4 1 655 2430 242 46 95.444778 aggressively5 1 5 4 4 2 913 2437 51 39 96.532631 try5 1 5 4 4 3 979 2438 35 28 96.741577 to5 1 5 4 4 4 1027 2438 59 39 96.986893 gets 1 5 4 4 5 1100 2434 186 34 96.753006 accounts (CX 44C). In addition, Occidental, as noted supra, receives Contacts 1 5 4 5 6 1405 2494 169 45 94.759407 Reports from one industry consultant relating, in detail, conversations that consultant had with other producers. One Contacts 1 5 4 7 5 1327 2610 151 45 83.890686 Report received by Occidental, reporting on a meeting with Georgia-Pacific PVC management, noted that GP's5 1 5 4 9 3 866 2730 139 28 96.827911 currents 1 5 4 9 4 1021 2731 153 39 96.373520 strategy5 1 5 4 9 5 1191 2725 29 36 97.010658 is5 1 5 4 9 6 1237 2727 297 45 96.725098 non-aggressive5 1 5 4 9 7 1550 2728 68 35 96.554329 ands 1 5 4 9 8 1634 2728 268 36 92.125359 conservative”5 1 5 4 9 9 1921 2731 68 41 85.428185 (JX4 1 5 4 10 0 653 2780 1335 51 -1 5 1 5 4 10 1 653 2780 32 42 96.369431 3,5 1 5 4 10 2 714 2782 61 34 96.135674 PX5 1 5 4 10 3 802 2782 73 42 95.500847 79).5 1 5 4 10 4 929 2782 38 35 95.500847 In5 1 5 4 10 5 995 2783 148 35 96.829346 another5 1 5 4 10 6 1169 2784 87 35 96.443466 such5 1 5 4 10 7 1286 2785 169 36 95.960884 Contact Report," Occidental was OCCIDENTAL PETROLEUM CORPORATION, ETAL. 119] 1010 Initial Decision informed of Borden management's view that the problem in the PVC industry is the inability of PVC producers to move prices to the “published industry consensus" (JX 3, PX 45). According to the report, Borden attributed this problem to the fact that Polymer4 1 3 1 5 0 535 855 1337 47 -1 5 1 3 1 5 1 535 855 192 45 96.066109 producers5 1 3 1 5 2 741 855 167 36 96.576012 continues 1 3 1 5 3 920 862 36 29 96.576012 to5 1 3 1 5 4 970 855 155 46 96.522697 struggle5 1 3 1 5 5 1138 861 36 30 96.894371 to5 1 3 1 5 6 1187 855 168 36 96.637848 maintains 1 3 1 5 7 1369 856 133 35 96.389610 markets 1 3 1 5 8 1516 856 100 35 96.271004 shares 1 3 1 5 9 1630 866 37 25 96.271004 as5 1 3 1 5 10 1681 866 20 25 96.778069 a5 1 3 1 5 11 1714 855 158 47 96.871567 quantity4 1 3 1 6 0 535 913 1337 47 -1 5 1 3 1 6 1 535 914 116 34 96.652550 rather5 1 3 1 6 2 674 914 83 34 96.915222 than5 1 3 1 6 3 782 913 108 46 96.672295 beings 1 3 1 6 4 915 913 162 35 96.764473 satisfied5 1 3 1 6 5 1102 913 85 36 96.711838 with5 1 3 1 6 6 1211 914 234 45 96.538612 maintaining5 1 3 1 6 7 1470 924 19 25 96.693901 a5 1 3 1 6 8 1512 920 215 40 96.727051 percentages 1 3 1 6 9 1751 914 43 35 96.687744 of5 1 3 1 6 10 1815 914 57 35 96.434830 thea 1 3 1 7 0 535 971 1338 46 -1 5 1 3 1 7 1 535 972 154 34 94.209290 market (JX 3, PX 45). Occidental was similarly informed that Conoco5 1 3 1 8 2 719 1029 130 36 96.533737 wishes5 1 3 1 8 3 864 1030 99 35 96.889473 others 1 3 1 8 4 975 1030 191 45 96.385612 producers5 1 3 1 8 5 1181 1030 120 35 96.673050 would5 1 3 1 8 6 1315 1036 61 29 96.942978 not5 1 3 1 8 7 1388 1040 63 25 96.524292 uses 1 3 1 8 8 1465 1030 205 46 96.552994 aggressive5 1 3 1 8 9 1683 1030 138 46 96.593369 pricing5 1 3 1 8 10 1835 1030 36 35 96.950188 in4 1 3 1 9 0 533 1088 1335 46 -1 5 1 3 1 9 1 533 1088 142 46 96.885765 periods5 1 3 1 9 2 691 1088 42 35 96.674530 of5 1 3 1 9 3 745 1088 70 35 96.431778 lows 1 3 1 9 4 830 1088 152 36 95.690582 demands 1 3 1 9 5 997 1088 35 35 96.917053 in5 1 3 1 9 6 1048 1088 100 36 96.337448 futile5 1 3 1 9 7 1163 1088 207 46 96.337448 campaigns5 1 3 1 9 8 1385 1095 35 29 96.398460 to5 1 3 1 9 9 1435 1088 158 36 96.475433 increases 1 3 1 9 10 1607 1088 135 36 96.840096 markets 1 3 1 9 11 1757 1088 111 36 96.659966 share.4 1 3 1 10 0 533 1146 1337 46 -1 5 1 3 1 10 1 533 1146 68 35 93.295631 Mr.5 1 3 1 10 2 618 1146 176 35 92.834541 Flammer5 1 3 1 10 3 808 1146 163 45 96.445213 deplores5 1 3 1 10 4 986 1147 57 34 96.445213 thes 1 3 1 10 5 1058 1146 125 36 96.952827 failures 1 3 1 10 6 1198 1146 42 36 96.986496 of5 1 3 1 10 7 1251 1146 197 46 96.646416 intelligent5 1 3 1 10 8 1461 1147 129 45 96.798157 peoples 1 3 1 10 9 1604 1153 36 29 96.388496 to5 1 3 1 10 10 1655 1157 65 25 96.388496 uses 1 3 1 10 11 1735 1146 135 46 96.826614 history4 1 3 1 11 0 534 1204 1336 47 -1 5 1 3 1 11 1 534 1205 67 34 96.753510 ands 1 3 1 11 2 615 1204 173 35 96.820000 available5 1 3 1 11 3 802 1205 163 35 96.820000 statistics5 1 3 1 11 4 979 1211 36 29 96.927437 to5 1 3 1 11 5 1029 1205 88 35 96.594498 theirs 1 3 1 11 6 1129 1216 81 24 96.594498 owns 1 3 1 11 7 1225 1205 193 46 96.713318 advantages 1 3 1 11 8 1432 1205 67 36 96.875748 ands 1 3 1 11 9 1513 1205 55 36 96.712830 for5 1 3 1 11 10 1581 1206 56 35 96.957863 thes 1 3 1 11 11 1651 1206 95 45 97.003807 goods 1 3 1 11 12 1761 1205 42 36 96.999168 of5 1 3 1 11 13 1813 1205 57 36 96.609024 thea 1 3 1 12 0 533 1262 479 46 -1 5 1 3 1 12 1 533 1262 178 46 93.786217 industry (JX 3, PX 82).

709. PVC producers also provide signals to their competitors with regard to other non-price market activities. For example, producers announce their schedules for temporary plant shutdowns and scheduled maintenance (RX 290B; RX 299B). In addition, during 1987, some producers have announced to the trade press the projected magnitude of their anticipated incremental capacity expansions (See, e.g., CX 165A; CX 166).

C. Competitive Performance in the Relevant Markets 710. During the early to mid 1980's, PVC producers exported PVC resin at a price lower than that at which they sold it in the United States, in order to avoid disrupting the domestic price structure (Schaefer Dkt. 9159, 1208; Schaefer JX 1, 587 In. 21-25; 589 In. 1-14).** [##] (Alberti CX 199C 4 In Camera). [##] (CX 132 In Camera). [##] (CX 10 In Camera), [##] Industry newsletters document the pervasiveness of such economic discrimination in the mass and suspension PVC market (See RX 288F; RX 289F; RX 290F; RX 291F; RX 292F; RX 293F; RX 294F; RX 295F; RX 297F; RX 298F; RX 299H; RX 300J; RX 301F; RX 302F). [##] (CX 11 Jn Camera).

38 As a result of the decline in the value of the dollar relative to other currencies, PVC producers are today able to export PVC at a price significantly above the domestic price.

Initial Decision 115 F.T.C.

711. [##] (CX 112C In Camera; CX 113A In Camera; JX 3, PX 94; Cf. RX 206A In Camera). [##] (Lewis CX 204B J 4 In Camera). 712. PVC producers in each of the relevant markets take care to assure that their pricing activity will not be perceived by their competitors as disruptive or aggressive, and exercise restraint in responding to efforts by their competitors’ customers to seek a competitive source of supply. [##] (CX 44C), [##] (CX 57 In Camera). [##] (CX 57 In Camera; See also CX 56 In Camera). [##] (CX 12A In Camera).

713. In order to avoid competitive reactions from their rivals, PVC producers do not generally look to increase market share, or gain substantial amounts of new business in market segments in which they do not participate, or at accounts they have not traditionally served. Thus, for example, Vista pointed out to one customer that was interested in purchasing pipe-grade resin that Vista5 1 3 3 7 2 789 1538 30 35 96.929810 is5 1 3 3 7 3 832 1545 61 28 96.969276 not5 1 3 3 7 4 906 1538 172 46 96.986984 currently5 1 3 3 7 5 1092 1538 113 45 96.553078 trying5 1 3 3 7 6 1218 1544 35 28 96.047028 to5 1 3 3 7 7 1267 1537 136 46 96.428276 expands 1 3 3 7 8 1417 1537 82 46 96.865356 pipes 1 3 3 7 9 1512 1537 105 45 95.405861 grades 1 3 3 7 10 1630 1537 91 35 95.405861 resins 1 3 3 7 11 1736 1538 90 34 96.979332 sales5 1 3 3 7 12 1841 1537 69 35 96.567932 ands 1 3 3 7 13 1923 1537 71 35 96.805573 that4 1 3 3 8 0 657 1596 1336 46 -1 5 1 3 3 8 1 657 1608 54 24 96.946274 we5 1 3 3 8 2 725 1597 121 35 96.565926 would5 1 3 3 8 3 860 1603 61 28 95.759926 not5 1 3 3 8 4 936 1596 242 46 95.759926 aggressively5 1 3 3 8 5 1192 1602 163 39 96.724388 competes 1 3 3 8 6 1369 1596 85 35 96.577606 with5 1 3 3 8 7 1469 1596 54 35 96.603386 his5 1 3 3 8 8 1538 1602 137 29 96.566383 currents 1 3 3 8 9 1690 1596 192 45 90.225418 suppliers (CX 130B). [##] (CX 36B Jn Camera). [##] (CX 77B In Camera; See also CX 76A In Camera). Similarly, an Occidental memorandum following the company's acquisition of Firestone Plastics noted, Prices 1 3 3 12 2 789 1830 176 34 96.008247 increases5 1 3 3 12 3 981 1830 91 34 96.523636 have5 1 3 3 12 4 1086 1829 91 34 95.423431 been5 1 3 3 12 5 1193 1828 255 46 94.630890 implemented5 1 3 3 12 6 1465 1828 34 35 94.630890 in5 1 3 3 12 7 1516 1828 43 35 92.237312 al]5 1 3 3 12 8 1576 1828 94 35 96.484009 PVC5 1 3 3 12 9 1684 1828 151 45 96.689125 products 1 3 3 12 10 1850 1828 91 35 96.939857 lines5 1 3 3 12 11 1957 1828 36 34 96.699562 in4 1 3 3 13 0 656 1885 1337 47 -1 5 1 3 3 13 1 656 1899 43 24 96.771385 an5 1 3 3 13 2 718 1887 109 36 96.586784 efforts 1 3 3 13 3 844 1894 36 28 96.142319 to5 1 3 3 13 4 897 1887 163 45 96.142319 improves 1 3 3 13 5 1076 1887 108 45 96.740730 profits 1 3 3 13 6 1201 1886 155 45 96.387848 margins5 1 3 3 13 7 1375 1887 68 33 96.319275 ands 1 3 3 13 8 1461 1892 151 39 96.849579 outpace5 1 3 3 13 9 1628 1896 71 24 96.440811 raw5 1 3 3 13 10 1717 1885 161 35 96.553047 materials 1 3 3 13 11 1895 1885 98 45 96.992493 price4 1 3 3 14 0 656 1944 707 43 -1 5 1 3 3 14 1 656 1946 198 35 92.379257 increases (JX 3, PX 50 at 150572).

714. [##] (See Pflugrath CX 177F J 9 In Camera; Heath CX 178D J 6 In Camera; Wilhite CX 179C-D J 4 In Camera; Bendavid CX 194B-C J 4 Jn Camera; Rutland CX 196A-B J 3 In Camera; Alberti CX 199C-D J 5 In Camera; Gmach CX 200C { 3 In Camera; Donnelly CX 176B-C { 2 Jn Camera; Underwood CX 203D { 8 Jn Camera; Hamilton CX 206F J 10 Jn Camera). [##] (Wilhite CX 179D J 4 In Camera). [##] (Alberti CX 199C 7 5 In Camera). [##] (Alberti CX 199C-D J 5 In Camera). [##] (Heath CX 178D { 6 Jn Camera). [##] (Pflugrath CX 177E 79 In Camera; See also Heath CX 178F 99 In Camera; Wilhite CX 179D {3 In Camera). [##] (Kulkaski RX 255C J 6 Jn Camera). [##] (See RX 110A In Camera; RX 106 In Camera; RX 124 In Camera; RX 206A In Camera). 715. [##] (RX 1L In Camera). [##] (RX 1L In Camera). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1193 1010 Initial Decision 716. [##] (CX 43C; Donnelly CX 176C-D J 4 Jn Camera; Heath CX 178E { 8; Kulkaski CX 195C ] 4 Jn Camera). [##] (Donnelly CX 176C-D { 4).

717. [##] (CX 100 M In Camera). [##] (CX 49D-E In Camera) and B.F. Goodrich. [##] (Hamilton CX 206F J 10 In Camera). Moreover, the fact that idle capacity is held by the two largest producers allows these firms to hold this capacity as a potential threat against any other producers that may consider making substantial expansions in the market.

718. [##] (CX 95B In Camera), [##] (CX 95A In Camera). [##] (CX 137Z61 In Camera).

719. [##] (CX 95D In Camera). [##] (Donnelly CX 176B { 3 Jn Camera). Thus, PVC recognize the degree to which they are able to maintain firm prices at relatively low levels of capacity utilization, without a significant degree of price discounting (See Dkt. 9159 CX 220C; Schaefer Dkt. 9159, 1123-24; H. Wheeler Dkt. 9159, 1745. 720. [##] (Pflugrath CX 177E-F J 10 In Camera; Heath CX 178F-G J 10 Jn Camera; Goldstein CX 180C ] 4 In Camera; Clark CX 193C-D ¥ 4 In Camera; Bendavid CX 194B-C { 4 In Camera; Kulkaski CX 195B J 3 In Camera; Porter CX 198B J 2 In Camera; Alberti CX 199D { 6 In Camera; Gmach CX 200C { 3 In Camera; Donnelly CX 176C J 4 In Camera; Hamilton CX 206F-G J 10-11 In Camera).

721. [##] (Pflugrath CX 177E-F { 10 In Camera). [##] (Donnelly CX 176C ¥ 4 In Camera). [##] (Clark CX 193C-D ] 4 In Camera). 722. [##] (Clark CX 193D J 4 In Camera). [##] (Gmach CX 200C J 3 In Camera). [##] (Gmach CX 200C J 3 In Camera; See also Alberti CX 199D 96 Jn Camera).

723. [##] (CX 96B In Camera; See also JX 3, PX 13 at 452726). Similarly, Occidental has described the profitable pricing levels that exist in the dispersion PVC market (JX 3, PX 13 at 452717). [##] (Flammer CX 84E 79; Hoyer CX 185E-F 911; Hill CX 183D-F Jn Camera).

724. [##] (CX 100 L In Camera). [##] (CX 100 K In Camera). 725. [##] (See CX 100 A-N Jn Camera; CX 1000). [##] 726. [##] (Goldstein CX 180C J 4 Jn Camera; Donnelly CX 176A-B 2 In Camera; Heath CX 178D-E {7 In Camera; Alberti CX 199B 93 In Camera; Wilhite CX 179B J2 In Camera; Pflugrath CX Initial Decision 115 F.T.C.

177D {7 In Camera; Clark CX 193B-C 73 In Camera; Porter CX 198A-B {2 In Camera; Underwood CX 203D §7 In Camera; Hamilton CX 206B-C 5 In Camera). [##] (Donnelly CX 176B J 2 In Camera). [##] (Heath CX 178E J 8 In Camera; RX 292B In Camera). [##] (Donnelly CX 176B 82 In Camera; Pflugrath CX 177E {8 In Camera).

727. [##] (CX 100 F In Camera).

728. [##] (CX 100 E In Camera). [##] (Baker CX 205C ¥ 4 In Camera).

729. [##] (CX 45A In Camera; See also CX 175; Donnelly CX 176B { 2 In Camera). [##] (CX 79A In Camera; See also CX 143]; CX 1441; CX 145]).

730. The following graph, CX 175, illustrates the increases in mass and suspension PVC prices relative to VCM prices, and the resulting increases in the PVC/VCM margin. [##] 731. Moreover, while Occidental appears to argue that PVC price increases in the United States may be attributable to world supply and demand conditions, the record reveals that the PVC/VCM margin has in fact increased substantially more in the United States than it has in Europe. Market prices for suspension PVC homopolymer and for VCM in the United States and Europe, respectively, as reported by Tecnon's Prices 1 3 6 7 3 958 1874 187 41 93.519951 Monitor, are recorded in the table below (RX 288F; RX 289F; RX 290F; RX 291D; RX 292F; RX 293F; RX 294F; RX 295F; RX 297F; RX 298F; RX 299H; RX 300J; RX 301F; RX 302F; RX 303F; RX 304F; RX 305H; RX 306F; RX 308F; RX 309F; RX 310H). Based on the range of reported prices for suspension PVC homopolymer ("U.S.; Actual" and European) and VCM ("U.S.; Actual" and European;5 1 3 6 13 4 1178 2221 204 42 95.221733 Contract) (See JId.), margins realized respectively by United States and European PVC producers can be calculated. These margins, presented in the right-hand column of the tables, are stated as a range, with the minimum value for each month measured as the difference between the highest reported VCM price and the lowest reported PVC price for that month, and the maximum value measured as the difference between the lowest reported VCM price and the highest reported PVC price for that month. Initial Decision OCCIDENTAL PETROLEUM CORPORATION, ET AL.

TECNON “PRICE MONITOR”

Reported VCM and Suspension PVC Homopolymer Prices MONTH YEAR May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan VCM LOW 15.5 13.5 15.75 16.5 17.25 17.25 18.25 20.5 in U.S. Currency May 1986 through January 1988 ($/Ton Prices Converted to Cents/Pound) UNITED STATES VCM PVC HIGH LOW 13.5 28.5 16.5 28.5 16.5 28.5 16.5 28.5 15.5 28.5 15.5 30 16 31 16 31 16 32 16.25 32 17 32 17.5 33 17.5 34 17.5 34 18.25 33 18.5 35 19.5 35 19.5 38 20.5 39 20.5 39 21 39 PVC HIGH 28.75 32.5 32.5 32.5 32.5 4] MARGIN 13. - 13.75 12. - 16.5 12. - 16.5 12. - 16.5 130 -17.5 14.5 - 18 1S - 16.5 IS - 16.5 16 - 18.25 15.75 - 18 15 - 17.5 15.5 -18 16.5 - 17.75 16.5 - 17.75 14.75 - 17 16.5 - 17.75 15.5 - 18 18.5 -20 18.5 -21 18.5 -22 18 -21.5 Initial Decision 1ISF.T.C.

EUROPE VCM VCM PVC PVC MONTH YEAR LOW HIGH LOW HIGH MARGIN May 1986 19.9 22.0 32.5 33.5 10.5-13.6 June 1986 19.4 21.4 31.6 32.6 10.2-13.3 July 1986 19.8 21.9 32.3 33.3 10.4-13.5 Aug 1986 21.0 23.1 33.5 35.3 10.4-14.3 Sep 1986 21.0 23.2 33.1 35.3 9.9-14.4 Oct 1986 21.6 23.9 35.3 36.4 11.4-14.8 Nov 1986 21.1 23.3 33,3 35.5 10.0-14.5 Dec 1986 21.7 24.0 34.2 36.5 10.3-14.8 Jan 1987 22.5 24.9 35.5 37.9 10.7-15.4 Feb 1987 22.0 25.7 36.0 39.2 10.3-17.1 Mar 1987 22.0 25.7 37.2 39.2 11.5-17.4 Apr 1987 22.6 26.4 38.3 40.3 11.9-17.6 May 1987 25.5 26.5 38.7 40.7 12.2-15.3 June 1987 25.0 26.0 38.8 41.4 12.8-16.3 July 1987 26.0 27.0 37.6 39.6 10.6-13.6 Aug 1987 25.3 26.3 36.6 38.5 10.4-13.3 Sep 1987 26.6 27.6 40.6 41.9 13,0-15.2 Oct 1987 28.7 29.7 39.6 40.9 9.9-12.1 Nov 1987 31.8 32.9 44.4 45.2 11.5-13.5 Dec 1987 31.6 32.7 44.1 44.6 11.5-13.0 Jan 1988 32.2 33.3 45.0 45.8 11.7-13.6 SOURCE RX 288F; RX 289F; RX 290F; RX 291D; RX 292F, RX 293F; RX 294F; RX 295F; RX 297F; RX 298F; RX 299H; RX 300J; RX 301F; RX 302F; RX 303F; RX 304F; RX 305H; RX 306F. 732. Comparison of United States and European margins for suspension PVC homopolymer in the table below, reveals that United States PVC margins have historically exceeded margins in Europe and that the gap between United States and European margins has increased since the acquisition.

733. European suspension PVC homopolymer margins have remained relatively stable over time while suspension PVC homopolymer margins in the United States have risen dramatically in recent years. Thus, in May 1986, minimum margins in the United States exceeded European minimum margins by 2.5 cents (13 cents vs. 10.5 cents) while maximum PVC margins in the United States exceeded maximum calculated European margins by 0.15 cents OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1197 1010 Initial Decision (13.75 cents vs. 13.6 cents). By January 1988, minimum PVC margins in the United States exceeded those in Europe by 6.3 cents per pound (18 cents vs. 11.7 cents), while maximum PVC margins in the United States exceeded those in Europe by 7.9 cents per pound (21.5 cents vs. 13.6 cents).

734. Suspension PVC homopolymer margins in Europe showed little change between May 1986 and January 1988, while minimum margins in the United States increased over this period by 38% (18 cents in January 1988 vs. 13 cents in May 1986) and maximum calculated margins in the United States increased by 56% (21.5 cents in January 1988 vs. 13.75 cents in May 1986). Suspension PVC Homopolymer/VCM Margins Calculated from Tecnon “Price Monitor”

Initial Decision in the United States and Europe Reported VCM and Suspension PVC Homopolymer Prices ($/Ton Prices Converted to Cents/Pound) in U.S. Currency May 1986 through January 1988 UNITED STATES MONTH YEAR MARGIN May 1986 13. - 13.75 June 1986 12. - 16.5 July 1986 12 - 16.5 Aug 1986 12. - 16.5 Sep 1986 13. - 17.5 Oct 1986 14.5 - 18 Nov 1986 15 - 16.5 Dec 1986 15 - 16.5 Jan 1987 16 - 18.25 Feb 1987 15.75 - 18 Mar 1987 15 - 17.5 Apr 1987 15.5 - 18 May 1987 16.5 - 17.75 June 1987 16.5 - 17.75 July 1987 14.75 - 17 Aug 1987 16.5 - 17.75 Sep 1987 15.5 - 18 Oct 1987 18.5 - 20 Nov 1987 18.5 - 21 Dec 1987 18.5 - 22 Jan 1988 18 - 21.5 SOURCE EUROPEAN MARGIN 10.5 - 13.6 10.2 - 13.3 10.4 - 13.5 10.4 - 14.3 9.9 - 14.4 11.4 - 14.8 10.0 - 14.5 10.3 - 14.8 10.7 - 15.4 10.3 - 17.1 11.5 - 17.2 11.9 - 17.6 12.2 - 15.3 12.8 - 16.3 10.6 - 13.6 10.4 - 13.3 13.0 - 15.2 9.9 - 12.1 11.5 - 13.5 11.5 - 13.0 11.7 - 13.6 RX 288F; RX 289F; RX 290F; RX 291D; RX 292F; RX 293F; RX 294F; RX 295F; RX 297F; RX 298F; RX 299H; RX 300J, RX 301F; RX 302F; RX 303F; RX 304F; RX 305H; RX 306F; RX 308F; RX 309F; RX 310H.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1199 1010 Initial Decision 735. The graph below plots minimum calculated margins for suspension PVC homopolymer in the United States relative to those in Europe, based on the Tecnon VCM and suspension PVC homopolymer price data.

736. The next graph plots maximum calculated margins for suspension PVC homopolymer in the United States relative to those in Europe, based on the Tecnon VCM and suspension PVC homopolymer price data.

Minimum Margin Between Suspension PVC Homopolymer and VCM Prices In U.S. and European Markets GRAPH FROM PAGE 218 GOES HERE Note: Minimum PVC Margin in each market is calculated by subtracting maximum VCM prices from the minimum PVC prices reported in RX288-RX310 Initial Decision 115 F.T.C.

Maximum Margin Between Suspension PVC Homopolymer and VCM Prices In U.S. and European Markets GRAPH FROM PAGE 219 GOES HERE Note: Maximum PVC Margin in each market is calculated by subtracting minimum VCM prices from the maximum PVC prices reported in RX288-RX310 OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1201 1010 Initial Decision 737. Regardless of whether minimum or maximum margins are considered, the increase in United States suspension PVC homopolymer margins relative to European margins, provides strong evidence that the increase in PVC prices in the United States are not explainable by cost increases or world-wide market forces. 738. Thus, it is not surprising that over the past year PVC producers have reported large profits from their PVC operations. Borden reported in September, 1986, that its operating income from the sale of PVC resins was more5 1 3 2 4 8 1244 1088 83 35 96.678604 than5 1 3 2 4 9 1342 1088 132 36 96.130486 doubles 1 3 2 4 10 1489 1089 67 36 96.814819 lasts 1 3 2 4 11 1570 1091 110 43 95.876663 year's5 1 3 2 4 12 1696 1091 113 35 89.568710 level (CX 1421). BF Goodrich reported operating income from PVC5 1 3 2 5 9 1840 1149 68 35 96.045120 anda 1 3 2 6 0 571 1199 1338 53 -1 5 1 3 2 6 1 571 1199 280 37 94.477661 Intermediates of $49.9 million for the nine months ended September 30, 1986 and $107.7 million for the nine months ended September 30, 1987 (CX 146L). Goodrich also noted that third quarter operating income increased5 1 3 2 9 4 1158 1383 35 30 97.012650 to5 1 3 2 9 5 1212 1375 107 41 96.733459 $46.85 1 3 2 9 6 1339 1378 150 42 96.626434 million,5 1 3 2 9 7 1509 1380 57 35 96.925049 2.55 1 3 2 9 8 1586 1380 104 36 96.986076 times5 1 3 2 9 9 1709 1381 67 35 96.639793 lasts 1 3 2 9 10 1793 1383 111 44 96.465714 year's4 1 3 2 10 0 567 1431 1337 49 -1 5 1 3 2 10 1 567 1431 145 37 96.293274 incomes 1 3 2 10 2 729 1433 42 35 96.293274 of5 1 3 2 10 3 785 1432 107 40 95.839470 $18.85 1 3 2 10 4 910 1434 159 36 89.159233 million (CX 146M). It noted that the increase in operating income was5 1 3 2 11 4 1071 1494 134 46 96.315773 largely5 1 3 2 11 5 1233 1496 222 35 96.586914 attributable5 1 3 2 11 6 1483 1503 35 29 96.821762 to5 1 3 2 11 7 1545 1497 185 37 96.764328 increased5 1 3 2 11 8 1757 1500 146 35 96.338539 volume4 1 3 2 12 0 565 1550 1337 54 -1 5 1 3 2 12 1 565 1550 193 35 96.762375 combined5 1 3 2 12 2 781 1551 85 35 96.845711 with5 1 3 2 12 3 887 1552 138 45 96.736763 margins 1 3 2 12 4 1047 1553 280 45 95.998848 improvements5 1 3 2 12 5 1349 1555 171 46 96.952629 resulting5 1 3 2 12 6 1541 1556 93 35 95.940605 from5 1 3 2 12 7 1657 1557 245 47 96.606758 significantly4 1 3 2 13 0 564 1607 1336 51 -1 5 1 3 2 13 1 564 1607 187 35 96.438568 enhanced5 1 3 2 13 2 769 1608 177 36 96.751923 domestic5 1 3 2 13 3 963 1609 138 46 97.000565 pricing5 1 3 2 13 4 1120 1611 67 34 95.918831 ands 1 3 2 13 5 1199 1603 15 59 95.848457 a5 1 3 2 13 6 1243 1618 160 38 95.848457 stronger5 1 3 2 13 7 1420 1614 91 33 96.596313 sales5 1 3 2 13 8 1530 1614 92 34 92.075417 mix (CX 146M).

Goodrich has recently announced plans to dispose of its interest in Uniroyal Goodrich Tire Company, in order to focus its resources, long-term, on its chemical and aerospace businesses (CX 167). Analysts5 1 3 2 17 2 774 1848 62 35 96.698486 says 1 3 2 17 3 855 1839 58 34 96.911629 thes 1 3 2 17 4 931 1846 185 38 96.911629 prospects5 1 3 2 17 5 1134 1840 57 35 93.193336 for5 1 3 2 17 6 1208 1841 219 36 92.070656 Goodrich’s5 1 3 2 17 7 1445 1843 69 45 97.008080 keys 1 3 2 17 8 1532 1845 189 45 82.251808 polyvinyl5 1 3 2 17 9 1739 1845 161 36 96.840576 chloride4 1 3 2 18 0 561 1894 1339 53 -1 5 1 3 2 18 1 561 1894 167 37 96.810738 business5 1 3 2 18 2 761 1907 58 25 96.521317 ares 1 3 2 18 3 852 1898 139 45 95.935295 strong (CX 167). Vista reported income from operations for the first three quarters of 1987 of $79.4 million, an improvement of $15.4 million over income for the same period of 1986. It noted that the improvements 1 3 2 21 7 1310 2076 180 47 96.602654 primarily5 1 3 2 21 8 1505 2077 143 37 96.932495 reflects5 1 3 2 21 9 1663 2079 127 46 96.629089 higher5 1 3 2 21 10 1803 2079 95 37 96.880203 PVC4 1 3 2 22 0 559 2130 1337 51 -1 5 1 3 2 22 1 559 2130 157 46 96.415459 margins5 1 3 2 22 2 738 2132 172 45 96.598709 resulting5 1 3 2 22 3 931 2132 93 35 96.984535 from5 1 3 2 22 4 1045 2133 58 35 96.496529 thes 1 3 2 22 5 1123 2133 125 46 96.603523 higher5 1 3 2 22 6 1267 2135 115 44 96.701637 prices5 1 3 2 22 7 1405 2136 106 45 96.974594 along5 1 3 2 22 8 1532 2136 85 35 96.928932 with5 1 3 2 22 9 1639 2137 112 35 96.512085 lowers 1 3 2 22 10 1769 2138 127 35 96.923973 ethane4 1 3 2 23 0 558 2187 1336 52 -1 5 1 3 2 23 1 558 2187 187 36 96.295609 feedstock5 1 3 2 23 2 759 2190 95 34 95.366516 cost (CX 145]; See also CX 1431; CX 1441; CX 139I-S). 739. Consideration of fixed costs and operating costs, as well as VCM feedstock costs, reveals an even more dramatic increase in PVC producer profits over the past year than that reflected in the Tecnon data. One monthly trade report has reported that PVC producers' margins were 8.1 cents per pound in 1987 compared to 2.1 cents in 1986, an increase of approximately 300 percent (CX 214E). 740. [##] (CX 13A In Camera).

Initial Decision 115 F.T.C.

X. THE ACQUISITION'S PROBABLE EFFECTS ON COMPETITION IN THE RELEVANT MARKETS 741. The ultimate inquiry under Section 7 of the Clayton Act is whether the effect of the acquisition may5 1 4 1 2 8 1476 841 44 35 96.547386 be5 1 4 1 2 9 1537 841 247 44 96.776917 substantially5 1 4 1 2 10 1800 846 35 30 96.798286 to5 1 4 1 2 11 1851 841 118 35 96.613617 lessen4 1 4 1 3 0 633 898 1335 47 -1 5 1 4 1 3 1 633 899 267 46 66.002365 competition. 15 U.S.C. 18. The test is one of reasonable probability. Section 7 is concerned with the probability, and not the certainty, of anticompetitive effects.

742. It has long been recognized that a horizontal acquisition in an industry characterized by few firms and high market shares may increase the market power held by the industry leaders and the joining parties. One of the principal dangers of concentration of market power is that the top firms will collectively use their market power to pursue parallels 1 4 2 6 5 1139 1364 150 46 96.908409 policies5 1 4 2 6 6 1306 1364 42 35 96.850655 of5 1 4 2 6 7 1360 1364 132 35 96.507423 mutual5 1 4 2 6 8 1510 1364 227 45 93.567017 advantage. The likely result is higher prices.

743. The Commission's task in a Section 7 case is to determine whether the facts of a particular acquisition are indicative of a probable future lessening of competition. This acquisition resulted in a major restructuring of the producer side of the relevant markets. It significantly increases concentration in the markets; it eliminated a substantial competitor in each of the markets; and it has increased the likelihood of collusion in each of the markets. 744. It is well settled that statistics reflecting the shares of the market controlled by the industry leaders and the parties to the merger are the primary indicia of market power. Such statistics are not conclusive, but they are entitled to great weight. 745. Under the DOJ Merger Guidelines, an HHI below 1000 suggests an unconcentrated market, an HHI between 1000 and 1800 suggests a moderately concentrated one, and an HHI above 1800 suggests a highly concentrated market. Where the post-merger market would be in the moderately concentrated range, a merger that increases the HHI by more than 100 points will, absent other factors, present serious antitrust difficulties. Where the post-merger market would be highly concentrated, an increase of only 50 points in the HHI will present serious difficulties. If the increase in the HHI exceeds 100 in a highly concentrated market, the acquisition is substantially likely to lessen competition except in extraordinary cases. DOJ Merger Guidelines, supra, at | 4493.101 at 6,879-12. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1203 1010 Initial Decision 746. Applying the standards of the DOJ Merger Guidelines and judicial precedent, the proposed acquisition raises major antitrust concerns in all three relevant markets. In the mass and suspension PVC market the combined market share is 18.0. (18.2) percent, the post-acquisition four-firm and eight-firm concentration ratios are 60.9 (62.7) percent and 95.8 (95.0) percent respectively, the HHI increases by 156 (158) points and the post acquisition HHI stands at 1278 (1305). In the dispersion PVC market the combined market share is 34.5 (27.9) percent, the post-acquisition four-firm and eight-firm concentration ratios are 85.2 (87.1) percent and 100 (100) percent respectively, the HHI increases by 448 (331), and the post-acquisition HHI is 2201 (2051). Finally, in the highly concentrated suspension PVC copolymer market the combined market share is 59.2 (52.2), the post-acquisition four-firm concentration ratio is 100 (100) percent, the HHI index increases by 1577 (1360) and the post acquisition HHI is 4368 (3504). 747. The levels of market concentration in the concentrated mass and suspension PVC market and in the highly concentrated dispersion PVC and suspension PVC copolymer markets are sufficient to bring into play the presumption of illegality recognized in the DOJ Merger Guidelines, supra, (CCH) J 4493 at 3.1 1(c). (See Goodrich, slip op. at 63).

748. [##] (CX 53A In Camera), [##] (CX 53A In Camera; CX 55 In Camera).

749. At the time of the acquisition, Tenneco was a significant and substantial competitor in each of the three relevant markets. Tenneco was a large producer and was perceived as being an aggressive supplier (See Weimar JX 1, 36 In. 25-27 In. 7; Friedman JX 1, 127 In. 10-24; 145 In. 5-146 In 12; JX 3, PX 8 at 97 In. 3-12; IX 3, PX 9 at 44 In. 21-45 In. 2, 48 In. 17-49 In. 1, 5O In. 15-19, 128 In. 4-129 In. 10, 130 In. 4-22). [##] (Heath CX 178F ¥ 9 In Camera). [##] (Kilkaski CX 195B J 3 In Camera). [##] (Underwood CX 203E { 9 In Camera). [##] (CX 115 In Camera). [##] (CX 127 In Camera). [##] (RX 265 In Camera). [##] (compare RX 265 In Camera with »? Based on United States 1985 Production. 40 Figures in parentheses are based on United States 1986 Operating Capacity. Initial Decision 115 F.T.C.

RX 268 In Camera; See CX 50 In Camera; CX 75B In Camera; CX 74B In Camera; CX 69 In Camera). [##] (Clark RX 254C ¥ 10 In Camera). [##] (Clark RX 254C { 10 In Camera). 750. Tenneco has also maintained a strong reputation for providing high quality products and good technical service (JX 3, PX 8 at 97 In. 21-98 In. 7, 120 In. 17-121 In. 7; IX 3, PX 9 at 44 In. 21-45 In. 14). Tenneco's Pasadena PVC plant is a modern, low-cost, efficient plant (JX 3, PX 104 at 3227-28; JX 3, PX 132; See JX 3, PX 8 at 59 In. 8-20). Tenneco's Burlington PVC facility is a wellmaintained facility and was the subject of substantial capital improvement by Tenneco in the years immediately preceding the acquisition (JX 3, PX 104 at 3222-3223; JX 3, PX 8 at 77 In. 15-23; JX 3, PX 9 at 45 In. 19-46 In. 11). Both the Pasadena and Burlington PVC operations were profitable to Tenneco (JX 3, PX 104 at 3219; JX 3, PX 9 at 150 In. 12-19, 128 In. 18-129 In. 10). 751. [##] (Pflugrath CX 17-7D J 7 In Camera, See CPF 812). [##] (See Pflugrath CX 177C-F { 6-10 In Camera; Heath CX 178D-G {7-10 In Camera; Wilhite CX 179C-D { 4 In Camera; Bendavid CX 194B-C J 4 In Camera; Rutland CX 196A-B J 3-4 In Camera; Alberti CX 199C-D J 5 In Camera; Gmach CX 200C { 3 In Camera, Donnelly CX 176B-C J 3 Jn Camera; Hamilton CX 206A { 10 Jn Camera).

752. [##] (Pflugrath CX 177E-F ¥ 10 Jn Camera; Heath CX 178F { 10 In Camera; Alberti CX 199D-E J 6 In Camera; Wilhite CX 179C J 4 In Camera; Clark CX 193C-D J 4 In Camera, Goldstein CX 180C ] 4 In Camera; Porter CX 198A-B J 2 In Camera; Kulkaski CX 195B { 3 In Camera; Bendavid CX 194B-C { 4 In Camera; Gmach CX 200C J 3 In Camera; Donnelly CX 176C J 4 In Camera; Hamilton CX 206F-G J 10-11 In Camera). [##] (Alberti CX 199D J 6 In Camera). [##] (Heath CX 178G { 10 Jn Camera). [##] (Bendavid CX 194C J 4 In Camera). [##] (CX 179C J 4 In Camera), [##] (Alberti CX 199D-E J 6 Jn Camera), [##] (Porter CX 198B {| 2 In Camera). [##] (Stuart CX 201D J 7 In Camera). [##] (Stuart RX 256A-B J 3 In Camera). [##] (Stuart CX 201D J 7 Jn Camera), [##] (Stuart CX 201D J 7 In Camera). [##] (CX 138J In Camera). As higher mass and suspension PVC homopolymer prices raise the costs of Carlon's competitors, Carlon gains an increased cost advantage over its rivals, and exploits this advantage by increasing its profit OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1205 1010 Initial Decision margin on PVC pipe products. It is not surprising that this customer would be in favor of, and testified in support of, the acquisition. 753. [##] (See CX 39 In Camera; CX 40 In Camera; CX 41 In Camera; CX 42 In Camera). [##] (CX 16 In Camera). [##] (Truog CX 202B J 3-4 In Camera).

754. [##] (See CX 78 In Camera; CX 131 In Camera). [##] (CX 59C In Camera). [##] (Silver CX 190C In Camera; Beveridge JX |, 93 In. 17 - 94 In. 8, 96 In. 15 - 97 In. 7; Weimar JX 1, 36 In. 6-13; Friedman JX 1, 136 In. 25-137 In. 7).

755. PVC producers also forecast an increase in PVC resin prices as a result of the acquisition. Occidental itself saw, as a benefit of the acquisition, the reduction in the number of suppliers of suspension PVC copolymer resin, which, Occidental noted, would significantly4 1 3 4 5 0 533 1383 1335 52 -1 5 1 3 4 5 1 533 1392 162 34 96.583473 enhances 1 3 4 5 2 712 1391 58 34 96.982094 thes 1 3 4 5 3 787 1389 235 46 96.978951 profitability5 1 3 4 5 4 1039 1388 43 35 96.995865 of5 1 3 4 5 5 1095 1388 58 34 97.004105 thes 1 3 4 5 6 1170 1388 195 34 96.244545 Pottstown5 1 3 4 5 7 1383 1384 214 46 96.532364 suspension5 1 3 4 5 8 1613 1383 116 46 84.357018 plant (JX 3, PX 12). Not surprisingly, Occidental has not otherwise noted among the perceived benefits of the acquisition the prospect of reduced competition and higher pricing. Other producers, however, have done so. Mr. Stevens, Director of Marketing for Tenneco Polymers (JX 3, PX 9 at 7 In. 5-6) testified that in his view the acquisition would offer suspension PVC copolymer producers an improved position to seek price increases (JX 3, PX 9 at 55 In. 1-7). One unnamed producer quoted in the trade press, in an article published subsequent to the consummation of the acquisition, noted: When5 1 3 4 14 10 1814 1905 57 35 96.998779 thea 1 3 4 15 0 538 1965 1333 49 -1 5 1 3 4 15 1 538 1972 161 42 93.305908 [Federal5 1 3 4 15 2 715 1971 115 35 96.637863 Trades 1 3 4 15 3 846 1969 261 42 94.628906 Commission]5 1 3 4 15 4 1126 1968 110 35 96.232117 asked5 1 3 4 15 5 1253 1967 157 35 96.811378 whether5 1 3 4 15 6 1425 1977 56 24 96.560989 we5 1 3 4 15 7 1496 1965 69 36 96.632126 had5 1 3 4 15 8 1582 1976 67 34 96.821068 any5 1 3 4 15 9 1668 1969 203 40 96.800903 arguments4 1 3 4 16 0 536 2022 1335 55 -1 5 1 3 4 16 1 536 2031 137 46 96.805649 against5 1 3 4 16 2 687 2030 81 45 96.557007 Oxy5 1 3 4 16 3 784 2028 133 47 93.115082 buying5 1 3 4 16 4 931 2028 178 40 92.823921 Tenneco,5 1 3 4 16 5 1125 2037 55 25 97.002083 we5 1 3 4 16 6 1195 2025 76 36 91.752228 said5 1 3 4 16 7 1286 2025 100 41 57.629761 'No!',5 1 3 4 16 8 1402 2035 54 24 96.814339 we5 1 3 4 16 9 1471 2024 136 35 96.862572 needed5 1 3 4 16 10 1622 2022 199 46 96.783569 somebody5 1 3 4 16 11 1836 2028 35 28 97.012787 to4 1 3 4 17 0 537 2079 1335 55 -1 5 1 3 4 17 1 537 2088 99 37 96.911453 stands 1 3 4 17 2 651 2099 47 35 96.431015 up5 1 3 4 17 3 714 2094 35 29 96.431015 to5 1 3 4 17 4 764 2086 182 37 96.923325 Goodrich5 1 3 4 17 5 962 2086 67 36 96.937263 ands 1 3 4 17 6 1044 2092 61 39 96.930138 puts 1 3 4 17 7 1120 2095 100 25 96.628693 some5 1 3 4 17 8 1234 2084 186 35 96.977699 backbone5 1 3 4 17 9 1434 2082 74 35 97.005989 into5 1 3 4 17 10 1522 2082 58 35 96.977707 thes 1 3 4 17 11 1594 2080 178 46 93.017273 industry (CX 44C). That producer went on to note that the benefits of the acquisition have been confirmed, with5 1 3 4 19 6 1300 2199 59 50 96.120255 thes 1 3 4 19 7 1372 2204 116 30 96.976646 recent5 1 3 4 19 8 1500 2198 115 35 96.759148 fourths 1 3 4 19 9 1629 2202 137 40 95.482361 quarters 1 3 4 19 10 1777 2196 96 46 95.482361 price4 1 3 4 20 0 536 2261 420 44 -1 5 1 3 4 20 1 536 2262 198 37 85.063850 increases (CX 44C).

756. PVC producers and market observers noted, in other reports, prior to the consummation of the acquisition, the benefit of reduced competition that would result from the acquisition. One Drexel Burnham study of the PVC industry noted that Producers5 1 3 5 4 10 1837 2487 41 34 96.259850 of4 1 3 5 5 0 538 2545 1336 56 -1 5 1 3 5 5 1 538 2554 185 47 89.962204 polyviny]5 1 3 5 5 2 739 2553 159 36 96.762688 chloride5 1 3 5 5 3 912 2552 93 35 96.950935 resins 1 3 5 5 4 1020 2551 86 36 96.883202 looks 1 3 5 5 5 1120 2549 186 45 96.688881 favorably5 1 3 5 5 6 1321 2559 95 36 96.976685 upon5 1 3 5 5 7 1432 2546 210 37 93.269928 Occidental5 1 3 5 5 8 1658 2545 216 36 39.764343 Chemical's4 1 3 5 6 0 538 2605 1337 54 -1 5 1 3 5 6 1 538 2613 214 46 96.165398 acquisitions 1 3 5 6 2 766 2612 42 35 93.274895 of5 1 3 5 6 3 817 2611 193 36 90.419121 Tenneco's5 1 3 5 6 4 1024 2609 92 35 96.679733 PVC5 1 3 5 6 5 1131 2614 121 30 96.834534 assets.5 1 3 5 6 6 1279 2608 79 35 96.941460 Ones 1 3 5 6 7 1372 2607 68 35 96.217903 less5 1 3 5 6 8 1455 2605 173 46 96.899033 producers 1 3 5 6 9 1640 2614 122 25 96.945831 means5 1 3 5 6 10 1777 2614 98 24 96.876152 more4 1 3 5 7 0 538 2662 1336 54 -1 5 1 3 5 7 1 538 2672 137 35 96.543655 markets 1 3 5 7 2 695 2670 210 46 81.883224 discipline (CX 38L). One trade journal, Monthly Petrochemical Statistical Analysis, in an issue dated January of 1986, Initial Decision 115 F.T.C.

reported that it saw the acquisition as5 1 3 1 1 8 1462 633 19 25 96.199226 a5 1 3 1 1 9 1499 623 192 35 96.199226 beneficial5 1 3 1 1 10 1710 623 139 45 96.860687 changes 1 3 1 1 11 1867 622 58 36 96.374779 for5 1 3 1 1 12 1942 623 58 35 97.020012 thea 1 3 1 2 0 662 681 1212 46 -1 5 1 3 1 2 1 662 682 179 45 93.435654 industry (CX 28G). [##] (CX 28G; See CX 127 In Camera). 757. Occidental intended to gain a role as a market leader with the acquisition (JX 3, PX 12 at 151333), and has gained such a role. As a result of the acquisition, Occidental significantly enhanced its position in all of the relevant PVC markets (JX 3, PX 12 at 151333). Occidental management recognized that the acquisition of the Tenneco PVC operations would allow Occidental to assume a leadership role in the PVC businesses (JX 3, PX 12 at 151333). [##] (RX 1K In Camera). [##] (RX 1L In Camera). Other producers see Occidental as having obtained a leadership position as a result of the acquisition (CX 44C; CX 38L). [##] (Donnelly CX 176C ] 4 In Camera). [##] (Donnelly CX 176C J 4 In Camera). 758. The acquisition eliminated, in each of the relevant markets, a significant independent competitive entity and substantially increased the concentration of market power and the likelihood that this market power will be exercised in an anticompetitive manner. The suspension PVC copolymer and dispersion PVC markets were highly concentrated at the time of the acquisition. The mass and suspension PVC market is substantially more concentrated than it was at the time of Goodrich. Thus, the presumption of anticompetitive effects is higher in each of these markets than it was in Goodrich (See Goodrich, slip op. at 63). In addition, record evidence in this case shows that cost differences among producers and PVC product heterogeneity, the structural factors identified by the Commission in Goodrich as making anticompetitive effects unlikely in the mass and suspension PVC market as a result of that acquisition, are today of less significance in the mass and suspension PVC market, and are not significant factors in the suspension PVC copolymer market or the dispersion PVC market. 759. Market conduct among PVC producers in each of the relevant markets strongly suggests that the markets are not in fact competitive. Indeed, the large increases in the price of PVC resin that have occurred during the period since the acquisition, and the wide perception of customers and competitors that the increases are a result of the acquisition, strongly suggest that these increases are in large part a result of the acquisition.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1207 1010 Initial Decision 760. Consideration of all of these factors leads to the conclusion that the acquisition is likely substantially to lessen competition in the mass and suspension PVC market, the suspension PVC copolymer market, and the dispersion PVC market.

XI. CONCLUSIONS OF LAW 1. The Commission has jurisdiction over the subject matter of this proceeding and over respondents Occidental Petroleum Corporation and Occidental Chemical Corporation (collectively Occidental) and over respondents Tenneco Inc., and Tenneco Polymers, Inc. (collectively Tenneco).

2. Occidental was, at all times relevant herein, a corporation engaged in or affecting commerce, as commerce is defined in the Clayton Act, as amended, and in the Federal Trade Commission Act, as amended.

3. Tenneco was, at all times relevant herein, a corporation engaged in or affecting commerce, as commerce is defined in the Clayton Act, as amended, and in the Federal Trade Commission Act, as amended.

4. On or about April 30, 1986, Occidental acquired from Tenneco, Tenneco's polyvinyl chloride ("PVC") assets and business, including a suspension PVC homopolymer plant located at Pasadena, Texas, a suspension PVC plant located at Burlington, New Jersey, and a dispersion PVC plant located at Burlington, New Jersey, certain assets and equipment from Tenneco's shutdown PVC plant at Flemington, New Jersey, and other assets relating to the manufacture and sale of PVC.

5. An appropriate line of commerce within which to evaluate the competitive effects of the acquisition is the production of mass and suspension PVC.

6. An appropriate line of commerce within which to evaluate the competitive effects of the acquisition is the production of suspension PVC copolymer.

7. An appropriate line of commerce within which to evaluate the competitive effects of the acquisition is the production of dispersion PVC.

Initial Decision 115 F.T.C.

8. The appropriate section of the country within which to evaluate the effects of the acquisition in each of the relevant lines of commerce is the United States as a whole. 9. Prior to and at the time of the acquisition, Occidental and Tenneco were actual competitors in the United States mass and suspension PVC market.

10. Prior to and at the time of the acquisition, Occidental and Tenneco were actual competitors in the United States suspension PVC copolymer market. .

11. Prior to and at the time of the acquisition, Occidental and Tenneco were actual competitors in the United States dispersion PVC market.

12. The effect of this acquisition has been or may be substantially to lessen competition or tend to create a monopoly in the aforesaid product and geographic markets in violation of Section 7 of the Clayton Act, as amended, and Section 5 of the Federal Trade Commission Act, as amended, in the following ways: a. It eliminates Tenneco as a significant competitive entity in the production of mass and suspension PVC in the United States; b. It eliminates substantial actual competition between Occidental and Tenneco and between Tenneco and others in the production of mass and suspension PVC in the United States; c. It significantly increases already moderately high levels of concentration in the United States mass and suspension PVC market; d. By raising significantly the level of concentration in the United States mass and suspension PVC market, it significantly enhances the likelihood of collusion or interdependent coordination in this market;

e. It eliminates Tenneco as a significant competitive entity in the production of suspension PVC copolymer in the United States; f. It eliminates substantial actual competition between Occidental and Tenneco and between Tenneco and others in the production of suspension PVC copolymer in the United States; g. It significantly increases already high levels of concentration in the United States suspension PVC copolymer market; h. By raising significantly the level of concentration in the United States suspension PVC copolymer market, it significantly OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1209 1010 Initial Decision enhances the likelihood of collusion or interdependent coordination in this market;

i. It significantly enhances the likelihood of dominant firm behavior to increase price in the suspension PVC copolymer market; j. It eliminates Tenneco as a significant competitive entity in the production of dispersion PVC in the United States; k. It eliminates substantial actual competition between Occidental and Tenneco and between Tenneco and others in the production of dispersion PVC in the United States; 1. It significantly increases already high levels of concentration in the United States dispersion PVC market; m. By raising significantly the level of concentration in the United States dispersion PVC market, it significantly enhances the likelihood of collusion or interdependent coordination in this market; 13. The order entered hereinafter is appropriate to remedy the violation of law found to exist.

XII. ORDER DEFINITIONS It is ordered, That for purposes of this order the following definitions shall apply:

A. Occidental means Occidental Petroleum Corporation and Occidental Chemical Corporation, two corporations organized under the laws of California with their principal places of business in Los Angeles, California, and their directors, officers, agents, and employees, and their subsidiaries, divisions, affiliates, successors, and assigns;

B. Tenneco means Tenneco Inc. and Tenneco Polymers, Inc., two corporations organized under the laws of Delaware with their principal places of business in Houston, Texas, and their directors, officers, agents, and employees, and their subsidiaries, divisions, affiliates, successors, and assigns.

Initial Decision 115 F.T.C.

C. The acquired5 1 3 1 1 4 1132 636 94 35 96.430000 PVC5 1 3 1 1 5 1251 637 135 34 95.414841 assets means the suspension PVC homopolymer manufacturing facility located at Pasadena, Texas, the suspension PVC manufacturing facility located at Burlington, New Jersey, the dispersion PVC manufacturing facility located at Burlington, New Jersey, and all assets, titles, properties, interests, rights and privileges, tangible and intangible, related to the PVC business that were acquired by Occidental from Tenneco, together with all improvements thereto.

D. PVC means any. vinyl chloride homopolymer with the repeating unit CH,=CHCI, and any copolymer of viny] chloride with varying amounts of other chemicals, including vinyl acetate, ethylene, propylene, vinylidene chloride, or acrylates. E. Mass5 1 3 3 1 3 933 1338 108 34 95.773109 PVC means PVC produced from viny] chloride by the mass (also referred to as bulk) process.

F. Suspension5 1 3 4 1 3 1053 1455 94 35 96.787605 PVC5 1 3 4 1 4 1159 1455 288 45 95.229706 homopolymer means PVC homopolymer produced from vinyl chloride by the suspension process. G. Suspension5 1 3 5 1 3 1051 1571 94 34 95.929237 PVC5 1 3 5 1 4 1156 1571 223 44 95.938835 copolymer means any copolymer of vinyl chloride and viny] acetate, that is produced by the suspension process and contains over 50 percent by weight vinyl chloride. H. Dispersion5 1 3 6 1 3 1046 1746 110 35 96.091896 PVC means PVC produced by the emulsion or dispersion process.

Il.

It is ordered, That within twelve (12) months from the date this order becomes final, Occidental shall divest, absolutely and in good faith, at no minimum price, the acquired PVC assets that Occidental acquired on or about April 30, 1986, together with all assets, title, properties, interest, rights and privileges, of whatever nature, tangible and intangible acquired by Occidental as a result of its acquisition of the acquired PVC assets or acquired by Occidental from Tenneco in connection with Occidental's acquisition of the acquired PVC assets, and all additions and improvements to the acquired PVC assets added by Occidental.

The purpose of the divestiture is to reestablish the acquired PVC assets, either singly or separately, as ongoing, viable enterprises engaged in the manufacture, distribution, sale, research and development of suspension PVC homopolymer, suspension PVC OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1211 1010 Initial Decision copolymer, and dispersion PVC; and to remedy the lessening of competition resulting from the acquisition of the acquired PVC assets by Occidental. The divestiture(s) 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, Occidental shall take all measures necessary to maintain the acquired PVC assets in their present condition and to prevent any deterioration, except for normal wear and tear, of any part of the acquired PVC assets, so as not to impair the acquired PVC assets's present operating viability or market value. III.

It is further ordered, That at the time of the divestiture required by this order, Occidental shall provide to the acquirer of the acquired PVC assets, on a nonexclusive basis, all PVC technology (including patent licenses and know-how) used by Occidental, or developed by Occidental for use in connection with the acquired PVC assets; and For a period of one (1) year following the divestiture required by this order, Occidental shall provide the acquirer of the acquired PVC assets, if the acquirer(s) so requests, such additional know-how as may reasonably be required to enable such acquirer(s) to manufacture and sell suspension PVC homopolymer, suspension PVC copolymer, and dispersion PVC. Occidental 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, Occidental shall provide to the acquirer(s) of the acquired PVC assets, A. A list of all Occidental's respective customers for suspension PVC homopolymer, suspension PVC copolymer, and dispersion PVC who have purchased PVC from Occidental during the three years prior to the date this order becomes final; and B. An assignment of all VCM supply agreements; all PVC sales, toll, or exchange agreements; and all PVC customer records and files Initial Decision 115 F.T.C.

relating to PVC produced in (or supplied by Occidental at any time since January 1, 1986 from) the acquired PVC assets. V.

It is further ordered, That if Occidental has not divested the acquired PVC assets 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 Commission from seeking civil penalties and other relief available to it, including a court-appointed trustee, for any failure by Occidental 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 acquired PVC assets. 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 acquired PVC assets, and Occidental shall develop such financial or other information relevant to the acquired PVC assets as the trustee may reasonably request. Occidental shall cooperate with the trustee, and shall take no action to interfere with or impede the trustee's accomplishment of the divestiture. Any delays in divestiture caused by Occidental or Tenneco 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's OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1213 1010 Initial Decision 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 Occidental 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 Occidental, 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 Occidental, and the trustee's power shall be terminated. The trustee's compensation shall be based at least in significant part on a commission arrangement contingent on the trustee divesting the acquired PVC assets. E. Occidental 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 willful 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, Occidental 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 acquired PVC assets.

Initial Decision 115 F.T.C.

J. The trustee shall report in writing to Occidental 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 this order becomes final, Occidental 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 mass PVC, suspension PVC homopolymer, suspension PVC copolymer, or dispersion PVC located in the United States without the prior approval of the Federal Trade Commission. VIL It is further ordered, That Occidental shall, within sixty (60) days after the date this order becomes final and every sixty (60) days thereafter 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 these provisions. 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 acquired PVC assets, 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 Occidental shall submit such further written reports of its compliance as the staff of the Commission may from time to time request in writing.

Vil.

It is further ordered, That Occidental, upon written request and on reasonable notice, for the purpose of securing compliance with OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1215 1010 Opinion 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 Occidental, 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 Occidental that relate to any matter contained in this order; and B. Subject to the reasonable convenience of Occidental, an Opportunity to interview officers or employees of Occidental, who may have counsel present, regarding such matters. IX.

It is further ordered, That Occidental, 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 subsidiaries or any other change in the corporation, which may affect compliance with the obligations arising out of this order. OPINION OF THE COMMISSION BY AZCUENAGA, Commissioner:

The complaint in this matter challenges the acquisition by Occidental Petroleum Corporation, through its subsidiary Occidental Chemical Corporation ("Occidental"), of the polyvinyl chloride business of Tenneco Polymers, Inc., a subsidiary of Tenneco, Inc. At the time of the acquisition, Occidental owned polyvinyl! chloride plants in Pottstown, Pennsylvania, Addis, Louisiana, and Burlington, New Jersey; Tenneco owned polyvinyl] chloride plants in Pasadena, Opinion 115 F.T.C.

Texas, and Burlington, New Jersey.’ The complaint alleges that the acquisition may substantially lessen competition in the manufacture and sale of polyvinyl chloride in the United States in violation of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act.

The administrative law judge identified three relevant product markets: mass and suspension polyviny] chloride ("PVC") homopolymer, suspension PVC copolymer, and dispersion PVC. He concluded that the relevant geographic market for all three products is the United States. The administrative law judge found a violation in each of these markets and entered an order requiring divestiture. Occidental appealed the decision of the administrative law judge in each of the three markets. In the first market, mass and suspension PVC homopolymer, Occidental asserts on appeal that the decision of the administrative law judge is flatly5 1 3 3 4 7 1395 1433 248 35 72.821136 inconsistent”5 1 3 3 4 8 1660 1432 84 35 96.721222 with5 1 3 3 4 9 1757 1432 59 35 97.011169 thes 1 3 3 4 10 1828 1431 162 36 96.338371 decision4 1 3 3 5 0 653 1490 1336 43 -1 5 1 3 3 5 1 653 1494 42 36 96.809189 of5 1 3 3 5 2 704 1495 57 35 96.426605 thes 1 3 3 5 3 774 1494 243 36 95.338120 Commissions 1 3 3 5 4 1030 1493 37 35 91.280014 in5 1 3 3 5 5 1078 1494 79 34 89.574203 B.F.5 1 3 3 5 6 1175 1492 183 36 93.282242 Goodrich5 1 3 3 5 7 1373 1492 75 41 91.722977 Co.,5 1 3 3 5 8 1462 1491 139 36 95.353584 Dockets 1 3 3 5 9 1615 1491 104 41 95.721657 9159,5 1 3 3 5 10 1763 1491 42 34 95.721657 1105 1 3 3 5 11 1818 1490 88 35 82.771416 FTC5 1 3 3 5 12 1920 1490 69 35 96.410774 2074 1 3 3 6 0 654 1548 1337 50 -1 5 1 3 3 6 1 654 1554 137 43 96.188515 (1988),5 1 3 3 6 2 804 1552 132 46 96.979057 appeals 1 3 3 6 3 946 1551 191 36 96.554153 dismissed5 1 3 3 6 4 1147 1551 44 45 96.945335 by5 1 3 3 6 5 1203 1551 212 45 96.906860 stipulation,5 1 3 3 6 6 1432 1551 86 35 96.112648 Nos.5 1 3 3 6 7 1534 1550 156 35 93.171738 86-40655 1 3 3 6 8 1706 1550 34 35 92.852676 &5 1 3 3 6 9 1755 1548 160 36 96.885513 86-40665 1 3 3 6 10 1929 1549 62 43 96.912033 (2d4 1 3 3 7 0 653 1607 1337 51 -1 5 1 3 3 7 1 653 1612 71 36 96.038994 Cir.5 1 3 3 7 2 743 1611 102 47 96.964188 April5 1 3 3 7 3 862 1611 58 41 96.733215 24,5 1 3 3 7 4 942 1611 119 43 96.733215 1989),5 1 3 3 7 5 1086 1603 158 59 96.129745 modified5 1 3 3 7 6 1263 1603 93 59 96.900970 final5 1 3 3 7 7 1371 1608 116 42 96.085770 order,5 1 3 3 7 8 1511 1608 67 36 96.402412 1125 1 3 3 7 9 1594 1608 88 36 95.898476 FTC5 1 3 3 7 10 1700 1608 43 35 95.898476 835 1 3 3 7 11 1763 1607 141 44 96.874825 (1989),5 1 3 3 7 12 1921 1608 69 34 97.017113 anda 1 3 3 8 0 655 1662 1335 45 -1 5 1 3 3 8 1 655 1671 148 36 95.766304 should be set aside." R.A.B. at 2.7 In Goodrich, the Commission concluded that B. F. Goodrich's January 1982 acquisition of the mass ' Tenneco also owned a plant in Flemington, New Jersey. Occidental obtained an option to and later did acquire equipment from this plant. At the time of the Initial Decision, Tenneco was awaiting state approval of its clean up plan before dismantling the plant and selling the property. I.D. at 3 n.4. 2 We use the following abbreviations in this opinion: LD. Initial Decision I.D.F. Initial Decision Finding R.A.B. Respondents’ Appeal Brief R.R.B. Respondents’ Reply Brief C.A.B. Complaint Counsel's Answering Brief Tr. Transcript.

Citations to the record in B.F. Goodrich Co., Docket 9159, 110 FTC 207 (1988), incorporated by stipulation of the parties, are marked Goodrich. The record also includes testimony and exhibits from FTC v. Occidental Petroleum Corp., Civ. No. 86-0900 (D.D.C. Apr. 29, 1986), vacated as moot, No. 86-5254 (D.C. Cir. Oct. 23, 1986), marked as Joint Exhibits ("JX") and further identified by transcript page number, Plaintiff's Exhibit ("PX") or Defendants’ Exhibit ("DX"), as appropriate. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1217 1010 Opinion and suspension PVC business of Diamond Shamrock Chemicals Company was not unlawful, relying primarily on conclusions concerning product heterogeneity, transportation and production cost differences among producers and the elasticity of demand of finished vinyl products.’ See 110 FTC at 339. Occidental asserts that the market characteristics on which the Commission relied in Goodrich have not changed and that simple5 1 2 1 7 7 1334 969 198 35 96.623917 adherence5 1 2 1 7 8 1563 974 36 29 96.575790 to5 1 2 1 7 9 1630 968 249 35 96.557030 Commission4 1 2 1 8 0 540 1025 1189 49 -1 5 1 2 1 8 1 540 1028 222 46 93.136375 precedent, R.A.B. at 1, requires the same result in this case. In addition, Occidental asserts on appeal that suspension PVC copolymer is not a relevant product market but should be included in the mass and suspension PVC homopolymer market, because of supply side substitutability. R.A.B. at 60. Finally, Occidental claims that the administrative law judge improperly overlooked imports and relevant structural factors in finding a violation in the dispersion PVC market. R.A.B. at 11. We affirm the decision of the administrative law judge.’ I. MARKET DEFINITION Section 7 of the Clayton Act prohibits acquisitions that may substantially lessen competition or tend to create a monopoly. The analysis of competitive effects focuses on whether the acquisition is likely to create or enhance the ability of a firm or firms to exercise market power, that is, to raise prices. Hospital Corporation of America v. FTC, 807 F.2d 1381, 1386 (7th Cir. 1986), cert. denied, 481 U.S. 1038 (1987). The first step in the analysis is to identify the relevant product and geographic markets in which to assess competitive effects. United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 593 (1957); Goodrich, 110 FTC at 288. 3 The Commission held that Goodrich's acquisition violated Section 7 of the Clayton Act in the related market of vinyl chloride monomer. 110 FTC at 347-48. “ We adopt the findings and conclusions of the administrative law judge to the extent that they are not inconsistent with this opinion. Opinion 115 F.T.C.

A. Product Markets Product markets are defined by thes 1 4 1 1 7 1437 737 205 36 93.112793 reasonable5 1 4 1 1 8 1654 737 350 47 92.083023 interchangeability4 1 4 1 2 0 666 795 1337 47 -1 5 1 4 1 2 1 666 796 42 36 96.827812 of5 1 4 1 2 2 721 806 65 26 96.819206 uses 1 4 1 2 3 803 806 41 25 96.977180 or5 1 4 1 2 4 859 796 58 35 93.306190 thes 1 4 1 2 5 934 795 295 47 92.210678 cross-elasticity5 1 4 1 2 6 1246 795 43 35 96.398933 of5 1 4 1 2 7 1302 796 172 34 94.057480 demand between a product and its possible substitutes. Brown Shoe Co. Inc. v. United States, 370 US. 294, 325 (1962). When the cross-elasticity of demand or supply between products is high, the products ordinarily are in a single market. Because cross-elasticity data rarely are available, product markets usually are defined by reference to other relevant evidence. Such evidence may include patterns of substitution between and among products, similarities or differences in use, design, physical composition and technical characteristics, price similarities or dissimilarities that are not attributable to common trends and the perceptions of industry members that the products are or are not substitutes. See Goodrich, 110 FTC at 290; Grand Union Co., 102 FTC 812, 1038-42 (1983).

1. Polyvinyl Chloride Polyvinyl chloride is a thermoplastic resin that is combined with additives, such as stabilizers and coloring agents, and then converted by heat and pressure to a variety of finished vinyl products. I.D.F. 12. Products made from other materials compete with finished viny] products -- cast iron pipes, for example, compete with pipes made from PVC, and wood siding competes with viny] siding -- but there are no substitutes for PVC in vinyl products. PVC is produced as a white powder or granules by four different processes: suspension, mass or bulk, dispersion and solution.> I.D.F. 15-16. Each of the four processes involves polymerization (a chemical reaction) of the raw ingredient vinyl chloride monomer > PVC made by the solution process is not involved in this case. I.D. at 5 n.5. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1219 1010 Opinion ("VCM").® A second monomer, vinyl acetate, is added to produce suspension PVC copolymer. The suspension process is by far the most common, and PVC produced by the suspension process accounts for more than 85% of the PVC produced in the United States.’ I.D.F. 17.

PVC homopolymer resins made by the mass and the suspension processes are comparable in appearance and properties and are interchangeable for many end uses, such as pipe and pipe fittings, wire and cable, packaging film and sheet, siding and bottles. Mass PVC homopolymer is more suitable than suspension PVC homopolymer for products requiring greater optical clarity, such as packaging materials.’ I.D.F. 17, 18 & 57; Goodrich, 110 FTC at 291. The parties agree that mass and suspension PVC homopolymer constitutes a relevant product market. I.D.F. 55; See Goodrich, 110 FTC at 290-92.

Suspension PVC copolymer resin ("copolymer"), made from vinyl chloride and vinyl acetate, has different characteristics from In layman's terms, PVC is made by cooking VCM and other ingredients in a large pot under heat and pressure. The resulting wet product is then dried. PVC made by the mass and suspension methods resembles sugar; dispersion PVC resin resembles flour or talcum powder. Lull, JX1(D, Tr. 504-06. PVC resin is combined with other ingredients to make finished vinyl products. Disch, JXI(IV), PXI1 at 655-56. The various processes for making PVC are described in notes 7-9 & 14 infra.

Suspension PVC homopolymer is made by mixing the ingredients -- VCM, demineralized water, suspending agents and catalysts -- in a reactor or large pot: Thes 1 5 1 3 2 629 2220 87 30 96.506569 orders 1 5 1 3 3 730 2220 36 30 96.408302 of5 1 5 1 3 4 779 2220 132 30 96.408302 additions 1 5 1 3 5 928 2220 57 30 96.862724 ands 1 5 1 3 6 1001 2226 194 32 96.579056 temperatures 1 5 1 3 7 1211 2220 36 29 96.737259 of5 1 5 1 3 8 1260 2220 178 38 96.257164 ingredients5 1 5 1 3 9 1457 2220 72 36 90.922432 [are]5 1 5 1 3 10 1547 2220 158 38 96.138161 important5 1 5 1 3 11 1721 2220 57 29 96.641808 ands 1 5 1 3 12 1797 2220 71 35 96.841690 [are]4 1 5 1 4 0 533 2268 1337 39 -1 5 1 5 1 4 1 533 2268 149 39 96.747025 regulated5 1 5 1 4 2 694 2268 39 38 96.797623 by5 1 5 1 4 3 745 2274 154 32 96.662567 computers 1 5 1 4 4 910 2268 138 30 94.295502 control. The mixture is stirred to start the polymerization process, which takes 10-18 hours, depending on the grade of homopolymer being produced: “Reactor temperature, pressure, and other conditions are constantly monitored and controlled by the computer." After polymerization, the wet product (or slurry) is removed from the reactor, excess VCM is removed, the slurry is de-4 1 5 1 9 0 533 2509 1335 39 -1 5 1 5 1 9 1 533 2511 140 30 95.959435 watered in a centrifuge and the resulting wetcake is dried in heated air chambers. The dried resin particles are moved to large silos and sorted by type and quality before shipment. JXI(III), PX18, Ex.16-H(1); Disch, JX1(IV), PX11 at 627-28. 8 In the mass process, VCM is polymerized without water. Disch, JX1(IV), PX11 at 629; Goodrich I.D.F. 23. Occidental, Goodrich and Certain Teed are the only PVC producers with mass PVC production facilities. RX197Z In Camera. Opinion 115 F.T.C.

other PVC resins and is used to make different products.’ I.D.F. 19 & 69 (portion In Camera). Copolymer is recognized by industry members as a separate product from the demand side. It is sold in distinct5 1 3 1 4 2 841 804 151 35 96.756874 end-uses 1 3 1 4 3 1006 804 182 35 73.124062 markets. I.D.F. 69-78 (portion In Camera).'° The price of copolymer moves independently of the price of homopolymer resins, implying that the two are not in the same market." I.D.F. 72. Mr. Disch, formerly of Tenneco and then with Occidental,’” and Mr. Schaefer, Senior Vice President of Occidental PVC Resins and Compounds Division, testified that suspension homopolymer and copolymer prices are unrelated, I.D.F. 73, and a comparison of Occidental's actual prices for suspension homopolymer and copolymer bears this out. See I.D. at 21 (chart). The administrative law judge concluded that suspension PVC copolymer constitutes a separate product market. I.D.F. 81. Occidental disputes this conclusion and maintains that, because of supply side substitutability, suspension copolymer is part of the mass and suspension PVC ° Thes 1 5 1 1 3 886 1704 82 29 96.946312 basics 1 5 1 1 4 985 1704 99 38 92.981575 recipes 1 5 1 1 5 1102 1728 28 5 58.034241 ..5 1 5 1 1 6 1150 1728 4 5 58.034241 .5 1 5 1 1 7 1172 1704 48 29 96.785934 for5 1 5 1 1 8 1234 1704 37 29 96.401535 all5 1 5 1 1 9 1288 1704 175 37 96.616325 copolymer5 1 5 1 1 10 1477 1704 94 29 96.016411 resins5 1 5 1 1 11 1589 1704 49 35 96.016411 [is]5 1 5 1 1 12 1656 1704 119 29 96.395699 various5 1 5 1 1 13 1791 1704 158 38 96.314407 quantities5 1 5 1 1 14 1966 1704 34 29 96.967888 of2 1 6 0 0 0 658 1751 1339 518 -1 3 1 6 1 0 0 658 1751 1339 518 -1 4 1 6 1 1 0 660 1751 1337 38 -1 5 1 6 1 1 1 660 1752 101 33 91.901352 VCM,5 1 6 1 1 2 779 1752 93 28 96.936455 VAM5 1 6 1 1 3 892 1752 93 37 95.160484 [vinyl5 1 6 1 1 4 1003 1757 112 23 95.455246 acetate5 1 6 1 1 5 1132 1752 178 34 95.888557 monomer],5 1 6 1 1 6 1329 1752 182 36 96.620171 suspending5 1 6 1 1 7 1528 1756 112 32 96.828651 agents,5 1 6 1 1 8 1657 1752 150 36 96.762276 catalysts,5 1 6 1 1 9 1824 1751 100 28 96.762276 buffers 1 6 1 1 10 1941 1752 56 28 96.963486 anda 1 6 1 2 0 659 1799 1338 37 -1 5 1 6 1 2 1 659 1800 225 30 96.499657 demineralized5 1 6 1 2 2 896 1800 111 29 79.517906 water. JX](ID, PX18, Ex. 16-H(2) at 2; See CXSA. The ingredients are combined in a reactor; polymerization starts when the demineralized water is added. The reactor cycle for a batch of suspension copolymer is 12-15 hours. The slurry is transferred to a stripping vessel, where the unreacted monomers are removed (1.5-2 hours), then to holding tanks, where up to seven individual batches are continuously blended to ensure product uniformity. The slurry is next pumped through a centrifuge, then dried in a rotary dryer. Finally, the resin is passed through a screener to remove oversize product and transferred to a bagging operation or bulk storage facilities before shipment to customers. JXI(III), PX18, Ex.]6-H(2) at 2-3.

10 According to Occidental, [t]he5 1 7 1 1 6 1327 2306 175 38 96.413612 copolymer5 1 7 1 1 7 1514 2305 112 30 96.766266 markets 1 7 1 1 8 1639 2305 24 29 97.000679 is5 1 7 1 1 9 1676 2306 90 28 96.348404 about5 1 7 1 1 10 1782 2304 55 31 96.980148 1925 1 7 1 1 11 1853 2304 140 37 75.132553 [million]4 1 7 1 2 0 657 2355 1338 40 -1 5 1 7 1 2 1 657 2357 125 38 96.186737 pounds,5 1 7 1 2 2 796 2356 70 30 96.303581 with5 1 7 1 2 3 878 2356 72 30 96.623833 53%5 1 7 1 2 4 963 2356 90 38 96.518089 going5 1 7 1 2 5 1066 2355 61 30 96.680252 into5 1 7 1 2 6 1140 2355 141 38 96.958832 flooring;5 1 7 1 2 7 1295 2355 117 30 97.018219 records5 1 7 1 2 8 1426 2355 57 30 93.255547 ands 1 7 1 2 9 1495 2355 190 38 92.713364 calendering5 1 7 1 2 10 1700 2355 147 38 96.378197 [pressing5 1 7 1 2 11 1860 2355 135 29 96.616112 between4 1 7 1 3 0 657 2404 794 36 -1 5 1 7 1 3 1 657 2405 115 35 94.554962 rollers]5 1 7 1 3 2 787 2413 145 21 96.706306 consumes 1 7 1 3 3 944 2405 48 29 95.535408 thes 1 7 1 3 4 1005 2404 83 30 39.956589 rest. RX197L Jn Camera.

'l When two products are in the same market, the prices of each ordinarily will respond to changes in the price of the other. Although the prices of copolymer and homopolymer move independently of one another, both presumably reflect changes in the price of their common raw material, vinyl chloride monomer. 12 Mr. Disch was a vice president at Tenneco; before the acquisition, Occidental announced that Mr. Disch would become director of national accounts at Occidental. JX1(IV), PX8 at 109.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. —- 122] 1010 Opinion homopolymer market. R.A.B. at 61. In part 1.A.2 below, we explain our conclusion that suspension PVC copolymer is a relevant market.

PVC made by the dispersion process accounts for about 7% of PVC sold in the United States.'* RX197H In Camera. Dispersion resin is finer than other PVC resins and is used for vinyl] resilient sheet flooring,’ coatings and molded plastic products. I.D.F. 20 & 30-33. The parties agree with the administrative law judge that dispersion PVC is a relevant product market. I.D.F. 82 & 105. 2. Production Substitution Productive capacity that could be modified economically within a year to produce the relevant product constrains the ability of incumbent firms to increase prices and, therefore, should be included in the product market. On appeal, Occidental maintains that productive capacity devoted to suspension PVC copolymer should be counted as part of the mass and suspension PVC homopolymer market, because of the ease of production substitution. R.A.B. at 61. According to Occidental, [a]ny5 1 5 1 8 5 1251 1694 211 44 96.676476 copolymer5 1 5 1 8 6 1490 1694 98 45 96.417397 plants 1 5 1 8 7 1618 1704 66 25 94.413109 cans 1 5 1 8 8 1716 1694 158 45 94.413109 produce2 1 6 0 0 0 535 1790 595 9 -1 3 1 6 1 0 0 535 1790 595 9 -1 4 1 6 1 1 0 535 1790 595 9 -1 5 1 6 1 1 1 535 1790 595 9 95.000000 2 1 7 0 0 0 614 1833 1014 51 -1 3 1 7 1 0 0 614 1833 1014 51 -1 4 1 7 1 1 0 614 1833 1014 51 -1 5 1 7 1 1 1 614 1833 24 22 74.238701 35 1 7 1 1 2 679 1846 186 38 96.581696 Suspension5 1 7 1 1 3 878 1846 77 29 96.677620 PVC5 1 7 1 1 4 967 1846 175 38 96.381905 copolymer5 1 7 1 1 5 1154 1854 61 21 96.616913 was5 1 7 1 1 6 1228 1851 52 24 96.972656 not5 1 7 1 1 7 1292 1851 27 24 96.873619 at5 1 7 1 1 8 1332 1845 80 30 96.840363 issues 1 7 1 1 9 1424 1845 29 30 96.933929 in5 1 7 1 1 10 1467 1845 161 30 95.432030 Goodrich.2 1 8 0 0 0 614 1901 1260 50 -1 3 1 8 1 0 0 614 1901 1260 50 -1 4 1 8 1 1 0 614 1901 1260 50 -1 5 1 8 1 1 1 614 1901 25 21 48.000275 45 1 8 1 1 2 684 1914 62 29 81.074623 Thes 1 8 1 1 3 778 1913 97 29 63.669506 basic recipe" for dispersion PVC resin is VCM, demineralized water, emulsifier and catalyst. The ingredients are weighed and mixed, pumped through an homogenization system and then moved to reaction towers. The reaction process is controlled by “use of ‘cooling tower' and ‘refrigerated’ water circulating through the tower jackets. The reaction is considered complete when the tower pressure decreases to a preset level." After the unreacted VCM is removed, the mixture is moved through blend tanks to rotary vacuum filters for dewatering and through a hot air drying system. The product is then spray dried to obtain a very fine particle size; another resin and alcohol may be added to5 1 9 1 8 15 1752 2295 122 30 96.895813 achieve4 1 9 1 9 0 538 2344 1336 42 -1 5 1 9 1 9 1 538 2348 46 29 97.017921 thes 1 9 1 9 2 595 2356 104 30 96.997192 proper5 1 9 1 9 3 708 2346 178 39 96.775612 rheological5 1 9 1 9 4 897 2346 251 30 91.788101 characteristics. Dispersion PVC is bagged in 50-pound bags for shipment. JX1(IID, PX18, Ex.16-H(2), at 5-7; Disch, JX1(IV), PX11 at 630. A dispersion PVC copolymer resin is made but is not at issue in this case. > Different types of PVC are used for different types of viny] flooring and are not interchangeable in these end uses. Dispersion PVC is used for vinyl sheet flooring. Suspension PVC copolymer is used as a binder for inexpensive filler in viny] resilient floor tile. Solid viny] tile, made from suspension PVC homopolymer, is 30 times more expensive than copolymer tile. See CX192 A-D; CX197B In Camera, CX205B; CX209 In Camera; JX3, PX9 at 34-35 & 97-98. Opinion 115 F.T.C.

homopolymer resins with the simple turn of a valve," and [h]omopolymer5 1 3 1 2 2 1017 695 116 45 96.680832 plants5 1 3 1 2 3 1153 706 66 25 96.207214 cans 1 3 1 2 4 1237 695 45 36 96.207214 be5 1 3 1 2 5 1300 698 193 34 96.371750 converted5 1 3 1 2 6 1512 704 35 29 96.644096 to5 1 3 1 2 7 1566 698 211 46 96.472809 copolymer5 1 3 1 2 8 1792 700 215 45 96.165703 production4 1 3 1 3 0 669 752 1333 51 -1 5 1 3 1 3 1 669 752 145 46 96.975639 quickly5 1 3 1 3 2 827 753 69 35 96.808853 ands 1 3 1 3 3 907 753 192 46 96.621284 profitably5 1 3 1 3 4 1113 753 35 36 96.863968 in5 1 3 1 3 5 1161 765 170 35 96.604080 responses 1 3 1 3 6 1344 761 35 29 96.996994 to5 1 3 1 3 7 1393 756 208 46 96.490921 copolymer5 1 3 1 3 8 1612 757 96 46 96.932350 prices 1 3 1 3 9 1721 758 209 36 87.339592 increases. Id.

This assertion involves two different issues: whether a suspension copolymer plant can easily and economically switch to the production of suspension homopolymer and whether a suspension homopolymer plant can easily and economically switch to production of suspension copolymer. We discuss each separately below. We agree that a suspension copolymer plant could be modified with relative ease to produce suspension homopolymer.'® It is because of the ease of substitution that the administrative law judge included suspension copolymer capacity in measuring the market for mass and suspension homopolymer. I.D.F. 56 (portion Jn Camera)."” It is not so clear that this substitution could be accomplished economically, because of substantial production cost differences between suspension copolymer and homopolymer plants. See I1.D.F. 56 (portion Jn Camera). Suspension copolymer is made in small reactors or vessels; most suspension homopolymer is made in large reactors at lower cost.'* The cost of making suspension PVC homopolymer in a small reactor is as much as 6 cents per pound higher than in a large reactor.'? According to Occidental business According to Tenneco, a suspension copolymer plant can be modified to produce suspension homopolymer by a5 1 5 1 2 6 1318 1998 112 37 96.054634 changes 1 5 1 2 7 1442 2003 30 24 96.833954 to5 1 5 1 2 8 1483 1998 47 30 97.004364 thes 1 5 1 2 9 1542 2007 119 29 96.140030 process5 1 5 1 2 10 1673 2000 128 29 96.627151 controls5 1 5 1 2 11 1813 1999 36 30 96.985939 of5 1 5 1 2 12 1857 2000 47 29 93.291901 thes 1 5 1 2 13 1916 2009 78 20 93.171738 reac-4 1 5 1 3 0 657 2044 1337 40 -1 5 1 5 1 3 1 657 2049 51 25 95.569397 tor.5 1 5 1 3 2 732 2044 62 29 96.567505 Thes 1 5 1 3 3 806 2044 114 39 96.235916 changes 1 5 1 3 4 933 2053 53 21 96.660866 cans 1 5 1 3 5 999 2045 36 29 96.376762 be5 1 5 1 3 6 1048 2045 221 38 96.376762 accomplished5 1 5 1 3 7 1282 2045 28 29 96.196899 in5 1 5 1 3 8 1324 2046 57 28 96.196899 less5 1 5 1 3 9 1394 2046 67 29 96.973045 than5 1 5 1 3 10 1478 2046 35 30 95.993668 105 1 5 1 3 11 1525 2046 97 38 91.226173 days. JX1(II), PX18 at 49.

'” The parties do not challenge this finding. '8 Small reactors are 2500-10,000 gallons; large reactors are “at least" 18,000 gallons. Bailey, JX3, PX6 at 98; See Goodrich, 110 FTC at 321 n.177. Small reactor suspension plants are older and, in general, have been displaced by more efficient, large reactor suspension plants. According to Mr. Schaefer of Occidental, fin5 1 8 1 4 2 741 2389 47 29 96.761658 thes 1 8 1 4 3 799 2389 79 38 96.353600 early5 1 8 1 4 4 895 2389 107 33 85.111572 1970's,5 1 8 1 4 5 1016 2413 24 5 23.508926 ..5 1 8 1 4 6 1057 2413 2 5 23.508926 .5 1 8 1 4 7 1073 2398 15 20 95.065239 a5 1 8 1 4 8 1100 2390 57 28 94.065636 real5 1 8 1 4 9 1169 2390 216 38 93.049438 technological5 1 8 1 4 10 1397 2391 213 37 93.244667 breakthrough5 1 8 1 4 11 1624 2415 4 4 49.363129 .5 1 8 1 4 12 1643 2415 4 4 49.363129 .5 1 8 1 4 13 1663 2415 4 4 68.227814 .5 1 8 1 4 14 1680 2391 175 36 77.580078 consist[ed]5 1 8 1 4 15 1869 2391 35 29 97.016228 of5 1 8 1 4 16 1912 2392 81 29 96.843140 these4 1 8 1 5 0 657 2437 1336 39 -1 5 1 8 1 5 1 657 2446 70 30 96.662605 very5 1 8 1 5 2 742 2438 79 37 96.764130 large5 1 8 1 5 3 835 2443 128 24 96.835274 reactors5 1 8 1 5 4 977 2437 98 30 96.449745 which5 1 8 1 5 5 1088 2447 48 20 96.826683 ares 1 8 1 5 6 1150 2438 72 29 96.342125 used5 1 8 1 5 7 1235 2444 30 23 96.881645 to5 1 8 1 5 8 1278 2439 86 28 96.771149 makes 1 8 1 5 9 1377 2439 184 37 96.360672 commodity5 1 8 1 5 10 1574 2439 89 37 96.891762 grades 1 8 1 5 11 1677 2439 76 30 96.956001 PVC5 1 8 1 5 12 1767 2439 86 30 96.340111 resin.5 1 8 1 5 13 1879 2440 69 29 95.431679 Ands 1 8 1 5 14 1962 2449 31 20 96.660721 as4 1 8 1 6 0 656 2485 1340 39 -1 5 1 8 1 6 1 656 2486 47 28 96.751030 thes 1 8 1 6 2 717 2485 100 36 96.860207 [PVC]5 1 8 1 6 3 831 2485 135 29 96.369553 business5 1 8 1 6 4 979 2486 52 28 96.772034 has5 1 8 1 6 5 1042 2494 102 29 96.047928 grown5 1 8 1 6 6 1156 2486 56 29 96.047928 ands 1 8 1 6 7 1224 2486 124 29 96.060295 becomes 1 8 1 6 8 1360 2495 80 20 96.060295 more5 1 8 1 6 9 1453 2487 181 37 96.355522 commodity5 1 8 1 6 10 1646 2488 140 32 96.596466 oriented,5 1 8 1 6 11 1807 2497 8 19 96.854034 a5 1 8 1 6 12 1828 2488 123 28 96.275543 numbers 1 8 1 6 13 1961 2488 35 29 96.634506 of4 1 8 1 7 0 656 2533 1337 41 -1 5 1 8 1 7 1 656 2534 162 38 96.640244 producers5 1 8 1 7 2 836 2534 135 29 96.489708 invested5 1 8 1 7 3 989 2533 29 30 96.997841 in5 1 8 1 7 4 1036 2534 80 38 96.787239 large5 1 8 1 7 5 1133 2539 112 24 96.489235 reactors 1 8 1 7 6 1261 2534 135 38 96.763191 capacity5 1 8 1 7 7 1414 2535 28 28 97.001823 in5 1 8 1 7 8 1460 2536 86 28 96.683060 orders 1 8 1 7 9 1562 2540 30 24 96.923561 to5 1 8 1 7 10 1609 2536 140 28 96.195648 maintains 1 8 1 7 11 1767 2545 16 20 96.975899 a5 1 8 1 7 12 1800 2536 193 38 96.707199 competitive4 1 8 1 8 0 655 2582 943 38 -1 5 1 8 1 8 1 655 2582 130 38 96.307144 positions 1 8 1 8 2 799 2582 29 29 96.630615 in5 1 8 1 8 3 842 2582 48 29 96.333870 thes 1 8 1 8 4 902 2582 186 37 96.498932 commodity5 1 8 1 8 5 1101 2582 162 29 92.193527 business. JX1(I), Tr. 560-61.

19 JX1-4, PX131 at 1349 (4 cents per pound); CX43P (4 cents per pound); Goodrich RX875V-W (6.3 cents per pound). If the price of pipe grade homopolymer PVC is 29 cents, the cost disadvantage of small reactor plants is 14% to 22% of the price.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1223 1010 Opinion planning documents, because of this cost disadvantage, suspension PVC homopolymer made in small reactors cannot economically compete in the general purpose sectors.” RXI97M In Camera. Occidental (and other producers) sell their small reactor suspension PVC homopolymer in specialty5 1 3 1 5 5 1216 848 143 37 96.249573 niches that ares 1 3 1 5 8 1568 848 123 47 92.831047 priced5 1 3 1 5 9 1711 848 164 47 92.132545 approxi-4 1 3 1 6 0 539 905 1338 48 -1 5 1 3 1 6 1 539 907 131 46 92.834641 mately5 1 3 1 6 2 685 905 184 41 91.423965 $.07-$.125 1 3 1 6 3 883 907 115 35 96.397560 above5 1 3 1 6 4 1012 907 151 35 96.528656 General5 1 3 1 6 5 1177 908 156 45 96.265404 Purposes 1 3 1 6 6 1345 907 112 35 96.403740 resins5 1 3 1 6 7 1471 907 68 35 96.403740 ands 1 3 1 6 8 1553 907 175 35 96.780670 therefore5 1 3 1 6 9 1741 907 136 35 96.369492 deliver4 1 3 1 7 0 539 959 1336 53 -1 5 1 3 1 7 1 539 977 19 25 77.985199 a5 1 3 1 7 2 571 972 117 30 77.985199 returns 1 3 1 7 3 703 977 86 25 96.857330 overs 1 3 1 7 4 802 965 89 37 96.948021 theirs 1 3 1 7 5 904 965 85 47 93.199631 high5 1 3 1 7 6 1003 959 156 43 16.959679 costs."!5 1 3 1 7 7 1189 966 174 36 73.053970 RX197M5 1 3 1 7 8 1376 966 40 35 96.280548 In5 1 3 1 7 9 1433 966 167 41 96.280548 Camera;5 1 3 1 7 10 1616 966 66 36 92.151138 Sees 1 3 1 7 11 1698 966 113 36 87.276718 1.D.F.5 1 3 1 7 12 1828 965 47 37 96.936920 564 1 3 1 8 0 539 1024 1336 46 -1 5 1 3 1 8 1 539 1024 159 46 96.074127 (portions 1 3 1 8 2 715 1025 39 34 93.035339 In5 1 3 1 8 3 775 1024 184 43 93.269325 Camera);5 1 3 1 8 4 979 1024 187 41 91.692963 CX183B;5 1 3 1 8 5 1186 1024 224 35 91.692963 CX182B-D5 1 3 1 8 6 1428 1025 39 34 96.160812 In5 1 3 1 8 7 1488 1024 165 35 96.593430 Camera.5 1 3 1 8 8 1689 1025 69 34 96.830833 For5 1 3 1 8 9 1775 1024 100 35 96.706741 these4 1 3 1 9 0 538 1082 1336 46 -1 5 1 3 1 9 1 538 1093 159 30 96.421738 reasons,5 1 3 1 9 2 736 1082 189 46 94.892372 switching5 1 3 1 9 3 961 1082 214 46 94.892372 productions 1 3 1 9 4 1210 1082 94 35 95.910385 from5 1 3 1 9 5 1342 1082 214 46 95.910385 suspension5 1 3 1 9 6 1591 1082 212 46 92.935509 copolymer5 1 3 1 9 7 1838 1088 36 29 92.935509 to4 1 3 1 10 0 538 1139 1338 46 -1 5 1 3 1 10 1 538 1139 211 46 96.555267 suspension5 1 3 1 10 2 762 1139 272 46 96.642624 homopolymer5 1 3 1 10 3 1046 1150 145 35 96.782478 appears5 1 3 1 10 4 1205 1139 245 42 96.279510 uneconomic,5 1 3 1 10 5 1465 1139 118 36 96.739235 unless5 1 3 1 10 6 1597 1140 58 36 96.176849 thes 1 3 1 10 7 1668 1139 208 46 96.176849 copolymer4 1 3 1 11 0 537 1197 1337 47 -1 5 1 3 1 11 1 537 1198 177 45 96.507912 producers 1 3 1 11 2 745 1198 107 35 96.378731 could5 1 3 1 11 3 884 1197 152 46 96.472534 identify5 1 3 1 11 4 1069 1208 19 25 96.889709 a5 1 3 1 11 5 1123 1198 190 46 96.110100 specialty niche" for his high cost homopolymer.” We conclude, therefore, that it is not necessary to include suspension copolymer capacity to measure the mass and suspension homopolymer market. Still, because of the ease of substitution and with an abundance of caution, we include suspension copolymer capacity in the mass and suspension homopolymer market for the purposes of this case.

It is possible that suspension copolymer capacity may constrain the pricing of suspension homopolymer producers but that the pricing constraint does not run in the opposite direction, from homopolymer capacity to copolymer producers. If this is the case, then it is appropriate to include suspension copolymer capacity in measuring the suspension homopolymer market, as we have decided to do, but not to include homopolymer capacity in measuring the suspension 20 Occidental also said in its business planning documents that [n]umerous2 1 6 0 0 0 532 2192 1339 276 -1 3 1 6 1 0 0 532 2192 1339 276 -1 4 1 6 1 1 0 532 2192 1337 39 -1 5 1 6 1 1 1 532 2192 50 29 96.809303 olds 1 6 1 1 2 595 2193 84 29 91.998993 small5 1 6 1 1 3 695 2192 199 38 86.529976 [suspension]5 1 6 1 1 4 907 2198 113 24 96.738899 reactors 1 6 1 1 5 1032 2193 168 38 96.680717 operations5 1 6 1 1 6 1213 2193 76 29 96.680717 have5 1 6 1 1 7 1302 2193 102 29 96.563202 closed5 1 6 1 1 8 1417 2193 88 29 96.424278 downs 1 6 1 1 9 1519 2202 72 20 96.359871 overs 1 6 1 1 10 1602 2199 100 24 96.115631 recent5 1 6 1 1 11 1714 2202 85 29 96.607391 years5 1 6 1 1 12 1812 2193 57 30 96.607391 due4 1 6 1 2 0 532 2240 1336 39 -1 5 1 6 1 2 1 532 2245 30 24 97.008614 to5 1 6 1 2 2 574 2240 75 29 96.870857 theirs 1 6 1 2 3 661 2240 134 38 96.729385 inability5 1 6 1 2 4 808 2245 30 24 95.825768 to5 1 6 1 2 5 850 2246 137 32 96.749878 competes 1 6 1 2 6 1000 2249 39 20 95.837944 on5 1 6 1 2 7 1051 2249 16 21 93.302498 a5 1 6 1 2 8 1080 2240 283 38 92.328918 cost/performances 1 6 1 2 9 1376 2241 88 29 96.896721 basis.5 1 6 1 2 10 1489 2241 99 29 96.527138 Those5 1 6 1 2 11 1601 2241 58 29 95.578430 still5 1 6 1 2 12 1673 2241 29 29 97.002228 in5 1 6 1 2 13 1715 2241 153 38 97.009132 operation4 1 6 1 3 0 533 2289 1338 37 -1 5 1 6 1 3 1 533 2298 47 20 96.801224 ares 1 6 1 3 2 597 2289 171 37 96.485748 competing5 1 6 1 3 3 784 2289 70 37 96.397446 only5 1 6 1 3 4 871 2289 28 28 96.792473 in5 1 6 1 3 5 916 2289 143 37 96.926003 specialty5 1 6 1 3 6 1075 2289 128 29 9.747604 niches. RX197S In Camera. Mr. Schaefer of Occidental said that thes 1 6 1 4 5 937 2336 49 29 96.649422 olds 1 6 1 4 6 998 2337 84 28 96.194672 small5 1 6 1 4 7 1094 2341 125 24 96.967079 reactors5 1 6 1 4 8 1231 2337 59 28 96.963646 that5 1 6 1 4 9 1301 2346 48 20 96.790176 ares 1 6 1 4 10 1360 2337 56 29 96.584183 still5 1 6 1 4 11 1429 2337 51 29 95.925980 left5 1 6 1 4 12 1491 2346 54 20 96.576012 cans 1 6 1 4 13 1556 2337 129 38 96.155891 produces 1 6 1 4 14 1696 2337 174 38 96.161873 copolymer4 1 6 1 5 0 533 2385 1337 37 -1 5 1 6 1 5 1 533 2385 55 29 96.832008 ands 1 6 1 5 2 601 2390 26 24 96.730675 at5 1 6 1 5 3 638 2385 72 29 96.781937 least5 1 6 1 5 4 721 2390 133 32 96.078941 competes 1 6 1 5 5 867 2385 28 29 96.731560 in5 1 6 1 5 6 906 2385 47 29 96.869484 thes 1 6 1 5 7 964 2385 143 33 96.819580 business,5 1 6 1 5 8 1120 2385 129 29 96.139854 whereas5 1 6 1 5 9 1261 2394 58 28 96.977615 you5 1 6 1 5 10 1332 2390 104 24 96.218384 cannot5 1 6 1 5 11 1447 2385 127 37 91.381584 produces 1 6 1 5 12 1588 2409 4 5 66.536560 .5 1 6 1 5 13 1607 2409 24 5 66.536560 ..5 1 6 1 5 14 1645 2385 225 37 96.665688 homopolymer4 1 6 1 6 0 533 2433 696 35 -1 5 1 6 1 6 1 533 2433 29 29 96.639442 in5 1 6 1 6 2 575 2433 85 29 96.173096 those5 1 6 1 6 3 673 2433 153 29 89.373085 reactors. JXI(III), PX 136 at 83.

*1_ Occidental in its business plans said that the specialty5 1 7 1 1 11 1603 2506 77 29 92.435440 resins 1 7 1 1 12 1697 2506 69 36 83.746536 [i.e.,5 1 7 1 1 13 1783 2506 85 29 94.601456 small2 1 8 0 0 0 532 2557 1336 136 -1 3 1 8 1 0 0 532 2557 1336 136 -1 4 1 8 1 1 0 532 2557 1336 38 -1 5 1 8 1 1 1 532 2563 112 23 96.394112 reactors 1 8 1 1 2 653 2557 176 38 96.269539 suspension5 1 8 1 1 3 839 2557 76 30 96.522743 PVC5 1 8 1 1 4 925 2557 238 37 95.715744 homopolymer]5 1 8 1 1 5 1175 2557 191 38 96.196991 competitions 1 8 1 1 6 1376 2557 126 29 96.697456 consists5 1 8 1 1 7 1513 2557 34 29 96.968643 of5 1 8 1 1 8 1555 2557 144 29 96.687431 domestic5 1 8 1 1 9 1710 2557 158 37 96.749146 producers4 1 8 1 2 0 532 2605 1336 39 -1 5 1 8 1 2 1 532 2606 70 29 96.545670 with5 1 8 1 2 2 624 2606 86 29 95.962578 small5 1 8 1 2 3 730 2611 113 24 96.698982 reactors 1 8 1 2 4 862 2605 148 30 93.030212 facilities.5 1 8 1 2 5 1050 2605 212 36 45.329041 O[ccidental],5 1 8 1 2 6 1285 2605 129 39 96.343315 Georgia5 1 8 1 2 7 1434 2605 82 34 93.182205 Gulf,5 1 8 1 2 8 1537 2605 67 30 89.660126 B.F.5 1 8 1 2 9 1627 2605 163 34 95.987793 Goodrich,5 1 8 1 2 10 1811 2605 57 30 95.987793 anda 1 8 1 3 0 532 2654 983 39 -1 5 1 8 1 3 1 532 2655 118 38 92.000641 Keysor5 1 8 1 3 2 661 2655 149 37 94.835693 comprises 1 8 1 3 3 823 2654 71 30 94.835693 90%5 1 8 1 3 4 908 2654 35 30 97.016968 of5 1 8 1 3 5 953 2655 48 28 96.552452 thes 1 8 1 3 6 1013 2654 138 29 22.471077 market. RX197M Jn Camera.

22 Suspension homopolymer specialty resins might constitute a relevant product market, but that argument was not made in this case. Opinion 115 F.T.C.

copolymer market. We therefore turn to the second production substitution issue: whether a suspension PVC homopolymer plant can easily and economically be converted to production of suspension PVC copolymer.

Conversion of a suspension homopolymer plant to produce copolymer would require capital investment for additional equipment for viny] acetate, including vinyl acetate feed lines, storage tanks and a recovery system, as well as different meters and gauges for vinyl acetate. Hill, CX183C; Flammer, CX184C; Fischer, CX208D; Disch, JX3, PX8 at 68; Lull, JX1(D, Tr. 509-10. Such a conversion would cost several million dollars and would take approximately two to two and one-half years, including time for planning, construction and new environmental permitting that may be required because of the addition of viny] acetate to the polymerization process. I.D.F. 320-24 (portion In Camera) & 328 (portion In Camera).”? Additional time -- three months to a year -- would be required after physical conversion for production trials, followed by customer trials. I.D.F. 325-26. The administrative law judge concluded that producers of homopolymer would not modify plants to produce copolymer in response to even significant5 1 3 2 16 5 1261 1740 197 35 87.576653 increases in the price of copolymer, because plant conversion would be difficult and unprofitable. I.D.F. 79-80 (portion In Camera), 304-31 (portion In Camera). We agree. According to an Occidental document of December 1985, [t]he4 1 3 3 2 0 663 1971 1336 47 -1 5 1 3 3 2 1 663 1974 211 36 96.132439 conversion5 1 3 3 2 2 888 1974 41 35 96.132439 of5 1 3 3 2 3 940 1984 18 24 95.901184 a5 1 3 3 2 4 973 1973 101 35 95.669525 small5 1 3 3 2 5 1087 1979 135 29 96.253792 reactors 1 3 3 2 6 1235 1973 217 45 96.395683 Suspension5 1 3 3 2 7 1469 1972 296 45 90.534317 [homopolymer]5 1 3 3 2 8 1781 1971 108 35 96.946541 Resins 1 3 3 2 9 1903 1971 96 46 96.434196 plant4 1 3 3 3 0 663 2030 1335 48 -1 5 1 3 3 3 1 663 2040 35 28 96.866112 to5 1 3 3 3 2 715 2033 159 45 96.046120 produces 1 3 3 3 3 890 2032 46 36 95.467438 505 1 3 3 3 4 955 2031 168 43 96.273918 [million]5 1 3 3 3 5 1141 2031 141 46 96.470215 pounds5 1 3 3 3 6 1298 2042 62 35 96.470215 pers 1 3 3 3 7 1375 2041 83 35 96.941895 years 1 3 3 3 8 1474 2031 42 34 96.661591 of5 1 3 3 3 9 1528 2031 221 45 96.590706 Copolymer5 1 3 3 3 10 1764 2030 30 35 96.170708 is5 1 3 3 3 11 1810 2030 188 35 96.625023 estimated4 1 3 3 4 0 663 2082 1340 50 -1 5 1 3 3 4 1 663 2097 35 29 96.785873 to5 1 3 3 4 2 727 2097 79 28 96.253960 costs 1 3 3 4 3 835 2089 46 39 96.253960 $25 1 3 3 4 4 913 2090 167 42 96.355965 [million]5 1 3 3 4 5 1111 2096 36 29 96.355965 to5 1 3 3 4 6 1176 2088 81 40 93.259079 $2.55 1 3 3 4 7 1291 2088 199 43 81.937195 [million].. CX51.% Mr. Hill of Keysor-Century Corporation, a producer of copolymer, estimated that conversion would cost $3 million and would take one to two years, if the plant remained in operation during the process. CX183C. Mr. 23 Deciding whether to convert a plant to copolymer could extend the time considerably. Mr. Disch reported that Tenneco took about 2 years to decide to replace the reactors at its Burlington plant (planning began in 1982; the new reactors did not come into production until July 1985, JX1(1I), PX20 at 32-34) and that a decision to convert a plant to copolymer would be more complicated. JXI(IV), PX8 at 76 & 78-79.

1985.

Memorandum from F.A. Sacks, Occidental Director of Marketing, Dec. 13, OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1225 1010 Opinion Flammer of Vista Polymers, Inc., estimated that conversion of a homopolymer plant to produce copolymer would take 2 to 2.5 years. CX184D & E. Tenneco reported that the cost of converting its Flemington, New Jersey, plant from homopolymer to copolymer, completed in 1975, was $5 million, JX1(III), PX18 at 36, and that subsequent improvements to increase Flemington's copolymer capacity by 10 million pounds (to 95 million pounds per year) cost $3.2 million and took 3 years, from planning in early 1978 to production in the first quarter of 1981.” JX1(IID, PX20 at 34-35. Against this evidence from Occidental, Tenneco and other industry members, Occidental relies on an estimate prepared in anticipation of this litigation at the direction of Mr. Lull, Occidental's Director of Manufacturing for PVC. The estimate was that conversion of a suspension homopolymer plant to produce 50 million pounds of copolymer would cost about $1 million to $1.5 million and would take approximately 42 weeks. Lull, JX1(1), Tr. 516-17 & 531-38; RX182. Given the circumstances in which this estimate was developed and its inconsistency with other figures in the record, we do not find Occidental's estimate persuasive.”° 5 In light of this experience with Flemington, the basis for Tenneco's 1986 estimate (in a document prepared for the Commission's review of this acquisition) that majors 1 6 1 2 3 739 1957 122 30 96.656693 process5 1 6 1 2 4 884 1949 85 30 96.988152 items5 1 6 1 2 5 993 1950 129 30 94.253136 needed to convert a plant from homopolymer to copolymer would cost $250,000 to $750,000, depending5 1 6 1 3 8 1480 2010 37 20 96.318344 on5 1 6 1 3 9 1532 2010 90 30 96.318344 scope5 1 6 1 3 10 1635 2002 36 30 96.929749 of5 1 6 1 3 11 1680 2003 108 33 96.178558 work, and that installation would take 3 to 9 months, depending5 1 6 1 4 10 1440 2058 39 20 97.008209 on5 1 6 1 4 11 1494 2058 90 29 96.750076 scope5 1 6 1 4 12 1599 2050 35 29 96.587967 of5 1 6 1 4 13 1645 2051 108 33 96.735199 work, is not clear. JX1(III), PX18 at 50.

26 Occidental asserts that the cost of conversion could be reduced by eliminating a new recovery system, identified in the April 1986 estimate prepared for Mr. Lull as costing $685,000. R.A.B. at 62-63. A recovery system recovers, separates, purifies and recycles unreacted monomers (VCM and vinyl acetate ("VAC")) after polymerization. Mr. Lull said that a new recovery system was not necessary, that the combined VCM and VAC could be collected in the same recovery system used for recovering VCM used in making homopolymer. Lull, JX1(), Tr. 514. Other copolymer producers disagreed and testified that new monomer recovery systems would be needed for conversion to copolymer. Hill, CX183B-C (VCM and VAC must be separated to reuse VCM and for waste water purification); Hornack, RX177 C-D In Camera; JX1(II), PX18 at 50 (Tenneco identified recovery,5 1 8 1 11 3 870 2690 200 38 96.771713 purification,5 1 8 1 11 4 1085 2692 56 28 96.936249 ands 1 8 1 11 5 1155 2692 117 37 96.680412 recycle5 1 8 1 11 6 1297 2692 154 30 95.264877 facilities for VAC as a major4 1 8 1 12 0 516 2737 1336 40 -1 5 1 8 1 12 1 516 2746 122 29 96.777054 process5 1 8 1 12 2 663 2737 70 30 96.530212 items 1 8 1 12 3 758 2738 130 29 95.989090 needed for conversion); See also Flammer, CX184C; Fisher, CX208D-E & RX264B-C; Bailey, JX3, PX6 at 76-77. Opinion 115 F.T.C.

Even if technically feasible,” conversion of a suspension homopolymer plant to produce copolymer is hi ghly unlikely, because of the declining demand for copolymer.”® Every witness who testified on the subject said that modifying a homopolymer plant or reopening a closed plant to produce copolymer would be uneconomic.” Mr. Schaefer, a vice president of Occidental, testified The recovery system identified in Mr. Lull's estimate is a carbon adsorption system that may be less expensive than other recovery systems. See Fisher, RX264B-C ("comparative costs" not studied). The carbon system generates a crudely5 1 5 1 4 2 835 1199 145 38 93.215515 purified VCM and somewhat5 1 5 1 4 6 1381 1215 81 21 96.728966 more5 1 5 1 4 7 1480 1208 234 31 96.579758 contaminated VAC. RX 182B. Care is necessary in using recovered VCM and VAC, because of the risk of contamination. According to Tenneco, use of recovered monomer must be limited to prevent batch5 1 5 1 7 4 988 1346 139 38 29.884674 'set-up,"5 1 5 1 7 5 1146 1347 28 30 96.160339 in5 1 5 1 7 6 1193 1348 98 30 96.160339 which5 1 5 1 7 7 1309 1358 16 21 96.901619 a5 1 5 1 7 8 1343 1350 87 30 96.778809 batch5 1 5 1 7 9 1448 1352 35 29 96.976494 of5 1 5 1 7 10 1498 1354 175 38 96.501297 copolymer5 1 5 1 7 11 1690 1355 141 31 92.372551 becomes5 1 5 1 7 12 1850 1359 163 30 92.180374 unuseable4 1 5 1 8 0 675 1391 1335 49 -1 5 1 5 1 8 1 675 1391 113 29 96.483978 chunks5 1 5 1 8 2 800 1401 33 20 96.415726 or5 1 5 1 8 3 844 1401 16 21 96.415726 a5 1 5 1 8 4 873 1401 77 21 96.517731 mass5 1 5 1 8 5 964 1393 28 30 96.517731 in5 1 5 1 8 6 1005 1395 47 28 96.972687 thes 1 5 1 8 7 1065 1401 119 29 96.941521 reactor,5 1 5 1 8 8 1197 1396 113 31 96.116386 instead5 1 5 1 8 9 1321 1398 36 30 96.950508 of5 1 5 1 8 10 1365 1398 124 32 96.740776 discrete5 1 5 1 8 11 1500 1401 144 39 92.308144 particles.5 1 5 1 8 12 1668 1404 140 36 74.109665 JX1(III),5 1 5 1 8 13 1821 1406 89 30 92.797890 PX185 1 5 1 8 14 1924 1413 28 24 96.420235 at5 1 5 1 8 15 1963 1407 47 30 95.886803 50.4 1 5 1 9 0 674 1440 1337 52 -1 5 1 5 1 9 1 674 1440 106 36 92.950783 Vygen5 1 5 1 9 2 793 1440 135 30 96.456802 believed5 1 5 1 9 3 941 1442 58 29 96.686653 that5 1 5 1 9 4 1012 1443 183 39 96.826477 imperfectly5 1 5 1 9 5 1207 1446 126 37 93.120071 purified5 1 5 1 9 6 1345 1447 91 30 91.801743 VCM5 1 5 1 9 7 1449 1449 68 35 90.071152 (i.e.,5 1 5 1 9 8 1531 1449 90 30 90.840630 VCM5 1 5 1 9 9 1633 1453 217 30 96.528259 contaminated5 1 5 1 9 10 1862 1455 38 37 96.867371 by5 1 5 1 9 11 1913 1455 98 36 95.161095 VAC)4 1 5 1 10 0 673 1489 1337 49 -1 5 1 5 1 10 1 673 1496 60 22 96.938103 was5 1 5 1 10 2 747 1489 47 29 96.727081 thes 1 5 1 10 3 807 1494 77 25 96.884201 most5 1 5 1 10 4 896 1490 90 39 96.937393 likely5 1 5 1 10 5 999 1500 104 21 96.321701 sources 1 5 1 10 6 1116 1493 34 29 96.934448 of5 1 5 1 10 7 1159 1494 232 31 96.466774 contamination5 1 5 1 10 8 1405 1497 28 29 96.834145 in5 1 5 1 10 9 1447 1497 36 30 96.907768 its5 1 5 1 10 10 1496 1498 230 40 96.495682 homopolymer5 1 5 1 10 11 1737 1502 86 30 93.136383 resin.5 1 5 1 10 12 1849 1503 115 30 91.485931 CX1255 1 5 1 10 13 1977 1506 33 28 96.218491 In4 1 5 1 11 0 673 1536 1336 55 -1 5 1 5 1 11 1 673 1536 135 30 83.324287 Camera,5 1 5 1 11 2 830 1537 94 31 95.404297 When5 1 5 1 11 3 935 1540 156 29 93.287117 recovered5 1 5 1 11 4 1104 1541 88 30 93.073051 VCM5 1 5 1 11 5 1204 1543 55 29 96.960739 ands 1 5 1 11 6 1271 1542 83 31 96.842049 VAC5 1 5 1 11 7 1365 1553 46 21 96.494438 ares 1 5 1 11 8 1423 1547 157 37 94.223000 separated,5 1 5 1 11 9 1594 1549 118 35 94.223000 vessels,5 1 5 1 11 10 1724 1559 105 30 96.333847 pumps5 1 5 1 11 11 1841 1552 56 29 96.847519 ands 1 5 1 11 12 1908 1552 101 39 95.924538 piping4 1 5 1 12 0 672 1585 1336 47 -1 5 1 5 1 12 1 672 1585 105 30 95.671890 should5 1 5 1 12 2 790 1586 36 30 95.671890 be5 1 5 1 12 3 840 1588 148 38 96.980621 upgraded5 1 5 1 12 4 1000 1588 78 30 96.806572 from5 1 5 1 12 5 1089 1590 108 30 96.530563 carbon5 1 5 1 12 6 1211 1596 28 25 96.552864 to5 1 5 1 12 7 1252 1592 133 31 95.946945 stainless5 1 5 1 12 8 1399 1595 81 34 92.178711 steel,5 1 5 1 12 9 1493 1596 126 30 96.966003 because5 1 5 1 12 10 1632 1597 35 29 96.990013 of5 1 5 1 12 11 1677 1598 46 30 96.078835 thes 1 5 1 12 12 1736 1600 151 30 96.967880 corrosive5 1 5 1 12 13 1900 1601 108 31 96.929840 effects4 1 5 1 13 0 670 1633 1337 52 -1 5 1 5 1 13 1 670 1633 36 30 96.951141 of5 1 5 1 13 2 716 1634 93 30 94.688019 VAC.5 1 5 1 13 3 835 1635 76 35 93.111954 Lull,5 1 5 1 13 4 924 1636 115 37 76.220764 JX1(D,5 1 5 1 13 5 1053 1638 46 29 96.527885 Tr.5 1 5 1 13 6 1113 1638 122 32 94.874695 533-34.5 1 5 1 13 7 1261 1640 70 31 95.924820 This5 1 5 1 13 8 1345 1644 129 36 96.681709 upgrades 1 5 1 13 9 1487 1644 101 30 95.695084 would5 1 5 1 13 10 1601 1645 84 40 96.337395 brings 1 5 1 13 11 1698 1647 56 30 93.295517 Mr.5 1 5 1 13 12 1769 1647 89 31 74.351814 Lull's5 1 5 1 13 13 1872 1650 135 30 96.788597 estimate4 1 5 1 14 0 670 1683 530 34 -1 5 1 5 1 14 1 670 1689 29 22 95.904099 to5 1 5 1 14 2 712 1683 89 30 96.361832 about5 1 5 1 14 3 814 1683 69 32 96.691055 $1.55 1 5 1 14 4 897 1686 125 29 90.495026 million.5 1 5 1 14 5 1048 1687 152 30 90.495026 RX182B.3 1 5 2 0 0 663 1731 1342 424 -1 4 1 5 2 1 0 742 1731 1263 49 -1 5 1 5 2 1 1 742 1731 63 29 96.849724 Thes 1 5 2 1 2 830 1731 137 30 96.423767 estimates 1 5 2 1 3 991 1735 142 36 96.822838 prepared5 1 5 2 1 4 1157 1735 47 29 96.415115 for5 1 5 2 1 5 1227 1737 57 29 96.471916 Mr.5 1 5 2 1 6 1309 1737 66 30 89.767067 Lull5 1 5 2 1 7 1400 1741 139 28 96.602165 assumed5 1 5 2 1 8 1563 1740 54 30 96.811485 full5 1 5 2 1 9 1645 1743 202 37 85.333298 “compliance5 1 5 2 1 10 1871 1746 71 28 96.097397 with5 1 5 2 1 11 1967 1747 38 28 96.097397 all4 1 5 2 2 0 667 1780 1337 48 -1 5 1 5 2 2 1 667 1785 193 30 93.271500 governments 1 5 2 2 2 874 1780 237 38 93.138092 (Federal/State)5 1 5 2 2 3 1124 1784 202 37 94.671471 regulations, including emissions standards, RX182A, and did not identify the cost of complying with environmental regulations for vinyl acetate. These costs may be substantial. Occidental claimed to be ones 1 5 2 4 12 1838 1888 35 29 96.948578 of5 1 5 2 4 13 1883 1890 48 28 96.427872 thes 1 5 2 4 14 1945 1890 58 28 96.429214 few4 1 5 2 5 0 665 1923 1337 49 -1 5 1 5 2 5 1 665 1923 176 36 96.963402 companies5 1 5 2 5 2 866 1923 60 29 96.599747 that5 1 5 2 5 3 949 1924 52 30 96.573868 has5 1 5 2 5 4 1027 1931 84 32 96.547737 spent5 1 5 2 5 5 1135 1927 48 29 97.009125 thes 1 5 2 5 6 1207 1927 105 39 94.004150 capital5 1 5 2 5 7 1338 1934 29 24 95.706543 to5 1 5 2 5 8 1391 1929 96 31 75.196754 installs 1 5 2 5 9 1513 1932 48 29 96.943848 thes 1 5 2 5 10 1585 1941 157 31 96.502151 necessary5 1 5 2 5 11 1767 1935 235 31 96.447617 environmental4 1 5 2 6 0 664 1970 1338 45 -1 5 1 5 2 6 1 664 1970 172 38 96.650757 equipments 1 5 2 6 2 859 1972 125 32 78.387665 specifics 1 5 2 6 3 1006 1978 29 24 78.387665 to5 1 5 2 6 4 1057 1974 142 33 90.005615 handling5 1 5 2 6 5 1221 1976 80 33 74.079346 vinyl5 1 5 2 6 6 1324 1983 111 25 96.707733 acetate5 1 5 2 6 7 1458 1982 195 29 49.600563 monomers. CX5E In Camera (emphasis added). According to Occidental, most5 1 5 2 7 7 1516 2028 78 30 96.160339 PVC5 1 5 2 7 8 1606 2030 160 36 96.827988 producers5 1 5 2 7 9 1780 2031 75 30 96.312042 have5 1 5 2 7 10 1867 2033 134 38 96.743393 dropped4 1 5 2 8 0 664 2067 1336 53 -1 5 1 5 2 8 1 664 2067 74 28 97.009331 theirs 1 5 2 8 2 752 2067 175 39 96.966728 copolymer5 1 5 2 8 3 940 2069 75 29 96.878799 lines5 1 5 2 8 4 1030 2070 114 30 96.460327 instead5 1 5 2 8 5 1158 2071 36 30 96.268219 of5 1 5 2 8 6 1204 2072 148 39 96.268219 investing5 1 5 2 8 7 1366 2074 48 30 96.964630 thes 1 5 2 8 8 1427 2075 107 38 96.348442 capital5 1 5 2 8 9 1549 2082 30 23 96.348442 to5 1 5 2 8 10 1593 2078 136 38 87.645882 comply with the tough4 1 5 2 9 0 663 2115 819 40 -1 5 1 5 2 9 1 663 2115 235 31 96.524757 environmental5 1 5 2 9 2 912 2118 206 37 86.278625 regulations. CX5D-E In Camera.

It is worth noting that the evidence addresses only the conversion of a small reactor suspension homopolymer plant to copolymer production. Conversion of a Jarge reactor plant appears to be even less likely. Some witnesses questioned whether copolymer could be produced in large reactors, e.g., Hill, CX183B; Flammer, CX184C; others testified that producing copolymer in large reactors, even if possible, would not be economically feasible. Bailey, JX3, PX6 at 77-78; Disch, JX3, PX8 at 72-73.

*8 The demand for copolymer for vinyl floor tile is flat, and the demand for copolymer for phonograph records is declining rapidly. See, e.g., Hill, CX183F; Bailey, JX3, PX6 at 82.

°° Mr. Lull said that he considered only the technical feasibility of conversion and did not consider the economic feasibility. JX1(I), Tr. 535 & 538. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1227 1010 Opinion that Occidental would not reopen its closed Perryville, Maryland, suspension PVC homopolymer plant to produce copolymer, even if the price of copolymer increased three cents or four cents a pound (approximately a 10% increase), because of insufficient demand for copolymer. JX1(I), Tr. 585-86. Mr. Schaefer also testified that Occidental would not consider expanding copolymer capacity at its Pottstown plant: As5 1 3 1 7 4 990 991 85 45 96.178299 long5 1 3 1 7 5 1090 1003 37 23 96.841698 as5 1 3 1 7 6 1142 993 57 34 96.905518 thes 1 3 1 7 7 1214 994 147 35 96.822372 outlook5 1 3 1 7 8 1375 995 55 34 96.954414 for5 1 3 1 7 9 1444 997 250 45 96.873283 consumption5 1 3 1 7 10 1708 998 186 36 96.862991 continues4 1 3 1 8 0 558 1045 1334 54 -1 5 1 3 1 8 1 558 1050 36 29 96.296257 to5 1 3 1 8 2 625 1045 45 35 96.296257 be5 1 3 1 8 3 703 1056 69 24 96.742249 ones 1 3 1 8 4 803 1046 43 35 96.676514 of5 1 3 1 8 5 873 1048 165 44 96.336426 negatives 1 3 1 8 6 1069 1050 157 44 95.937180 growth for copolymer, any additional production capacity would5 1 3 1 9 4 1137 1108 145 45 96.247559 depress5 1 3 1 9 5 1302 1109 58 36 96.646111 thes 1 3 1 9 6 1380 1110 127 45 80.760361 price. Jd. at 587.2° Mr. Disch said that conversion to produce copolymer was unlikely because of declining demand, and Tenneco in 1982 or 1983 reduced its copolymer capacity because of declining demand. JX3, PX8 at 59 & 66-67.

Air Products exited the copolymer market in 1983, because of declining demand for copolymer, and believes that reentry would be uneconomic.*' Fisher, CX208B-C. Formosa has not made copolymer since 1981 and would not reenter copolymer production even if prices increased by 10%. Mr. Boyer of Formosa, like Mr. Schaefer of Occidental, said that entry by Formosa would create excess © The copolymer capacity of Occidental's Pottstown plant is limited by the size of the vinyl acetate recovery system. Lull, JX1(1), Tr. 539. Although Occidental asserts on appeal that the cost of such a recovery system could5 1 6 1 2 14 1843 1966 37 28 97.013336 be4 1 6 1 3 0 544 2001 1335 50 -1 5 1 6 1 3 1 544 2001 124 38 96.863548 brought5 1 6 1 3 2 681 2012 31 20 97.006042 as5 1 6 1 3 3 725 2003 58 29 96.979309 lows 1 6 1 3 4 796 2013 31 19 96.680038 as5 1 6 1 3 5 841 2003 174 36 91.923920 $685,000, R.A.B. at 63, citing Lull, JX1(1), Tr. 516, this figure tells us nothing about the economic feasibility of investing in additional copolymer capacity. Like Occidental, Vygen could expand its copolymer capacity by upgrading its viny] acetate recovery and wastewater discharge systems, but, according to the president of Vygen, this would5 1 6 1 7 9 1408 2201 113 38 96.403893 requires 1 6 1 7 10 1540 2211 16 20 96.915367 a5 1 6 1 7 11 1576 2203 174 30 96.642860 substantial5 1 6 1 7 12 1769 2201 107 46 95.921974 capital4 1 6 1 8 0 541 2241 1339 47 -1 5 1 6 1 8 1 541 2241 192 38 96.775482 expenditures 1 6 1 8 2 749 2243 39 38 93.275185 by5 1 6 1 8 3 804 2244 122 37 92.219688 Vygen that is not5 1 6 1 8 7 1143 2247 218 40 96.431686 economically5 1 6 1 8 8 1373 2249 192 38 78.416542 justifiable,”5 1 6 1 8 9 1582 2251 88 37 96.863708 given5 1 6 1 8 10 1687 2252 48 29 96.632668 thes 1 6 1 8 11 1752 2253 75 29 96.632668 levels 1 6 1 8 12 1844 2253 36 29 96.940575 of4 1 6 1 9 0 541 2290 1334 43 -1 5 1 6 1 9 1 541 2290 124 30 96.614937 demands 1 6 1 9 2 677 2292 56 28 96.857674 ands 1 6 1 9 3 744 2292 147 38 96.735008 projected5 1 6 1 9 4 903 2294 110 37 97.000298 growths 1 6 1 9 5 1026 2293 45 30 96.597382 for5 1 6 1 9 6 1081 2295 178 38 93.117455 copolymer.5 1 6 1 9 7 1282 2297 143 34 91.792053 Hornack,5 1 6 1 9 8 1438 2298 104 30 79.668137 RXI775 1 6 1 9 9 1555 2299 27 29 93.138893 D5 1 6 1 9 10 1592 2301 31 28 92.029449 In5 1 6 1 9 11 1638 2301 134 29 95.254097 Camera.5 1 6 1 9 12 1795 2301 80 30 95.254097 Even4 1 6 1 10 0 540 2340 1334 45 -1 5 1 6 1 10 1 540 2347 16 21 96.372543 a5 1 6 1 10 2 570 2340 152 30 96.372543 sustained5 1 6 1 10 3 736 2341 80 38 96.662895 prices 1 6 1 10 4 830 2341 131 30 96.793938 increases 1 6 1 10 5 974 2343 36 29 96.577911 of5 1 6 1 10 6 1023 2343 68 30 96.929459 10%5 1 6 1 10 7 1106 2345 99 29 96.539268 would5 1 6 1 10 8 1220 2350 49 24 96.585587 not5 1 6 1 10 9 1283 2346 105 29 93.299873 induces 1 6 1 10 10 1402 2347 106 38 93.010834 Vygen5 1 6 1 10 11 1522 2353 30 24 96.874557 to5 1 6 1 10 12 1564 2349 135 29 96.519485 dedicate5 1 6 1 10 13 1713 2349 161 31 95.875252 additional4 1 6 1 11 0 539 2388 1088 40 -1 5 1 6 1 11 1 539 2388 134 37 95.832756 capacity5 1 6 1 11 2 688 2394 28 23 96.969124 to5 1 6 1 11 3 730 2390 175 37 96.448921 copolymer5 1 6 1 11 4 916 2391 184 37 93.017242 production.5 1 6 1 11 5 1126 2392 148 35 91.732658 Hornack,5 1 6 1 11 6 1288 2394 143 30 92.241966 CX182C5 1 6 1 11 7 1444 2396 31 28 95.097427 In5 1 6 1 11 8 1490 2396 137 29 96.504250 Camera.2 1 7 0 0 0 613 2449 1260 60 -1 3 1 7 1 0 0 613 2449 1260 60 -1 4 1 7 1 1 0 613 2449 1260 60 -1 5 1 7 1 1 1 613 2449 24 21 55.266361 3!5 1 7 1 1 2 681 2462 53 29 69.152473 Air5 1 7 1 1 3 747 2463 140 29 95.377388 Products5 1 7 1 1 4 901 2464 179 30 96.856400 maintained5 1 7 1 1 5 1095 2472 132 31 95.065056 separates 1 7 1 1 6 1240 2468 174 36 96.649376 productions 1 7 1 1 7 1429 2469 73 29 96.498047 lines5 1 7 1 1 8 1516 2470 46 29 96.489433 for5 1 7 1 1 9 1575 2470 230 39 96.621185 homopolymer5 1 7 1 1 10 1816 2473 57 28 96.892044 and2 1 8 0 0 0 533 2512 1340 330 -1 3 1 8 1 0 0 533 2512 1340 330 -1 4 1 8 1 1 0 538 2512 1335 44 -1 5 1 8 1 1 1 538 2512 175 37 96.630447 copolymer5 1 8 1 1 2 737 2513 81 33 96.711906 until,5 1 8 1 1 3 845 2513 28 29 95.352921 in5 1 8 1 1 4 903 2514 138 34 96.429512 1983-84,5 1 8 1 1 5 1067 2516 86 29 96.648209 when5 1 8 1 1 6 1178 2517 47 28 96.648209 thes 1 8 1 1 7 1250 2518 78 37 96.220161 plants 1 8 1 1 8 1354 2527 61 21 96.870377 was5 1 8 1 1 9 1439 2520 102 29 95.915359 closed5 1 8 1 1 10 1566 2520 47 29 96.292267 for5 1 8 1 1 11 1640 2521 33 29 96.806442 155 1 8 1 1 12 1699 2523 128 33 95.857002 months,5 1 8 1 1 13 1853 2523 20 28 95.857002 it4 1 8 1 2 0 539 2560 1331 53 -1 5 1 8 1 2 1 539 2560 216 39 87.001030 reconfigured the plant to dedicate both reactor trains" to suspension homopolymer. Fisher, CX208B. Air Products exited the copolymer market because it believed that its sales of copolymer would be insufficient to cover production costs: Thes 1 8 1 4 13 1790 2663 81 46 96.271896 price4 1 8 1 5 0 535 2704 1335 47 -1 5 1 8 1 5 1 535 2704 34 29 96.136009 of5 1 8 1 5 2 580 2705 175 38 96.136009 suspension5 1 8 1 5 3 768 2706 77 30 96.949738 PVC5 1 8 1 5 4 857 2707 172 39 96.554596 copolymer5 1 8 1 5 5 1041 2709 76 28 96.770485 resins 1 8 1 5 6 1131 2710 97 28 96.918533 would5 1 8 1 5 7 1242 2710 74 30 97.006218 have5 1 8 1 5 8 1328 2716 30 24 95.309586 to5 1 8 1 5 9 1370 2711 131 30 95.309586 increases 1 8 1 5 10 1514 2713 38 38 97.008392 by5 1 8 1 5 11 1566 2713 126 30 95.719131 30-50%5 1 8 1 5 12 1706 2715 122 28 96.698746 relatives 1 8 1 5 13 1841 2721 29 23 97.004578 to4 1 8 1 6 0 535 2753 1336 47 -1 5 1 8 1 6 1 535 2753 47 29 96.449562 thes 1 8 1 6 2 608 2754 81 37 96.449562 prices 1 8 1 6 3 714 2755 35 28 96.635368 of5 1 8 1 6 4 772 2756 177 37 95.650650 suspension5 1 8 1 6 5 974 2757 77 29 96.479301 PVC5 1 8 1 6 6 1077 2758 229 38 96.068069 homopolymer5 1 8 1 6 7 1329 2760 102 29 96.068069 before5 1 8 1 6 8 1456 2767 127 32 96.792938 re-entry5 1 8 1 6 9 1610 2762 60 29 95.361328 into5 1 8 1 6 10 1695 2764 176 36 95.361328 copolymer4 1 8 1 7 0 533 2801 1113 41 -1 5 1 8 1 7 1 533 2801 176 36 96.283737 productions 1 8 1 7 2 723 2803 100 28 96.369614 would5 1 8 1 7 3 836 2803 36 29 96.888992 be5 1 8 1 7 4 886 2804 156 29 96.823692 economics 1 8 1 7 5 1055 2805 47 28 97.000015 for5 1 8 1 7 6 1114 2806 53 28 97.009750 Air5 1 8 1 7 7 1179 2806 167 30 78.160156 Products. Fisher, CX208C.

Opinion 115 F.T.C.

copolymer capacity and drive price down to a level that would make entry unprofitable. Boyer, CX185G. Mr. Flammer of Vista Polymers and Mr. Hill of Keysor-Century also testified that additional copolymer capacity would be economically5 1 3 1 4 6 1526 807 246 46 96.778908 impractical, because of declining demand. CX184D; CX183F Jn Camera. Mr. Bailey of Occidental said that there5 1 3 1 6 5 1231 923 30 34 96.440369 is5 1 3 1 6 6 1286 934 46 24 96.979561 no5 1 3 1 6 7 1357 923 189 36 96.156509 economics 1 3 1 6 8 1570 924 136 36 96.447731 benefits 1 3 1 6 9 1730 931 36 29 96.771400 to5 1 3 1 6 10 1789 926 201 46 96.573616 producing4 1 3 1 7 0 652 980 1335 47 -1 5 1 3 1 7 1 652 980 212 46 96.608139 copolymer5 1 3 1 7 2 879 991 38 25 96.581863 as5 1 3 1 7 3 933 980 163 46 96.302711 opposed5 1 3 1 7 4 1112 987 36 29 96.877190 to5 1 3 1 7 5 1164 981 305 46 93.234573 homopolymer. JX1(IV), PX6 at 77. Mr.

Disch, who moved from Tenneco to Occidental, testified that demand for copolymer is not sufficient to attract new entry and predicted that expansion or conversion to produce copolymer might occur only if demand for copolymer were to increase over a period of years. JX1(IV), PX8 at 67 & 89-90.

Conversion of a suspension homopolymer plant to produce both homopolymer and copolymer also is unattractive, because of the costs of switching production between the two products. These costs result from the problem of cross-contamination between the two products and from the downtime required to clean the production system before beginning production of a different product.** Mr. Fisher testified that Air Products would not swing its production capacity between homopolymer and copolymer because of the additional costs involved: product contamination could reduce the saleability or the price of resins, and production of copolymer could reduce the overall capacity of the plant by 20% to 30%. CX208C-D.** Mr. Boyer of Formosa testified that copolymer production had5 1 3 2 13 3 978 2040 43 25 96.987228 an5 1 3 2 13 4 1036 2030 135 35 94.151329 overall5 1 3 2 13 5 1187 2030 165 46 96.763512 negatives 1 3 2 13 6 1367 2030 132 46 96.784622 impacts 1 3 2 13 7 1514 2041 46 24 96.998505 on5 1 3 2 13 8 1576 2031 58 35 96.752014 thes 1 3 2 13 9 1649 2031 204 46 96.743065 operations5 1 3 2 13 10 1869 2031 43 36 96.915680 of5 1 3 2 13 11 1924 2032 57 35 96.824570 thea 1 3 2 14 0 643 2088 1338 48 -1 5 1 3 2 14 1 643 2088 130 46 95.646408 plant, because problems with contamination resulted in off-grade >? Tenneco (at Burlington), Occidental (at Pottstown) and Borden have swing capacity to produce either copolymer or specialty homopolymer resins. Switching is costly. Switching between copolymer and homopolymer requires closing down and thoroughly cleaning the reactors, dryers and other equipment. Tenneco estimates the downtime for each production switch is about 8 hours. JXI(III), PX18 at 50. Downtime for product changeovers at Occidental's Pottstown plant in 1984 “amount[ed] to 13.9 [million] pounds of lost production." RX230A In Camera. 33 This estimate appears to be consistent with Occidental's experience at Pottstown. See note 32 supra. Mr. Lull of Occidental testified that the number of different resins produced at a plant should be reduced to “absolutely minimize down time, maximize productivity and decrease costs." JX1(I), Tr. 548 & 526; See also JXICID, PX15 at 21; RX230A Jn Camera.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1229 1010 Opinion batches of both homopolymer and copolymer, reducing the value of total plant output. CX185G. Mr. Hornack of Vygen said that switching production between homopolymer and copolymer is not economically feasible, because of the loss of production and because any contaminated copolymer is a total loss. According to Mr. Hornack, contaminated homopolymer can be sold as an off-grade product at a price 20% to 30% below that of prime resin, but contaminated copolymer cannot be sold at any price. CX182D In Camera.™ The record shows that conversion of a homopolymer plant to produce copolymer is costly and time-consuming and that such conversion is unlikely to occur within one year in response to an increase in the price of copolymer. We hold that supply-side considerations do not warrant including capacity devoted to the production of suspension homopolymer resin in measuring the suspension PVC copolymer market.

B. Geographic Market The relevant geographic market includes those suppliers that constrain the ability of the merged firm to raise price or restrict output, i.e., those firms to which buyers could turn in the event of a price increase. FTC v. Elders Grain Inc., 868 F.2d 901, 907 (7th Cir. 1989); Hospital Corporation of America 106 FTC 361, 466 (1985), aff'd, 807 F.2d 1381 (7th Cir. 1986), cert. denied, 481 U.S. 1038 (1987). Price movements, shipping patterns, transportation costs and 34 Contamination may continue to occur long after a production line switch. Occidental experienced contamination in the first 5 to 8 batches of copolymer after switching from homopolymer. RX94C In Camera (a batch of copolymer is about 13,000 pounds; the reactor cycle for a batch is 12 to 15 hours, JX1(1), PX18, Ex.16-H(2) at 2-3). Occidental identified a5 1 8 1 4 7 1343 2457 98 30 96.612747 whole5 1 8 1 4 8 1462 2457 67 28 96.133850 hosts 1 8 1 4 9 1550 2455 34 30 96.963593 of5 1 8 1 4 10 1603 2453 211 40 90.821213 possibilities for contamination on swing equipment, including reactors, drop lines and stripping vessels, blend tanks, dryer feed lines and dryers, dust collectors, conveying systems, silos, loading lines and railcars or trucks. In June 1985, Occidental noted that “contamination is a real problem and we must eliminate it in future shipments." CX72: See also CX73; CX124-126 In Camera. In January 1986, Occidental attributed its failure to meet 1985 copolymer sales goals to its inability5 1 8 1 10 13 1734 2749 30 24 96.315125 to5 1 8 1 10 14 1777 2743 106 38 96.941193 supply4 1 8 1 11 0 549 2794 1088 42 -1 5 1 8 1 11 1 549 2803 261 30 96.254959 uncontaminated5 1 8 1 11 2 823 2802 102 28 90.450821 resin. CX60 (copolymer sales 20% below plan).

Opinion 115 F.T.C.

the existence of excess capacity outside the tentatively identified geographic market are relevant to identify the geographic market. Elders Grain Inc., 868 F.2d at 906-07; Goodrich, 110 FTC at 289: Hospital Corporation of America, 106 FTC at 466-69. The administrative law judge concluded that the relevant geographic market for each of the three relevant products is the United States. I.D.F. 147, 154 & 165. Occidental claims that the relevant geographic market for mass and suspension PVC is5 1 3 2 4 10 1927 1070 33 29 94.482643 at5 1 3 2 4 11 1979 1075 19 24 94.482643 a4 1 3 2 5 0 661 1109 1336 49 -1 5 1 3 2 5 1 661 1109 202 43 96.018822 minimum,5 1 3 2 5 2 887 1112 114 35 96.544670 North5 1 3 2 5 3 1024 1113 199 36 74.546417 America. R.A.B. at 21 n.17. Occidental also claims that imports of dispersion PVC and the ability of foreign producers to increase imports in the event of a noncompetitive price increase show that the market for dispersion PVC is broader than the United States. R.A.B. at 11 & 72-80.

1. PVC Imports The Commission observed in Goodrich that imports5 1 5 1 1 8 1781 1587 57 24 95.959496 ares 1 5 1 1 9 1853 1588 20 23 95.959496 a5 1 5 1 1 10 1888 1579 101 34 94.039795 small4 1 5 1 2 0 653 1626 1336 57 -1 5 1 5 1 2 1 653 1626 205 46 96.989967 proportions 1 5 1 2 2 874 1627 42 36 96.551247 of5 1 5 1 2 3 926 1628 174 36 96.913605 domestic5 1 5 1 2 4 1115 1629 93 36 96.596420 PVC5 1 5 1 2 5 1223 1632 250 45 96.789452 consumption5 1 5 1 2 6 1489 1633 79 41 96.620445 and,5 1 5 1 2 7 1585 1633 124 36 96.641670 absent5 1 5 1 2 8 1723 1635 266 48 96.739822 extraordinary4 1 5 1 3 0 652 1686 1337 52 -1 5 1 5 1 3 1 652 1686 214 41 96.533478 conditions,5 1 5 1 3 2 883 1687 46 35 96.712181 do5 1 5 1 3 3 943 1694 61 28 96.800117 not5 1 5 1 3 4 1019 1698 129 36 96.838799 appears 1 5 1 3 5 1162 1695 35 29 96.838799 to5 1 5 1 3 6 1212 1690 176 35 96.748932 constrain5 1 5 1 3 7 1404 1692 173 35 96.937416 domestic5 1 5 1 3 8 1592 1693 145 45 65.973679 prices. 110 FTC at 300. In the intervening years, PVC imports to the United States have remained only a minor part of total domestic supply. Despite a strong price increase for PVC in the United States between 1984 and 1988 (from 23 cents per pound in November 1984 to 40 cents per pound in January 1988), imports declined from between approximately 4% and 5% of domestic supply in 1984-1985 to 2.7% of domestic supply in 1986 and to 1.5% of domestic supply in the period from December 1986 through November 1987. I.D.F. 119-24 (portion Jn Camera); See 1.D. at 36-37 (charts).*° By mid-1986, imports of PVC to the United States had plunged and exports had soared. RXI64A; RX22A In Camera; RX23F In Camera.

> One approach for identifying geographic markets suggests that an area is a strong5 1 7 1 2 3 804 2618 127 29 93.408684 market if imports and exports are less than 10% of supply. Elzinga & Hogarty, Thes 1 7 1 3 3 883 2666 133 29 96.979782 Problems 1 7 1 3 4 1027 2667 35 29 96.993965 of5 1 7 1 3 5 1070 2667 186 39 97.011032 Geographic5 1 7 1 3 6 1267 2668 114 30 97.019104 Markets 1 7 1 3 7 1392 2669 184 31 96.793732 Delineation5 1 7 1 3 8 1589 2671 27 29 93.256302 in5 1 7 1 3 9 1629 2671 184 39 93.136513 Antimerger5 1 7 1 3 10 1824 2672 102 34 81.524269 Suits, 18 Antitrust Bull. 45, 75 (1973); Thes 1 7 1 4 7 1249 2716 135 30 96.431129 Problems 1 7 1 4 8 1401 2717 35 29 96.680870 of5 1 7 1 4 9 1449 2718 189 39 96.522949 Geographic5 1 7 1 4 10 1655 2719 116 30 96.815933 Markets 1 7 1 4 11 1788 2720 189 30 96.981125 Delineation4 1 7 1 5 0 641 2762 1336 41 -1 5 1 7 1 5 1 641 2762 160 30 96.737968 Revisited:5 1 7 1 5 2 814 2763 62 28 95.920792 Thes 1 7 1 5 3 889 2763 76 29 97.013763 Cases 1 7 1 5 4 977 2763 36 29 97.013763 of5 1 7 1 5 5 1021 2764 99 34 91.602036 Coal, 23 Antitrust Bull. 1 (1978). Under this standard, the United States clearly is a relevant geographic market for PVC. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1231 1010 Opinion The relative increase in PVC imports in 1984 and 1985 -although imports were still only a minor part of total domestic supply -- appears to have been related to currency exchange rate fluctuations that had the effect of increasing the price of PVC in the United States as compared to foreign prices.*° Goodrich, 110 FTC at 300; I.D.F. 140-41, I.D. at 45; CX174D; RX2IL; RX168Z42 In Camera; JX1-4, PX104 at E-4; See Schaefer, JX3, PX10 at 1130; Stevens, JX3, PX9 at 59; Disch, JX3, PX8 at 90; JX1-4, DX13 at 2 In Camera. This suggests, as Occidental claims, that imports are responsive to domestic price increases, but the degree of responsiveness does not appear sufficient to defeat a collusive price increase in the United States. The increased value of the dollar relative to other currencies between 1980 and 1984 in effect increased domestic PVC prices by 66%, as compared to foreign prices. Goodrich, 110 FTC at 300; LD.F. 137. Even with the combined effects of this price increase and the weather-related domestic shortages, See note 36 supra, imports of mass and suspension homopolymer PVC in 1984 were less than 3.8% of total U.S. supply, suggesting that a collusive price increase by domestic producers would be profitable. I.D.F. 137-41.” An analysis by complaint counsel’s expert witness confirms that imports are not likely to be sufficiently responsive to price changes to defeat the profitability of a domestic price increase. Kaserman, JXI(), Tr. 296-303; JX1-4, PX141. According to complaint counsel's expert witness, a 10% increase in domestic prices would generate only a 20% increase in imports: for example, if imports were 5% of domestic supply, a 10% domestic price increase would © In Goodrich, the Commission attributed the increase in imports in 1984 to exchange rate fluctuations and to domestic shortages resulting from severe weather conditions in 1983-84 that closed several domestic PVC plants. 110 FTC at 300. 37 The value of the dollar against other currencies, as measured by the Federal Reserve Board, continued to increase in the first quarter of 1985 and then fell below 1984 levels in the last quarter of 1985. CXI74B & C. Imports of PVC were greatest in the last quarter of 1984 and the first quarter of 1985, when the value of the dollar was highest, and imports declined thereafter as the dollar fell. See I.D. at 45 (chart). A regression analysis prepared by Tenneco in 1985 also found a strong correlation between the value of the dollar and imports of PVC. JX1-4, DX13 at 3-9 In Camera; See 1.D.F. 116 In Camera. Opinion 115 F.T.C.

increase imports to only 6% of domestic supply. JX1-4, PX141; .D.F. 114-17. Applying this analysis, for 1987, when imports were only 1.5% of domestic supply, a 10% domestic price increase would increase imports to only about 1.8% of domestic supply. I.D.F. 117. This clearly would be insufficient to constrain a domestic price increase.

Other considerations limit the ability of imports to constrain domestic prices. Tariff and transportation costs may make imports uneconomic. E.g., CXl4; CX46A; JX1-4, DX13Z In Camera. Imports of PVC from most countries are subject to a 10.1% tariff. I.D.F. 143 (portion Jn Camera). Except for imports from Mexico and Canada, imported PVC faces freight costs for ocean transportation. Mexico and Canada have been the principal sources of imports into the United States. In 1986 and the first half of 1987, duty-free imports from Mexico accounted for 45% to 60% of all PVC imports, but these imports diminished considerably with the elimination of duty-free status for imports from Mexico. I.D.F. 126. Canada accounted for about 45% of imports of PVC in 1985. I.D.F. 127. The principal source of these imports is B.F. Goodrich, a leading domestic producer of PVC, the largest producer in Canada and a major producer in Mexico. /d. We agree with the administrative law judge that Goodrich has few incentives to undermine a domestic price increase by increasing imports from its Canadian and Mexican plants. See Goodrich, 110 FTC at 300-01; I.D.F. 127-28 (portion Jn Camera).® In addition, the ability of PVC producers to export is limited by demand for PVC in their home markets. For example, by the end of 1986 and through 1987, PVC was in short supply worldwide. Lull, RX1Q In Camera; I.D.F. 129 (portion In Camera); RX310D & E. Suppliers in the United States and elsewhere were rationing PVC to *8 As the administrative law judge pointed out, including Goodrich's Mexican and Canadian plants in the domestic market does not change market share and concentration data in any meaningful way. I.D.F. 126-28 (portion Jn Camera). OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1233 1010 Opinion their domestic customers, and little PVC was available for export.*? In general, domestic and foreign producers of PVC sell in export markets on an opportunistic basis. Schaefer, J XI(I), Tr. 589 & JX1(IV), PX10 at 1208; Bailey, JX1(1V), PX6 at 29; Friedman, JX1(1), Tr. 135; CX44C; Harris, JX1d]), Tr. 915. Mr. Schaefer testified that export sales are the lasts 1 3 1 6 8 1325 907 140 45 96.939308 pounds5 1 3 1 6 9 1484 913 61 29 96.977165 outs 1 3 1 6 10 1563 906 42 36 96.833748 of5 1 3 1 6 11 1621 907 86 42 93.273430 [the]5 1 3 1 6 12 1727 900 161 52 25.782257 plant.'”°4 1 3 1 7 0 548 965 1338 46 -1 5 1 3 1 7 1 548 965 132 41 92.404472 JX1-4,5 1 3 1 7 2 696 965 135 35 92.207939 PX1365 1 3 1 7 3 847 971 34 29 96.711563 at5 1 3 1 7 4 901 965 77 35 93.020584 149.5 1 3 1 7 5 1009 965 84 35 96.488075 This5 1 3 1 7 6 1111 971 163 39 96.065163 suggests5 1 3 1 7 7 1291 965 72 35 96.809296 that5 1 3 1 7 8 1378 965 177 45 95.754189 imported5 1 3 1 7 9 1570 965 94 35 96.444069 PVC5 1 3 1 7 10 1679 965 30 35 96.444069 is5 1 3 1 7 11 1725 965 161 46 96.496971 unlikely4 1 3 1 8 0 549 1022 1089 46 -1 5 1 3 1 8 1 549 1029 35 28 96.578506 to5 1 3 1 8 2 599 1022 150 46 96.828346 provides 1 3 1 8 3 765 1034 19 24 96.242538 a5 1 3 1 8 4 799 1023 113 35 96.375679 stable5 1 3 1 8 5 928 1033 126 25 96.824280 sources 1 3 1 8 6 1069 1022 43 36 96.222221 of5 1 3 1 8 7 1123 1023 128 45 96.592934 supply5 1 3 1 8 8 1267 1022 57 36 96.898560 for5 1 3 1 8 9 1338 1022 176 36 96.824265 domestic5 1 3 1 8 10 1528 1033 110 25 96.740097 users.3 1 3 2 0 0 545 1080 1342 558 -1 4 1 3 2 1 0 623 1080 1264 47 -1 5 1 3 2 1 1 623 1080 113 36 96.960793 Others 1 3 2 1 2 757 1081 174 35 96.296577 evidences 1 3 2 1 3 954 1081 173 35 96.296577 indicates5 1 3 2 1 4 1151 1081 72 35 96.586983 that5 1 3 2 1 5 1246 1081 148 46 96.111633 imports5 1 3 2 1 6 1417 1081 91 35 96.891388 have5 1 3 2 1 7 1531 1088 63 28 96.330269 not5 1 3 2 1 8 1615 1082 91 34 96.662315 been5 1 3 2 1 9 1730 1092 20 25 96.662315 a5 1 3 2 1 10 1772 1081 115 46 96.514000 major4 1 3 2 2 0 547 1139 1339 46 -1 5 1 3 2 2 1 547 1139 163 36 96.530334 restraints 1 3 2 2 2 732 1150 46 25 96.847794 on5 1 3 2 2 3 801 1139 176 36 96.690407 domestic5 1 3 2 2 4 999 1139 128 46 96.588928 prices.5 1 3 2 2 5 1169 1140 69 35 96.069275 Mr.5 1 3 2 2 6 1263 1139 171 36 96.634773 Schaefer5 1 3 2 2 7 1455 1139 158 36 96.696770 testified5 1 3 2 2 8 1635 1139 36 36 95.872009 in5 1 3 2 2 9 1698 1139 92 37 95.905243 19865 1 3 2 2 10 1813 1139 73 36 96.792847 that4 1 3 2 3 0 548 1198 1335 46 -1 5 1 3 2 3 1 548 1198 147 45 96.410217 imports5 1 3 2 3 2 710 1199 68 34 97.001480 had5 1 3 2 3 3 793 1205 61 28 96.445595 not5 1 3 2 3 4 868 1199 126 44 95.987328 placed5 1 3 2 3 5 1008 1209 162 34 96.470238 pressures 1 3 2 3 6 1184 1209 46 24 93.281998 on5 1 3 2 3 7 1246 1199 239 34 86.338493 Occidental's5 1 3 2 3 8 1501 1199 94 34 96.067154 PVC5 1 3 2 3 9 1609 1199 128 45 93.300674 prices,5 1 3 2 3 10 1752 1199 131 40 90.689362 JX1-4,4 1 3 2 4 0 547 1255 1337 47 -1 5 1 3 2 4 1 547 1255 136 35 91.478088 PX1365 1 3 2 4 2 701 1262 33 28 96.926117 at5 1 3 2 4 3 757 1256 78 40 95.876770 145,5 1 3 2 4 4 854 1256 69 35 96.671883 ands 1 3 2 4 5 941 1256 72 35 96.552841 that5 1 3 2 4 6 1030 1256 211 35 96.294357 Occidental5 1 3 2 4 7 1261 1256 87 35 96.745407 does5 1 3 2 4 8 1367 1263 61 28 96.998039 not5 1 3 2 4 9 1445 1256 98 35 96.303520 tracks 1 3 2 4 10 1560 1256 92 36 96.388779 PVC5 1 3 2 4 11 1670 1256 214 46 96.388779 production4 1 3 2 5 0 547 1313 1336 43 -1 5 1 3 2 5 1 547 1313 139 36 96.434830 outside5 1 3 2 5 2 701 1314 57 35 96.619949 thes 1 3 2 5 3 773 1313 131 36 96.731750 United5 1 3 2 5 4 919 1314 124 35 93.031822 States.5 1 3 2 5 5 1071 1315 137 41 45.578152 JX1(1),5 1 3 2 5 6 1224 1315 54 34 96.203072 Tr.5 1 3 2 5 7 1295 1315 147 35 96.372681 577-78.5 1 3 2 5 8 1471 1315 37 34 95.110558 In5 1 3 2 5 9 1524 1315 169 41 95.110558 addition,5 1 3 2 5 10 1708 1315 175 35 96.248039 domestic4 1 3 2 6 0 547 1372 1338 47 -1 5 1 3 2 6 1 547 1372 93 35 96.140320 PVC5 1 3 2 6 2 661 1372 129 46 95.907639 supply5 1 3 2 6 3 811 1379 175 28 95.866402 contracts5 1 3 2 6 4 1007 1373 171 45 96.738640 typically5 1 3 2 6 5 1198 1373 91 34 96.733215 limits 1 3 2 6 6 1308 1373 58 35 96.847893 thes 1 3 2 6 7 1386 1373 198 46 96.229889 obligations 1 3 2 6 8 1604 1380 36 29 96.576141 to5 1 3 2 6 9 1659 1380 95 28 96.707619 meets 1 3 2 6 10 1773 1374 112 35 96.815605 lower4 1 3 2 7 0 546 1430 1336 47 -1 5 1 3 2 7 1 546 1430 113 45 97.002792 prices5 1 3 2 7 2 673 1437 37 28 96.858330 to5 1 3 2 7 3 722 1431 114 45 96.499138 prices5 1 3 2 7 4 850 1430 138 36 96.511139 offered5 1 3 2 7 5 1001 1431 46 45 96.210022 by5 1 3 2 7 6 1062 1431 171 35 96.454132 domestic5 1 3 2 7 7 1247 1431 200 45 96.677696 producers,5 1 3 2 7 8 1462 1431 173 46 96.274246 implying5 1 3 2 7 9 1649 1432 71 35 96.850922 that5 1 3 2 7 10 1733 1431 99 36 96.085022 firms5 1 3 2 7 11 1847 1431 35 35 96.085022 in4 1 3 2 8 0 547 1488 1336 46 -1 5 1 3 2 8 1 547 1488 58 33 96.722031 thes 1 3 2 8 2 625 1488 176 34 96.446899 domestic5 1 3 2 8 3 822 1488 136 34 96.833504 markets 1 3 2 8 4 977 1488 46 35 96.885185 do5 1 3 2 8 5 1043 1494 62 28 96.373604 not5 1 3 2 8 6 1124 1489 124 44 95.951057 regards 1 3 2 8 7 1268 1489 175 44 95.951057 imported5 1 3 2 8 8 1463 1489 94 35 96.688812 PVC5 1 3 2 8 9 1578 1500 37 24 96.856956 as5 1 3 2 8 10 1618 1484 23 54 96.675323 a5 1 3 2 8 11 1675 1489 208 45 96.620659 significant4 1 3 2 9 0 545 1546 1335 45 -1 5 1 3 2 9 1 545 1546 233 45 96.035507 competitive5 1 3 2 9 2 800 1557 182 34 92.707680 presence.5 1 3 2 9 3 1026 1547 89 44 38.450508 E.g.,5 1 3 2 9 4 1140 1547 185 41 86.795647 CX112C;5 1 3 2 9 5 1348 1548 130 40 90.316513 JX1-4,5 1 3 2 9 6 1503 1547 110 36 91.321732 PX945 1 3 2 9 7 1636 1554 33 29 96.985931 at5 1 3 2 9 8 1692 1548 34 41 96.667755 2;5 1 3 2 9 9 1750 1547 130 42 96.389297 Lewis,4 1 3 2 10 0 546 1598 212 40 -1 5 1 3 2 10 1 546 1598 212 40 61.061356 CX204B.*!3 1 3 3 0 0 544 1662 1338 222 -1 4 1 3 3 1 0 619 1662 1263 48 -1 5 1 3 3 1 1 619 1662 184 45 96.271484 Although5 1 3 3 1 2 819 1673 101 25 96.532066 some5 1 3 3 1 3 935 1662 176 36 96.601372 domestic5 1 3 3 1 4 1127 1663 93 35 96.264458 PVC5 1 3 3 1 5 1235 1670 197 28 96.532722 customers5 1 3 3 1 6 1448 1663 91 35 96.765694 have5 1 3 3 1 7 1554 1664 135 46 96.762459 bought5 1 3 3 1 8 1705 1664 177 46 96.648468 imported4 1 3 3 2 0 544 1719 1336 49 -1 5 1 3 3 2 1 544 1719 93 36 96.695580 PVC5 1 3 3 2 2 651 1719 93 36 96.241600 from5 1 3 3 2 3 758 1720 84 35 96.822304 times 1 3 3 2 4 856 1727 36 28 96.999962 to5 1 3 3 2 5 906 1720 95 41 96.914093 time,5 1 3 3 2 6 1016 1721 35 34 96.709770 in5 1 3 3 2 7 1066 1722 152 44 96.449654 general,5 1 3 3 2 8 1234 1722 81 45 97.009361 they5 1 3 3 2 9 1330 1722 139 34 96.560555 declines 1 3 3 2 10 1483 1728 35 28 96.336189 to5 1 3 3 2 11 1531 1722 75 45 96.997810 rely5 1 3 3 2 12 1620 1733 46 24 96.167999 on5 1 3 3 2 13 1680 1722 147 46 95.940155 imports5 1 3 3 2 14 1843 1733 37 24 96.960442 as4 1 3 3 3 0 544 1779 1337 47 -1 5 1 3 3 3 1 544 1788 19 24 85.196609 a5 1 3 3 3 2 575 1779 138 44 85.196609 regular5 1 3 3 3 3 724 1789 124 24 96.829521 sources 1 3 3 3 4 861 1779 41 34 96.972717 of5 1 3 3 3 5 912 1779 126 45 96.758202 supply5 1 3 3 3 6 1051 1779 151 35 96.737892 because5 1 3 3 3 7 1216 1779 41 35 96.712730 of5 1 3 3 3 8 1267 1780 56 35 96.953552 thes 1 3 3 3 9 1336 1780 88 35 96.950424 needs 1 3 3 3 10 1438 1780 56 35 96.811081 for5 1 3 3 3 11 1505 1780 121 45 96.235107 timely5 1 3 3 3 12 1640 1781 67 34 96.694443 ands 1 3 3 3 13 1720 1781 161 45 96.890167 frequent4 1 3 3 4 0 544 1836 1332 48 -1 5 1 3 3 4 1 544 1836 202 41 96.449142 deliveries,5 1 3 3 4 2 777 1836 197 36 96.513504 consistent5 1 3 3 4 3 1003 1837 134 45 96.292274 quality5 1 3 3 4 4 1169 1837 67 35 95.998955 ands 1 3 3 4 5 1267 1838 175 34 95.998955 technical5 1 3 3 4 6 1474 1844 156 40 96.109230 support.5 1 3 3 4 7 1689 1839 74 39 91.789612 See,5 1 3 3 4 8 1798 1851 78 33 91.622177 e.g.,2 1 4 0 0 0 542 1941 594 12 -1 3 1 4 1 0 0 542 1941 594 12 -1 4 1 4 1 1 0 542 1941 594 12 -1 5 1 4 1 1 1 542 1941 594 12 95.000000 2 1 5 0 0 0 544 1986 1337 196 -1 3 1 5 1 0 0 544 1986 1337 196 -1 4 1 5 1 1 0 618 1986 1263 51 -1 5 1 5 1 1 1 618 1986 27 21 26.779877 °5 1 5 1 1 2 703 1998 31 29 73.505783 In5 1 5 1 1 3 754 1998 83 37 96.070892 April5 1 5 1 1 4 861 1998 85 34 96.562393 1987,5 1 5 1 1 5 965 1998 77 30 94.281708 PVC5 1 5 1 1 6 1061 2007 61 21 94.281708 was5 1 5 1 1 7 1143 1999 65 29 67.429474 red hot": “Producers have had to put their customers on sales control to make sure all their customers were given their fair share of available production," and foreign buyers offering 5 cents per pound over domestic PVC prices found few5 1 5 1 4 6 1098 2144 120 29 87.973816 takers. CX31G & H. 40° Mr. Schaeffer explained that U.S. producers typically sell at lower prices in export markets to covers 1 6 1 2 6 1015 2292 26 4 66.905228 ..5 1 6 1 2 7 1061 2292 2 4 68.064224 .5 1 6 1 2 8 1080 2268 129 28 96.852318 variables 1 6 1 2 9 1223 2273 80 23 96.775398 costs5 1 6 1 2 10 1318 2268 56 28 96.849091 ands 1 6 1 2 11 1388 2272 48 33 96.934433 gets 1 6 1 2 12 1451 2268 168 37 96.325874 something5 1 6 1 2 13 1633 2273 81 23 95.943138 extras 1 6 1 2 14 1727 2268 84 28 82.163170 back.5 1 6 1 2 15 1829 2292 27 4 79.277512 ..5 1 6 1 2 16 1873 2292 5 4 79.277512 .4 1 6 1 3 0 543 2316 1336 38 -1 5 1 6 1 3 1 543 2316 86 33 96.915428 Now,5 1 6 1 3 2 643 2316 25 29 95.599579 if5 1 6 1 3 3 677 2317 36 28 96.387520 he5 1 6 1 3 4 729 2317 26 34 92.153313 [a5 1 6 1 3 5 768 2316 78 30 96.949814 PVC5 1 6 1 3 6 859 2316 156 38 95.930511 producer]5 1 6 1 3 7 1030 2317 106 28 96.984795 started5 1 6 1 3 8 1151 2316 106 37 96.934608 selling5 1 6 1 3 9 1270 2317 123 37 96.457520 products 1 6 1 3 10 1406 2322 27 23 96.922821 at5 1 6 1 3 11 1446 2316 48 29 96.891541 thes 1 6 1 3 12 1508 2325 81 20 96.011292 same5 1 6 1 3 13 1602 2316 80 38 96.961304 prices 1 6 1 3 14 1695 2316 29 29 96.961304 in5 1 6 1 3 15 1737 2316 48 29 93.126404 thes 1 6 1 3 16 1798 2316 81 33 91.313362 U.S.,4 1 6 1 4 0 542 2364 1338 38 -1 5 1 6 1 4 1 542 2360 58 46 95.936996 he's5 1 6 1 4 2 614 2364 57 38 96.534470 just5 1 6 1 4 3 683 2364 90 38 96.534470 going5 1 6 1 4 4 785 2369 30 24 96.967995 to5 1 6 1 4 5 827 2364 131 38 96.714096 collapse5 1 6 1 4 6 971 2364 47 29 96.417381 thes 1 6 1 4 7 1030 2364 97 29 96.417381 whole5 1 6 1 4 8 1143 2364 166 36 96.546822 [domestic]5 1 6 1 4 9 1323 2364 113 38 96.846497 pricing5 1 6 1 4 10 1449 2369 139 24 93.063873 structures 1 6 1 4 11 1602 2388 5 5 58.877174 .5 1 6 1 4 12 1622 2388 4 5 58.877174 .5 1 6 1 4 13 1645 2388 2 6 84.759972 .5 1 6 1 4 14 1662 2364 56 29 96.989929 ands 1 6 1 4 15 1733 2364 63 29 96.049911 loses 1 6 1 4 16 1810 2373 16 20 96.049911 a5 1 6 1 4 17 1838 2364 42 29 96.533096 lot4 1 6 1 5 0 542 2412 1337 39 -1 5 1 6 1 5 1 542 2412 35 30 96.212982 of5 1 6 1 5 2 586 2413 133 36 78.216324 money. JX1-4, PX136 at 149. According to one industry journal, Oxy5 1 6 1 5 13 1787 2413 92 29 96.714172 chose4 1 6 1 6 0 542 2461 1335 38 -1 5 1 6 1 6 1 542 2466 30 24 96.468452 to5 1 6 1 6 2 589 2470 74 29 96.374352 pour5 1 6 1 6 3 679 2461 77 29 96.374352 PVC5 1 6 1 6 4 773 2461 62 29 96.312599 into5 1 6 1 6 5 851 2466 103 33 96.586998 exports 1 6 1 6 6 971 2461 142 29 86.295692 markets instead of cutting price in the United States. CX44C (Chemical Business, Feb. 1987).

“| The differences between domestic and export prices also are consistent with the conclusion that the United States is a relevant geographic market. See, e.g., RX299H. Domestic producers usually sell in export markets at a lower price than they could obtain domestically. Schaeffer, JX1-4, PX136 at 147; See JX1(1), Tr. 569.

Opinion 115 F.T.C, Pflugrath, CX177C In Camera; Dellevigne, CX188D; Baker, CX205B; Gmach, CX200D; Wilhite, CX179D; Weimar, RX249A-B & CX192F; Goldstein, CX180C; CX15; Friedman, CX120H-J Jn Camera; Lewis, CX204B. Delivery from overseas can be unpredictable, and shipments can be delayed in customs. Weekly or biweekly deliveries, which some customers require, are virtually impossible from overseas; larger volume import shipments would mean increased storage costs. Domestic PVC usually is shipped in bulk; imported PVC usually is shipped in bags, which imposes additional handling costs.** Some customers have found that imported resin is not of comparable or consistent quality, and foreign producers are not in a position to offer technical assistance to domestic purchasers or to replace a low grade shipment in a timely manner. See Friedman, JX1(D, Tr. 134-35 & 150; Mason, JX1(1), Tr. 196; Schaefer, JX1-4, PX136 at 148. For these reasons, foreign producers do not provide an alternative to domestic suppliers for regular, long-term supplies of Pvc.* 2. Dispersion PVC Imports The administrative law judge found that imports of dispersion PVC are a minor factor in the United States, that neither domestic producers nor customers regard imports of dispersion PVC as a significant source of supply and that domestic producers have been 2 The additional cost of bagging PVC would not apply to dispersion PVC, which almost always is shipped in bags.

43 In 1988, fourteen European PVC producers were found by the European Commission to have fixed prices for PVC between 1980 and 1984. Decision of 21 December 1988, 32 O.J. Eur. Comm. (No. L74) 1 (1989). The Commission has appealed the nullification of its decision (vacated on procedural grounds sub nom. BASF AG v. Commission (EC Ct. Ist Inst. Feb. 27, 1992), reported in 62 Antitrust & Trade Reg. Rep. (BNA) 294 (1992), appeal pending, reported in EC4 1 9 1 6 0 647 2567 1337 44 -1 5 1 9 1 6 1 647 2573 206 31 96.318535 Commissions 1 9 1 6 2 867 2572 102 39 96.481285 Opens5 1 9 1 6 3 983 2572 75 29 96.878517 News 1 9 1 6 4 1072 2572 93 28 96.394028 Probe5 1 9 1 6 5 1179 2570 35 30 96.901871 of5 1 9 1 6 6 1224 2570 97 29 96.936111 Cartel5 1 9 1 6 7 1335 2569 149 30 96.892685 Behavior5 1 9 1 6 8 1497 2569 29 29 96.612312 in5 1 9 1 6 9 1539 2569 77 29 96.732674 PVC5 1 9 1 6 10 1630 2568 142 33 72.303421 Market,”5 1 9 1 6 11 1787 2567 38 30 96.997231 635 1 9 1 6 12 1840 2567 144 29 96.827072 Antitrust4 1 9 1 7 0 648 2615 1336 44 -1 5 1 9 1 7 1 648 2623 28 29 93.259781 &5 1 9 1 7 2 688 2622 93 29 96.288651 Trades 1 9 1 7 3 793 2622 73 37 96.488823 Reg.5 1 9 1 7 4 880 2621 72 38 96.662033 Rep.5 1 9 1 7 5 967 2620 109 36 96.842491 (BNA)5 1 9 1 7 6 1093 2619 109 30 93.213692 179-805 1 9 1 7 7 1215 2618 125 36 92.756180 (1992)).5 1 9 1 7 8 1354 2618 43 29 96.978928 To5 1 9 1 7 9 1409 2618 48 29 96.988098 thes 1 9 1 7 10 1468 2623 97 24 96.792030 extent5 1 9 1 7 11 1578 2617 66 38 96.977242 they5 1 9 1 7 12 1657 2617 75 29 96.928436 have5 1 9 1 7 13 1744 2626 16 19 96.211914 a5 1 9 1 7 14 1772 2615 170 39 96.211914 propensity5 1 9 1 7 15 1954 2620 30 24 96.982498 to4 1 9 1 8 0 647 2665 1337 44 -1 5 1 9 1 8 1 647 2671 43 30 96.811134 fix5 1 9 1 8 2 706 2671 97 38 96.519707 prices5 1 9 1 8 3 817 2679 34 20 97.002762 or5 1 9 1 8 4 863 2676 30 23 96.730675 to5 1 9 1 8 5 908 2670 104 28 96.093285 follows 1 9 1 8 6 1027 2677 36 21 96.804794 an5 1 9 1 8 7 1078 2668 253 37 96.663757 anticompetitive5 1 9 1 8 8 1345 2667 79 38 96.976593 prices 1 9 1 8 9 1440 2667 140 32 96.767853 increase,5 1 9 1 8 10 1595 2666 155 38 96.693237 European5 1 9 1 8 11 1766 2665 84 29 96.693237 firms5 1 9 1 8 12 1865 2673 67 29 96.812553 may5 1 9 1 8 13 1947 2665 37 28 97.018570 be4 1 9 1 9 0 648 2713 1334 44 -1 5 1 9 1 9 1 648 2719 130 38 96.916519 unlikely5 1 9 1 9 2 791 2719 184 38 96.515228 guarantors of competition," Olin Corporation, Docket 9196, slip op. at 27 (June 13, 1990), aff'd, No. 90-70452 (9th Cir. Feb. 26, 1993), in the event of a collusive price increase in the United States. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1235 1010 Opinion able to increase the prices of dispersion resin without attracting any import response. He concluded that the United States is an appropriate relevant market for dispersion PVC. I.D.F. 155-65 (portion In Camera). Occidental asserts that this conclusion is incorrect, that foreign producers would5 1 3 1 5 6 1350 856 43 35 96.758827 be5 1 3 1 5 7 1408 856 303 46 95.965752 well-positioned5 1 3 1 5 8 1726 863 35 29 96.398285 to5 1 3 1 5 9 1776 857 113 35 96.655815 divert4 1 3 1 6 0 550 911 1337 49 -1 5 1 3 1 6 1 550 911 193 35 96.258896 additional5 1 3 1 6 2 757 911 200 46 96.274612 dispersion5 1 3 1 6 3 970 912 93 36 96.065605 PVC5 1 3 1 6 4 1076 919 36 29 96.222244 to5 1 3 1 6 5 1125 912 58 36 96.798470 thes 1 3 1 6 6 1196 913 131 35 97.016266 United5 1 3 1 6 7 1341 914 113 35 97.013153 States5 1 3 1 6 8 1468 913 31 36 96.218521 if5 1 3 1 6 9 1507 914 175 36 96.394287 domestic5 1 3 1 6 10 1695 915 192 45 96.684853 producers4 1 3 1 7 0 550 970 868 46 -1 5 1 3 1 7 1 550 970 193 45 96.280495 attempted5 1 3 1 7 2 759 976 35 29 96.476410 to5 1 3 1 7 3 809 970 161 36 96.809464 increases 1 3 1 7 4 984 971 147 45 81.675316 prices. R.A.B. at 76.

The volume of dispersion PVC imports to the United States must be estimated, because available data do not provide disaggregated information concerning dispersion PVC. Complaint counsel's expert witness estimated that 1985 imports of dispersion PVC were 36.1 million pounds or approximately 8% of total domestic supply. JX1-4, PX140, Table 24. This estimate was derived by including all imported PVC priced over 35 cents per pound.” Because this is a low price for dispersion PVC, this estimate may overstate actual imports.*° Occidental's estimate of imports of dispersion PVC, 30 to 40 million pounds, is similar and is similarly derived. See note 44 supra; 1.D.F. 155. Occidental's projections for dispersion imports in its 1985-88 Strategic Plan, 49 million pounds in 1985, 41 million pounds in 1986 and 46 million pounds in 1987, also are similar. JX1(II), DX12 at 102633 In Camera. And in October 1985, Occidental estimated that 1985 imports of dispersion PVC would be 38 million pounds and that 1986 imports would be 33 million pounds. JX1-4, PX76 at 351555-56. These estimates are consistent with “4 More precisely, complaint counsel's expert included as dispersion PVC imports5 1 6 1 1 2 690 2223 76 29 96.847252 from5 1 6 1 1 3 778 2224 147 29 96.502800 countries5 1 6 1 1 4 938 2224 46 29 96.531059 for5 1 6 1 1 5 995 2224 97 30 96.877541 which5 1 6 1 1 6 1105 2225 47 29 96.722610 thes 1 6 1 1 7 1165 2225 87 29 96.461395 values 1 6 1 1 8 1265 2225 36 29 96.423706 of5 1 6 1 1 9 1310 2226 122 37 96.039452 imports5 1 6 1 1 10 1445 2227 151 28 96.828667 exceeded5 1 6 1 1 11 1609 2226 89 32 96.817345 $0.355 1 6 1 1 12 1712 2236 52 29 96.754311 pers 1 6 1 1 13 1775 2228 102 37 96.749222 pound4 1 6 1 2 0 538 2270 1338 39 -1 5 1 6 1 2 1 538 2270 47 30 96.999550 for5 1 6 1 2 2 596 2271 47 29 96.743080 thes 1 6 1 2 3 655 2271 91 30 96.824837 entire5 1 6 1 2 4 758 2272 94 37 89.923401 year. JX1-4 PX140, Table 24; See R.R.B. at 76-77. The method is very similar to that used by Occidental. Sacks, JXI(IV), PX7 at 119-20 (Occidental estimate based on Departments 1 6 1 4 5 1052 2369 35 29 96.592674 of5 1 6 1 4 6 1095 2370 176 30 96.628723 Commerce5 1 6 1 4 7 1284 2370 145 35 96.856819 statistics,5 1 6 1 4 8 1442 2371 56 30 96.580582 ands 1 6 1 4 9 1510 2371 97 30 96.760597 which5 1 6 1 4 10 1619 2381 45 20 96.682106 we5 1 6 1 4 11 1675 2372 76 29 96.759621 have5 1 6 1 4 12 1762 2373 73 28 96.118912 tried5 1 6 1 4 13 1846 2377 30 24 97.012245 to4 1 6 1 5 0 538 2417 1338 41 -1 5 1 6 1 5 1 538 2417 59 29 96.686081 cull5 1 6 1 5 2 613 2417 90 30 96.727982 downs 1 6 1 5 3 717 2418 39 38 96.926437 by5 1 6 1 5 4 771 2418 57 29 96.389725 dues 1 6 1 5 5 843 2423 29 24 96.985168 to5 1 6 1 5 6 886 2423 124 34 96.723923 country5 1 6 1 5 7 1024 2418 36 30 96.790985 of5 1 6 1 5 8 1071 2418 95 39 96.697418 origin5 1 6 1 5 9 1181 2419 58 30 96.786598 ands 1 6 1 5 10 1253 2419 121 30 96.994331 relatives 1 6 1 5 11 1389 2420 80 38 96.651939 prices 1 6 1 5 12 1483 2420 93 30 96.868866 levels5 1 6 1 5 13 1591 2421 57 29 96.917305 ands 1 6 1 5 14 1663 2426 28 24 96.497398 et5 1 6 1 5 15 1705 2427 97 23 96.633934 cetera5 1 6 1 5 16 1816 2421 60 30 96.844963 that4 1 6 1 6 0 538 2466 1337 42 -1 5 1 6 1 6 1 538 2466 101 29 96.293549 would5 1 6 1 6 2 659 2466 126 38 96.246979 identify5 1 6 1 6 3 805 2467 47 29 96.429749 thes 1 6 1 6 4 871 2467 123 38 96.429749 products 1 6 1 6 5 1013 2476 32 21 96.768654 as5 1 6 1 6 6 1064 2467 167 39 96.547707 dispersion5 1 6 1 6 7 1250 2469 57 28 96.283501 ands 1 6 1 6 8 1325 2468 59 30 96.283501 feels 1 6 1 6 9 1403 2469 60 29 96.729149 that5 1 6 1 6 10 1482 2469 20 29 96.185966 it5 1 6 1 6 11 1521 2470 24 28 96.185966 is5 1 6 1 6 12 1564 2478 17 21 96.974884 a5 1 6 1 6 13 1599 2470 177 38 96.865158 reasonably5 1 6 1 6 14 1795 2470 80 38 96.535324 good4 1 6 1 7 0 537 2514 1341 41 -1 5 1 6 1 7 1 537 2514 136 30 96.368439 estimates 1 6 1 7 2 692 2515 30 29 96.989204 in5 1 6 1 7 3 740 2515 60 29 96.664192 that5 1 6 1 7 4 818 2515 39 30 96.823906 305 1 6 1 7 5 874 2521 30 24 95.879631 to5 1 6 1 7 6 920 2515 41 30 96.981430 405 1 6 1 7 7 978 2516 115 29 96.182060 millions 1 6 1 7 8 1111 2517 101 37 96.577347 pounds 1 6 1 7 9 1230 2518 128 37 95.242378 range). We find that the estimate of complaint counsel's expert is reasonable. “5 In 1985, Occidental's lowest mean actual sales price for dispersion PVC was 48.5 cents per pound (June 1985), JXI(III), PX15, Table 18A; Tenneco's mean selling price for dispersion PVC was about 47 cents per pound (June 1985), JXICID, PX18 at 39 & PX20 at 28.

Opinion 115 FT.C.

identifying the United States as the relevant geographic market for dispersion PVC.

Other evidence in the record is consistent with the conclusion that domestic prices for dispersion resin are not constrained by imports. In October 1986, after the acquisition of Tenneco, Occidental “embark[ed] upon a program to bring up the pricing" for low end dispersion resins by 2 cents to 4 cents per pound, about a 5% to 10% price increase. CX39-42. In June 1987, domestic producers increased the price of dispersion PVC by 3 cents per pound, CX205C, and Occidental observed that its dispersion5 1 3 2 8 7 1573 1177 165 36 96.915817 business5 1 3 2 8 8 1758 1180 188 36 96.643143 continues5 1 3 2 8 9 1966 1189 36 29 96.992241 to4 1 3 2 9 0 662 1224 1338 63 -1 5 1 3 2 9 1 662 1224 135 36 96.538086 remains 1 3 2 9 2 812 1235 85 36 97.003990 very5 1 3 2 9 3 912 1232 129 41 96.489777 strong.5 1 3 2 9 4 1070 1228 75 35 96.928444 Thes 1 3 2 9 5 1158 1229 89 37 96.956886 June5 1 3 2 9 6 1266 1231 12 35 95.657684 15 1 3 2 9 7 1297 1232 97 45 95.657684 prices 1 3 2 9 8 1408 1233 158 37 96.554199 increases 1 3 2 9 9 1581 1246 146 36 96.728775 appears5 1 3 2 9 10 1743 1243 35 30 96.744171 to5 1 3 2 9 11 1793 1238 45 36 96.184753 be5 1 3 2 9 12 1852 1239 148 48 95.996399 holding3 1 3 3 0 0 657 1279 1342 331 -1 4 1 3 3 1 0 722 1279 1277 62 -1 5 1 3 3 1 1 722 1283 55 35 66.897903 .. CX36A.*” These price increases apparently did not attract increased volumes of imported dispersion resin (or finished vinyl products) to the United States in sufficient quantity to defeat the price increase. Instead, in January 1988, domestic producers increased dispersion PVC prices by another 3 cents per pound. RX311A: CX205C.

The administrative law judge found that the level of dispersion imports likely declined after 1985. This is consistent with Occidental's analysis, See JX1-4, PX76 at 351556, and PVC imports generally declined between 1985 and 1987. Tenneco's sales manager testified in March 1986 that overs 1 3 4 5 7 1333 1872 58 35 96.948189 thes 1 3 4 5 8 1404 1880 79 38 97.006966 past5 1 3 4 5 9 1498 1874 54 35 96.522545 six5 1 3 4 5 10 1567 1877 142 34 96.841667 months5 1 3 4 5 11 1726 1888 55 23 96.672653 we5 1 3 4 5 12 1796 1878 93 35 96.821587 have5 1 3 4 5 13 1905 1890 84 24 96.853859 seen4 1 3 4 6 0 651 1923 1334 50 -1 5 1 3 4 6 1 651 1932 19 25 96.774590 a5 1 3 4 6 2 684 1923 126 46 96.438316 drying5 1 3 4 6 3 825 1934 46 35 96.892349 up5 1 3 4 6 4 886 1924 42 35 96.553391 of5 1 3 4 6 5 941 1926 225 45 90.594437 [dispersion]5 1 3 4 6 6 1183 1928 146 45 95.346062 imports5 1 3 4 6 7 1345 1940 37 24 95.346062 as5 1 3 4 6 8 1397 1931 57 34 96.979568 thes 1 3 4 6 9 1469 1932 113 34 96.588531 dollars 1 3 4 6 10 1596 1933 102 35 96.246124 values 1 3 4 6 11 1713 1935 62 34 96.792206 has5 1 3 4 6 12 1791 1935 194 36 95.304497 declined. Stevens, JX3, PX9 at 59. If dispersion imports declined at the same rate as PVC imports generally, 1987 imports of dispersion resin ° Ifwe apply to dispersion imports the analysis of complaint counsel's expert (i.é., a 10% domestic price increase would evoke a 20% increase in imports of dispersion resin, Kaserman, JXI(I), Tr. 296-303; JX]-4, PX141), we can calculate that imports would be between 9.6% and 13.2% of domestic supply in the event of a 10% domestic price increase. Under this analysis, domestic Suppliers would lose only 1.6% to 2.2% of domestic sales to imports in the event of a 10% price increase.

“7 The ability to increase the price for dispersion PVC may have been related to the acquisition: Tenneco had been very5 1 7 1 1 8 1377 2766 170 37 93.295753 aggressive5 1 7 1 1 9 1561 2767 172 38 64.552322 pricewise for dispersion resins, according to Occidental. CX78.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1237 1010 Opinion would be 11.6 million pounds, less than 3% of domestic production. LD.F. 157-58.% Officers of Occidental and Tenneco testified that they did not consider imports of dispersion resin in making pricing decisions for domestic dispersion resin. Mr. Schaefer of Occidental testified in 1986 that imported dispersion resin has relatively5 1 3 2 4 8 1536 927 103 36 92.868683 little effect on the price of domestic resin. JX1-4, PX136 at 145. He added that imported5 1 3 2 6 2 776 1047 201 47 96.549713 dispersion5 1 3 2 6 3 1002 1046 113 36 97.000168 resins5 1 3 2 6 4 1141 1046 64 35 96.098022 sells 1 3 2 6 5 1231 1052 34 28 96.278961 at5 1 3 2 6 6 1290 1055 101 25 96.922417 some5 1 3 2 6 7 1414 1045 166 35 96.165268 discounts 1 3 2 6 8 1605 1043 93 36 96.179977 from5 1 3 2 6 9 1723 1043 58 35 96.860939 thes 1 3 2 6 10 1806 1043 83 35 88.395683 U.S.4 1 3 2 7 0 553 1100 1338 53 -1 5 1 3 2 7 1 553 1106 203 47 96.992668 dispersion5 1 3 2 7 2 771 1106 128 46 88.573669 price. /d.; See also Bailey, JX3, PX6 at 29. Mr. Disch of Tenneco and later of Occidental identified only domestic producers as Tenneco's competitors for sales of dispersion PVC. JX3, PX8 at 38.

Dispersion PVC imports are subject to the same tariff and transportation costs that apply to other types of PVC, and the same considerations that limit the attractiveness of imported PVC to domestic consumers -- concerns about availability, delivery, storage costs, quality, cost and technical support -- limit the ability of imports of dispersion PVC resins to defeat a domestic price increase. Concerns about quality, delivery and technical support may be more important for dispersion PVC than for mass and suspension PVC, because, according to Occidental, dispersion resins requires 1 3 3 9 8 1708 1798 181 36 96.853844 advanced4 1 3 3 10 0 552 1857 1336 51 -1 5 1 3 3 10 1 552 1863 232 45 96.413757 technology,5 1 3 3 10 2 805 1861 171 46 96.718460 stringent5 1 3 3 10 3 995 1860 135 47 96.849220 quality5 1 3 3 10 4 1149 1860 149 41 95.858246 control,5 1 3 3 10 5 1318 1860 69 35 95.858246 ands 1 3 3 10 6 1405 1859 96 46 96.497498 goods 1 3 3 10 7 1521 1864 180 30 96.898529 customers 1 3 3 10 8 1719 1857 169 36 95.756790 service. RXI197C In Camera.”

Because of these concerns, neither customers nor producers of PVC view imported dispersion resin as a substitute for domestic resin in most end uses. I.D.F. 160; Stevens, JX3, PX9 at 55-57; Baker, CX205B-C. Instead, imported dispersion PVC is used primarily in low end applications, such as toys or traffic cones, in which the particular characteristics of the resin are not critical to the 48 There is some evidence that dispersion PVC imports may not have declined at the same rate but “continue[d] to come in because they are needed." RX164A (Chemical Week, Dec. 17, 1986). Also in 1986, Formosa and Goodyear expanded their U.S. dispersion production capacity. CX185E; RX127 A In Camera; RX237T In Camera.

“© Occidental also said that [I]t5 1 6 1 1 7 1201 2703 23 28 96.850716 is5 1 6 1 1 8 1238 2703 83 28 96.942268 these5 1 6 1 1 9 1334 2701 137 39 96.993294 qualities5 1 6 1 1 10 1485 2701 98 29 96.739517 which5 1 6 1 1 11 1596 2700 106 29 96.932159 enables 1 6 1 1 12 1715 2698 177 39 96.599396 Dispersion2 1 7 0 0 0 554 2748 1338 92 -1 3 1 7 1 0 0 554 2748 1338 92 -1 4 1 7 1 1 0 554 2748 1338 44 -1 5 1 7 1 1 1 554 2756 78 29 97.000710 resins 1 7 1 1 2 655 2761 29 24 96.438507 to5 1 7 1 1 3 707 2755 142 29 96.207825 maintains 1 7 1 1 4 871 2754 158 38 96.207825 profitable5 1 7 1 1 5 1051 2753 114 38 96.793617 pricing5 1 7 1 1 6 1187 2752 119 29 92.641235 levels. RX197C In Camera (Occidental 1986-1989 Strategic Plan).

Opinion VISET.C.

performance of the end product. I.D.F. 161; Disch, JX3, PX8 at 43-44; Stevens, JX3, PX9 at 56. Domestic producers maintain higher prices for dispersion resin sold for critical applications than for dispersion resins sold for low end applications. I.D.F. 161. Almost one-quarter of dispersion imports were accounted for by B.F. Goodrich, the second largest dispersion producer in the United States and the only dispersion PVC producer in Canada. I.D.F. 156. Goodrich would have few incentives to undermine a price increase in the United States by selling its Canadian dispersion resin at a lower price. In addition, demand in Canada limits Goodrich's ability to export to the United States. See CX137X In Camera. Occidental asserts that [p]roducers5 1 3 3 1 5 1430 1277 68 34 97.019875 ands 1 3 3 1 6 1513 1284 196 30 96.406860 customers5 1 3 3 1 7 1726 1279 42 35 97.003586 of5 1 3 3 1 8 1780 1280 201 46 96.670258 dispersion4 1 3 3 2 0 643 1331 1342 47 -1 5 1 3 3 2 1 643 1331 93 36 96.453209 PVC5 1 3 3 2 2 749 1332 189 45 96.453209 recognizes 1 3 3 2 3 952 1333 73 35 96.985802 that5 1 3 3 2 4 1037 1333 146 45 96.949738 imports5 1 3 3 2 5 1198 1334 119 35 96.315712 would5 1 3 3 2 6 1331 1335 44 35 96.987968 be5 1 3 3 2 7 1388 1346 20 24 96.464172 a5 1 3 3 2 8 1421 1335 149 36 96.464172 feasible5 1 3 3 2 9 1585 1337 204 36 96.515976 alternatives 1 3 3 2 10 1804 1349 124 25 96.623962 sources 1 3 3 2 11 1942 1340 43 34 96.570457 of4 1 3 3 3 0 643 1389 1337 51 -1 5 1 3 3 3 1 643 1389 126 46 96.585266 supply5 1 3 3 3 2 784 1389 31 36 96.960350 if5 1 3 3 3 3 826 1391 172 35 96.602478 domestic5 1 3 3 3 4 1012 1392 189 45 97.000511 producers5 1 3 3 3 5 1216 1392 180 36 96.611115 increased5 1 3 3 3 6 1409 1394 124 45 96.632339 prices,5 1 3 3 3 7 1549 1395 107 45 96.793915 citing5 1 3 3 3 8 1672 1402 201 29 96.705818 statements5 1 3 3 3 9 1888 1397 92 36 96.796143 from4 1 3 3 4 0 643 1449 1336 42 -1 5 1 3 3 4 1 643 1449 143 34 95.543732 various5 1 3 3 4 2 811 1449 198 36 92.594452 witnesses.5 1 3 3 4 3 1055 1450 134 36 91.026237 R.A.B.5 1 3 3 4 4 1215 1457 33 29 96.505135 at5 1 3 3 4 5 1272 1452 56 35 92.921059 77.5 1 3 3 4 6 1353 1453 57 34 96.924980 An5 1 3 3 4 7 1434 1453 242 36 95.679840 examinations 1 3 3 4 8 1700 1454 42 36 96.007545 of5 1 3 3 4 9 1762 1455 100 36 96.969505 these5 1 3 3 4 10 1885 1455 94 36 96.857506 cited4 1 3 3 5 0 643 1508 1334 51 -1 5 1 3 3 5 1 643 1513 205 29 96.106857 statements5 1 3 3 5 2 879 1508 87 34 96.424973 does5 1 3 3 5 3 996 1515 62 28 96.674721 not5 1 3 3 5 4 1087 1515 146 39 93.297112 supports 1 3 3 5 5 1261 1510 238 37 88.457481 Occidental's5 1 3 3 5 6 1529 1512 118 35 96.182861 claim.5 1 3 3 5 7 1704 1513 69 35 91.497040 For5 1 3 3 5 8 1800 1515 177 44 96.789825 example,4 1 3 3 6 0 642 1565 1337 50 -1 5 1 3 3 6 1 642 1565 212 35 96.433441 Occidental5 1 3 3 6 2 880 1572 127 40 96.458076 quotes5 1 3 3 6 3 1032 1566 58 36 96.612633 thes 1 3 3 6 4 1116 1573 187 30 96.154213 statements 1 3 3 6 5 1326 1569 42 34 96.519165 of5 1 3 3 6 6 1388 1569 69 35 96.354477 Mr.5 1 3 3 6 7 1483 1570 121 45 96.764702 Boyer5 1 3 3 6 8 1627 1570 42 35 96.610992 of5 1 3 3 6 9 1689 1572 173 35 96.345375 Formosa5 1 3 3 6 10 1888 1573 91 35 96.830307 that dispersion PVC imports have ‘influenced the slow downward trend [of dispersion PVC prices] over the past 3 years.’” Jd. In the same paragraph, however, Mr. Boyer said that [i]imported5 1 3 3 9 8 1672 1746 197 45 96.487465 dispersion5 1 3 3 9 9 1883 1747 93 35 96.936348 PVC4 1 3 3 10 0 638 1798 1336 51 -1 5 1 3 3 10 1 638 1798 95 35 96.987312 resins 1 3 3 10 2 751 1799 29 34 96.886940 is5 1 3 3 10 3 798 1806 62 27 96.872391 not5 1 3 3 10 4 875 1800 177 45 96.945511 currently5 1 3 3 10 5 1069 1811 20 24 96.182327 a5 1 3 3 10 6 1105 1800 207 46 96.182327 significant5 1 3 3 10 7 1329 1812 125 25 97.018394 sources 1 3 3 10 8 1471 1803 42 35 97.020905 of5 1 3 3 10 9 1526 1804 128 45 96.996773 supply5 1 3 3 10 10 1671 1804 35 35 96.915977 in5 1 3 3 10 11 1724 1805 57 34 96.683945 thes 1 3 3 10 12 1798 1805 176 35 96.367188 domestic4 1 3 3 11 0 638 1857 1336 51 -1 5 1 3 3 11 1 638 1857 133 34 96.970932 markets 1 3 3 11 2 784 1857 55 35 96.981842 for5 1 3 3 11 3 851 1857 198 45 96.589752 dispersion5 1 3 3 11 4 1061 1858 93 35 97.010590 PVC5 1 3 3 11 5 1167 1859 103 40 96.943573 resin,5 1 3 3 11 6 1285 1860 67 34 96.586800 ands 1 3 3 11 7 1365 1860 56 36 97.012009 thes 1 3 3 11 8 1435 1860 91 36 96.397194 levels 1 3 3 11 9 1540 1861 42 35 96.397194 of5 1 3 3 11 10 1591 1861 145 46 96.384392 imports5 1 3 3 11 11 1750 1863 28 34 96.783638 is5 1 3 3 11 12 1793 1870 61 28 96.940216 not5 1 3 3 11 13 1867 1863 107 45 96.966713 likely4 1 3 3 12 0 638 1914 1337 52 -1 5 1 3 3 12 1 638 1921 35 28 96.917465 to5 1 3 3 12 2 687 1914 157 36 96.774796 increases 1 3 3 12 3 857 1916 34 34 96.845383 in5 1 3 3 12 4 905 1926 169 35 96.905922 responses 1 3 3 12 5 1087 1922 36 29 96.854523 to5 1 3 3 12 6 1136 1927 20 24 96.092323 a5 1 3 3 12 7 1169 1917 177 35 93.306252 sustained5 1 3 3 12 8 1360 1924 216 39 92.978821 ten-percent5 1 3 3 12 9 1589 1920 156 35 96.366005 increases 1 3 3 12 10 1759 1920 36 35 96.366005 in5 1 3 3 12 11 1808 1921 58 35 96.753120 thes 1 3 3 12 12 1878 1921 97 45 96.753120 price4 1 3 3 13 0 637 1968 1336 55 -1 5 1 3 3 13 1 637 1972 43 35 96.912773 of5 1 3 3 13 2 690 1972 174 36 96.435661 domestic5 1 3 3 13 3 880 1973 202 46 95.998688 dispersion5 1 3 3 13 4 1097 1974 93 35 93.293930 PVC5 1 3 3 13 5 1206 1968 156 42 58.467705 resin.*° CX185F. Mr. Boyer also said that thes 1 3 3 14 3 823 2038 115 28 96.722015 returns 1 3 3 14 4 956 2042 46 24 97.005066 on5 1 3 3 14 5 1020 2032 215 36 96.843216 investments 1 3 3 14 6 1252 2032 55 36 96.389565 for5 1 3 3 14 7 1323 2034 200 45 96.455574 dispersion5 1 3 3 14 8 1541 2035 93 36 96.610344 PVC5 1 3 3 14 9 1651 2036 113 35 96.793922 resins5 1 3 3 14 10 1782 2036 29 35 97.003021 is5 1 3 3 14 11 1829 2037 96 45 93.250809 goods 1 3 3 14 12 1943 2058 29 4 93.240036 --4 1 3 3 15 0 636 2088 1336 52 -1 5 1 3 3 15 1 636 2088 95 45 96.975189 goods 1 3 3 15 2 746 2089 142 45 96.597260 enough5 1 3 3 15 3 902 2089 71 35 96.986076 that5 1 3 3 15 4 986 2090 170 35 96.650276 Formosa5 1 3 3 15 5 1170 2101 73 24 96.345863 was5 1 3 3 15 6 1257 2090 35 36 96.626396 in5 1 3 3 15 7 1310 2091 91 36 96.778206 19865 1 3 3 15 8 1415 2092 201 46 96.020828 expanding5 1 3 3 15 9 1630 2093 58 35 97.004890 thes 1 3 3 15 10 1702 2094 160 46 96.911667 capacity5 1 3 3 15 11 1877 2094 42 35 96.383011 of5 1 3 3 15 12 1929 2094 43 36 96.735672 its2 1 4 0 0 0 634 2350 595 15 -1 3 1 4 1 0 0 634 2350 595 15 -1 4 1 4 1 1 0 634 2350 595 15 -1 5 1 4 1 1 1 634 2350 595 15 95.000000 2 1 5 0 0 0 709 2396 1262 54 -1 3 1 5 1 0 0 709 2396 1262 54 -1 4 1 5 1 1 0 709 2396 1262 54 -1 5 1 5 1 1 1 709 2396 28 21 70.439896 °05 1 5 1 1 2 793 2409 171 37 96.459976 According5 1 5 1 1 3 982 2414 30 23 96.500290 to5 1 5 1 1 4 1030 2409 57 29 96.526939 Mr.5 1 5 1 1 5 1106 2410 108 37 96.916222 Boyer,5 1 5 1 1 6 1234 2410 140 38 93.274376 although5 1 5 1 1 7 1394 2411 209 38 80.718224 [d]ispersion PVC resin pricing is relatively stable,” prices declined from about 55 cents to about 45 cents per pound between 1983 and 1986. CX185E- F. Other evidence shows little decline in price between 1984 and 1986. Georgia Gulf's average dispersion price declined $.004 between January 1984 (52.6 cents) and January 1986 (52.2 cents). RX179Z11 In Camera. Occidental's mean actual price for dispersion resin declined $.017 between January 1984 (50.1 cents) and January 1986 (48.4 cents). JX1(III), PX15, Table 18A; CX100H. Domestic producers increased dispersion PVC prices beginning in October 1986. See CX39-42; CX17; CX36A; CX205C. OCCIDENTAL PETROLEUM CORPORATION, ET AL. {239 1010 Opinion Delaware plant to produce dispersion PVC. CX185E; See also RX237T In Camera.”

Occidental also cites the testimony of Mr. McClellan, president of Plast-o-merics, Inc., a purchaser of PVC resins, that5 1 3 2 2 10 1695 815 45 35 96.701180 he5 1 3 2 2 11 1759 814 122 35 96.701180 would4 1 3 2 3 0 544 873 1336 50 -1 5 1 3 2 3 1 544 881 163 34 96.074577 increases 1 3 2 3 2 733 880 55 35 96.736923 his5 1 3 2 3 3 817 890 63 24 96.320297 uses 1 3 2 3 4 907 878 42 36 96.524223 of5 1 3 2 3 5 971 878 140 45 95.868401 foreign5 1 3 2 3 6 1138 877 93 35 95.724655 PVC5 1 3 2 3 7 1258 876 31 35 95.724655 if5 1 3 2 3 8 1312 876 58 35 96.092163 thes 1 3 2 3 9 1396 875 96 46 96.892616 prices 1 3 2 3 10 1519 875 42 35 96.957199 of5 1 3 2 3 11 1584 873 176 36 96.542900 domestic5 1 3 2 3 12 1787 873 93 35 96.270393 PVC4 1 3 2 4 0 544 932 1337 45 -1 5 1 3 2 4 1 544 938 184 35 95.914482 increased5 1 3 2 4 2 742 937 93 36 90.912857 5%. R.A.B. at 77. Mr. McClellan's testimony was not so unequivocal. In fact, he said that if the price of domestic resin increased 5%, his company probably5 1 3 2 6 6 1283 1049 117 37 96.512512 would5 1 3 2 6 7 1414 1055 34 30 96.434006 to5 1 3 2 6 8 1462 1059 100 25 96.999298 some5 1 3 2 6 9 1573 1048 134 35 93.629120 extent increase its use of foreign resin, but, he added, [s]o5 1 3 2 7 10 1395 1108 105 35 96.982170 much5 1 3 2 7 11 1515 1107 42 36 96.855751 of5 1 3 2 7 12 1567 1107 25 35 96.855751 it5 1 3 2 7 13 1606 1106 120 36 96.393959 would5 1 3 2 7 14 1741 1106 140 46 96.711838 depend4 1 3 2 8 0 544 1160 1336 57 -1 5 1 3 2 8 1 544 1181 95 36 96.658745 upon5 1 3 2 8 2 655 1169 305 37 92.724785 circumstances. JX1(II), Tr. 725D. Even so, Mr. McClellan's experience is unusual. Most customers said that they could not rely on imported dispersion resin.

Occidental also cites the testimony of a5 1 3 3 1 8 1416 1341 131 36 93.293106 former5 1 3 3 1 9 1560 1341 166 35 91.623177 Tenneco5 1 3 3 1 10 1741 1339 138 36 96.929382 official4 1 3 3 2 0 545 1398 1339 50 -1 5 1 3 3 2 1 545 1432 54 6 37.727707 ...5 1 3 3 2 2 616 1404 71 34 96.799873 that5 1 3 3 2 3 701 1404 147 44 96.936440 imports5 1 3 3 2 4 864 1402 119 35 96.880211 would5 1 3 3 2 5 998 1401 105 45 96.761833 begins 1 3 3 2 6 1119 1407 35 29 96.984833 to5 1 3 3 2 7 1169 1401 158 45 96.549400 displace5 1 3 3 2 8 1342 1400 173 35 96.882584 domestic5 1 3 3 2 9 1530 1398 199 46 96.585434 dispersion5 1 3 3 2 10 1744 1398 94 36 96.540215 PVC5 1 3 3 2 11 1853 1398 31 35 96.682030 if4 1 3 3 3 0 543 1456 1336 50 -1 5 1 3 3 3 1 543 1461 178 36 96.846550 domestic5 1 3 3 3 2 739 1461 116 45 96.845985 prices5 1 3 3 3 3 874 1471 94 24 96.610741 were5 1 3 3 3 4 986 1466 36 28 96.238937 to5 1 3 3 3 5 1040 1459 190 35 70.749344 increase. R.A.B. at 77. This characterization of the testimony is incomplete. The witness, Mr. Disch, formerly with Tenneco and now with Occidental, See note 12 supra, did say that consumption of dispersion resin for low end uses, such as toys and “other non-critical miscellaneous items," would tend to decline if price increased. JX3, PX8 at 42-43; See L.D.F. 161. For other end uses of dispersion resin, however, Mr. Disch testified that customers would5 1 3 3 10 3 909 1866 76 36 96.997223 finds 1 3 3 10 4 1000 1866 25 36 96.993523 it5 1 3 3 10 5 1039 1866 173 36 96.647888 difficult to substitute away from domestic dispersion PVC. JX3, PX8 at 44. For these more critical applications, Mr. Disch said, customers are very5 1 3 3 12 8 1544 1980 207 46 89.573044 particular”5 1 3 3 12 9 1771 1980 108 35 96.804970 about4 1 3 3 13 0 542 2038 1337 51 -1 5 1 3 3 13 1 542 2043 59 35 96.866898 thes 1 3 3 13 2 629 2042 167 47 96.607719 qualities5 1 3 3 13 3 825 2042 42 35 96.999619 of5 1 3 3 13 4 892 2043 57 34 96.690544 thes 1 3 3 13 5 976 2041 94 36 96.133041 resins 1 3 3 13 6 1099 2041 98 40 93.188828 used,5 1 3 3 13 7 1225 2040 48 35 86.723534 /d.5 1 3 3 13 8 1306 2047 33 29 96.248955 at5 1 3 3 13 9 1367 2040 57 40 96.248955 38,5 1 3 3 13 10 1453 2040 68 34 96.490852 ands 1 3 3 13 11 1549 2039 89 35 96.507248 theirs 1 3 3 13 12 1665 2038 214 45 96.760597 fabricating4 1 3 3 14 0 542 2097 1336 50 -1 5 1 3 3 14 1 542 2102 208 45 96.889580 equipments 1 3 3 14 2 765 2101 29 35 96.662148 is5 1 3 3 14 3 811 2100 218 46 96.610153 specialized5 1 3 3 14 4 1045 2106 35 28 96.814896 to5 1 3 3 14 5 1096 2099 175 35 96.553535 domestic5 1 3 3 14 6 1287 2099 124 35 96.866837 resins.5 1 3 3 14 7 1439 2098 48 35 89.925705 Jd.5 1 3 3 14 8 1507 2104 33 29 58.987251 at5 1 3 3 14 9 1553 2098 58 34 58.987251 44.5 1 3 3 14 10 1640 2098 69 34 96.524437 Mr.5 1 3 3 14 11 1727 2097 151 35 96.776154 Stevens4 1 3 3 15 0 543 2154 1337 50 -1 5 1 3 3 15 1 543 2160 41 36 93.295135 of5 1 3 3 15 2 594 2160 168 36 92.196091 Tenneco5 1 3 3 15 3 776 2159 76 36 96.315750 also5 1 3 3 15 4 866 2158 156 36 96.835052 testified5 1 3 3 15 5 1034 2158 72 36 96.852608 that5 1 3 3 15 6 1120 2157 175 47 96.639565 imported5 1 3 3 15 7 1309 2156 197 47 96.983742 dispersion5 1 3 3 15 8 1519 2155 94 36 96.983742 resins 1 3 3 15 9 1626 2155 29 36 96.992630 is5 1 3 3 15 10 1670 2155 87 36 96.670570 used5 1 3 3 15 11 1772 2155 35 36 96.940186 in5 1 3 3 15 12 1822 2154 58 36 96.993233 thea 1 3 3 16 0 545 2213 1335 51 -1 5 1 3 3 16 1 545 2219 88 35 91.413300 low end dispersion markets, the traffic cone type of thing,” in which there5 1 3 3 17 2 673 2277 29 34 96.960243 is5 1 3 3 17 3 717 2287 85 34 96.654617 very5 1 3 3 17 4 816 2276 87 35 96.547989 little5 1 3 3 17 5 917 2275 214 45 96.677902 technology5 1 3 3 17 6 1146 2274 199 35 84.600189 involved. JX3, PX9 at 55-56. In the high end markets, such as flooring, according to Mr. Stevens, technology is very5 1 3 3 19 4 954 2391 286 47 90.352615 sophisticated, and domestic customers would find substitution of imported dispersion resins difficult and costly. Jd. at 56-57. This evidence is consistent with Occidental's analysis that most applications of dispersion resin are specialty5 1 3 3 22 8 1558 2563 237 46 96.730072 applications5 1 3 3 22 9 1811 2563 68 35 96.872589 and2 1 4 0 0 0 541 2656 595 6 -1 3 1 4 1 0 0 541 2656 595 6 -1 4 1 4 1 1 0 541 2656 595 6 -1 5 1 4 1 1 1 541 2656 595 6 95.000000 2 1 5 0 0 0 617 2699 1261 49 -1 3 1 5 1 0 0 617 2699 1261 49 -1 4 1 5 1 1 0 617 2699 1261 49 -1 5 1 5 1 1 1 617 2699 24 22 48.711960 >!5 1 5 1 1 2 679 2712 31 28 82.431076 In5 1 5 1 1 3 725 2710 85 34 94.121887 1986,5 1 5 1 1 4 821 2710 160 38 96.507423 Goodyear5 1 5 1 1 5 991 2710 63 29 96.811363 also5 1 5 1 1 6 1066 2710 150 29 96.516823 increased5 1 5 1 1 7 1228 2708 34 30 96.951202 its5 1 5 1 1 8 1274 2708 164 38 96.728065 dispersion5 1 5 1 1 9 1448 2707 174 38 96.633347 productions 1 5 1 1 10 1633 2707 133 37 96.236603 capacity5 1 5 1 1 11 1779 2706 50 37 96.634346 (by5 1 5 1 1 12 1845 2706 33 29 96.983345 152 1 6 0 0 0 543 2756 1335 83 -1 3 1 6 1 0 0 543 2756 1335 83 -1 4 1 6 1 1 0 543 2756 1335 43 -1 5 1 6 1 1 1 543 2761 117 30 96.839195 millions 1 6 1 1 2 680 2761 117 38 96.634644 pounds5 1 6 1 1 3 816 2766 31 24 95.400856 to5 1 6 1 1 4 868 2761 55 29 95.400856 1155 1 6 1 1 5 943 2760 116 29 96.568520 millions 1 6 1 1 6 1078 2760 130 37 96.617729 pounds)5 1 6 1 1 7 1228 2764 27 24 96.868309 at5 1 6 1 1 8 1274 2758 36 30 96.868309 its5 1 6 1 1 9 1329 2758 128 38 96.352982 Niagara5 1 6 1 1 10 1475 2758 87 33 95.785767 Falls,5 1 6 1 1 11 1582 2757 75 29 96.626717 News 1 6 1 1 12 1677 2757 92 32 95.957870 York,5 1 6 1 1 13 1789 2756 89 38 96.333298 plant.4 1 6 1 2 0 543 2809 344 30 -1 5 1 6 1 2 1 543 2809 146 30 90.654869 RX127A5 1 6 1 2 2 702 2810 32 29 95.756073 In5 1 6 1 2 3 749 2809 138 29 95.838226 Camera. Opinion 115 F.T.C.

processes [that] require advanced technology, stringent quality control, and good customer service. It is these qualitites which enable Dispersion resin to maintain profitable levels.". RX197C In Camera.”

Occidental points also to its Strategic Plan for 1985-88 that allegedly projected5 1 3 2 2 3 1082 932 72 35 97.011765 that5 1 3 2 2 4 1174 931 139 47 96.589516 foreign5 1 3 2 2 5 1334 932 201 46 96.589516 dispersion5 1 3 2 2 6 1556 934 94 35 96.000267 PVC5 1 3 2 2 7 1670 935 195 46 96.302414 producers5 1 3 2 2 8 1886 936 109 35 96.302414 could4 1 3 2 3 0 658 989 1333 49 -1 5 1 3 2 3 1 658 989 173 36 96.354256 ‘continues 1 3 2 3 2 846 996 36 29 96.354256 to5 1 3 2 3 3 897 989 144 47 96.369926 depress5 1 3 2 3 4 1056 990 116 47 96.830620 prices5 1 3 2 3 5 1188 991 125 35 96.312469 and/or5 1 3 2 3 6 1327 992 82 46 96.943398 gains 1 3 2 3 7 1424 992 135 36 93.299469 markets 1 3 2 3 8 1575 993 142 36 74.758789 share.' R.A.B. at 77.

This was not a projection but one of a number of hypothetical Risks that Occidental identified under the general heading, Opportunities5 1 3 2 6 2 958 1166 68 34 96.679474 ands 1 3 2 6 3 1041 1165 137 35 88.421791 Risks. JX1(ID, DX12 at 102637-38 In Camera (1985-88); See also RX197G-H In Camera (1986-89). Despite these Risks, Occidental concluded in its business plans for 1985-88 and for 1986-89 that [d]ue5 1 3 2 9 5 1120 1347 36 29 97.009483 to5 1 3 2 9 6 1171 1341 58 35 96.932945 thes 1 3 2 9 7 1244 1341 234 47 96.871941 profitability5 1 3 2 9 8 1494 1342 71 35 96.738968 that5 1 3 2 9 9 1581 1343 212 46 96.534538 Dispersion5 1 3 2 9 10 1808 1343 181 46 96.788948 provides,4 1 3 2 10 0 653 1398 1337 47 -1 5 1 3 2 10 1 653 1399 57 35 96.557503 thes 1 3 2 10 2 724 1398 85 45 96.557503 only5 1 3 2 10 3 823 1398 205 46 96.851639 acceptable5 1 3 2 10 4 1042 1405 152 40 96.700256 strategy5 1 3 2 10 5 1207 1399 31 35 96.461868 is5 1 3 2 10 6 1252 1405 35 30 96.414124 to5 1 3 2 10 7 1301 1400 128 45 93.254303 grow. JX1(II), DX12 at 102638 Jn Camera, RX197 H In Camera; See also RX197D In Camera. Finally, Occidental relies on the testimony of James Beightol, a PVC broker, that5 1 3 3 2 4 1024 1574 32 35 96.504494 if5 1 3 3 2 5 1068 1575 176 35 96.244255 domestic5 1 3 3 2 6 1260 1575 200 46 96.011047 dispersion5 1 3 3 2 7 1476 1576 94 35 96.694725 PVC5 1 3 3 2 8 1584 1578 194 45 96.423737 producers5 1 3 3 2 9 1795 1578 194 45 96.211334 attempted4 1 3 3 3 0 651 1633 1337 47 -1 5 1 3 3 3 1 651 1639 35 29 96.246552 to5 1 3 3 3 2 710 1633 93 35 96.246552 raises 1 3 3 3 3 826 1633 115 45 96.867943 prices5 1 3 3 3 4 967 1634 115 34 96.884903 above5 1 3 3 3 5 1105 1634 232 45 96.445930 competitive5 1 3 3 3 6 1360 1635 124 39 96.422295 levels,5 1 3 3 3 7 1509 1635 148 45 96.205048 imports5 1 3 3 3 8 1682 1637 121 34 96.556587 would5 1 3 3 3 9 1828 1636 160 35 96.556587 increase4 1 3 3 4 0 651 1685 1337 54 -1 5 1 3 3 4 1 651 1691 269 44 91.309616 dramatically. R.A.B. at 77.°° Mr. Beightol’s estimates of dispersion PVC imports were anecdotal and unsupported. For example, Mr. Beightol’s estimate of imports from Canada was based on his “poll[ing] the audience" in the courtroom “during the break": I4 1 3 3 8 0 649 1922 1335 46 -1 5 1 3 3 8 1 649 1922 110 35 96.674881 asked5 1 3 3 8 2 775 1922 130 45 94.863945 peoples 1 3 3 8 3 934 1922 94 35 96.305557 from5 1 3 3 8 4 1045 1922 81 46 95.905312 Oxy5 1 3 3 8 5 1143 1923 72 34 96.268730 that5 1 3 3 8 6 1231 1933 93 24 96.004555 were5 1 3 3 8 7 1341 1923 171 35 0.000000 there...5 1 3 3 8 8 1532 1923 25 36 0.000000 . JX1(ID, Tr. 694-95.

For his estimate of imports from Germany, Mr. Beightol relied on his recollection of a chance meeting with an employee of an American importer at5 1 3 3 11 3 895 2107 19 25 96.881546 a5 1 3 3 11 4 927 2097 126 46 96.583488 plastics 1 3 3 11 5 1068 2097 100 35 96.636948 shows 1 3 3 11 6 1182 2097 35 35 96.440941 in5 1 3 3 11 7 1233 2097 160 46 96.853271 Chicago5 1 3 3 11 8 1406 2098 66 36 93.260139 lasts 1 3 3 11 9 1486 2109 163 34 90.694641 year....5 1 3 3 11 10 1676 2099 13 35 85.065125 I5 1 3 3 11 11 1699 2099 74 45 85.065125 just5 1 3 3 11 12 1787 2099 110 35 96.426369 asked5 1 3 3 11 13 1911 2099 74 35 96.426369 him4 1 3 3 12 0 647 2155 1338 48 -1 5 1 3 3 12 1 647 2156 95 35 96.918350 what5 1 3 3 12 2 758 2155 86 35 96.386406 kinds 1 3 3 12 3 862 2155 42 35 96.522301 of5 1 3 3 12 4 916 2156 147 35 95.485771 volumes 1 3 3 12 5 1079 2155 82 46 96.561752 they5 1 3 3 12 6 1179 2166 94 25 96.641098 were5 1 3 3 12 7 1290 2156 165 46 96.520981 bringing5 1 3 3 12 8 1473 2156 34 35 96.437996 in5 1 3 3 12 9 1525 2157 94 34 96.770432 from5 1 3 3 12 10 1636 2157 212 46 93.688515 Germany. Jd. at 697. Mr. Beightol displayed no special knowledge of dispersion >? Occideutal's statement that dispersion PVC requires a high degree of customer service, R.A.B. at 81-82 (portion Jn Camera), undermines its assertion that imported dispersion resin is readily substitutable for domestic dispersion resin. See R.A.B. at 77.

53 Mr. Beightol’s statement appears to be inconsistent with that of Mr. Boyer of Formosa, a producer of dispersion resin, who said that imports of dispersion PVC are not5 1 8 1 2 3 793 2758 90 36 96.256676 likely5 1 8 1 2 4 900 2762 29 24 97.013901 to5 1 8 1 2 5 946 2757 132 30 96.772995 increases 1 8 1 2 6 1095 2757 28 29 96.972282 in5 1 8 1 2 7 1139 2766 141 29 96.532631 responses 1 8 1 2 8 1297 2763 29 24 96.509483 to5 1 8 1 2 9 1342 2767 16 20 96.989052 a5 1 8 1 2 10 1374 2758 150 29 93.284134 sustained5 1 8 1 2 11 1541 2764 183 32 92.302834 ten-percent5 1 8 1 2 12 1739 2758 134 30 96.596375 increases 1 8 1 2 13 1889 2759 29 29 96.993759 in5 1 8 1 2 14 1935 2759 47 29 96.929642 thea 1 8 1 3 0 645 2805 842 37 -1 5 1 8 1 3 1 645 2806 79 36 96.680878 prices 1 8 1 3 2 737 2805 35 29 96.585289 of5 1 8 1 3 3 781 2805 147 29 96.756050 domestic5 1 8 1 3 4 941 2805 168 37 96.392876 dispersion5 1 8 1 3 5 1121 2805 78 30 96.703659 PVC5 1 8 1 3 6 1212 2805 102 29 90.775459 resin. CX185F.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 124] 1010 Opinion imports,” his estimates were inconsistent with others in the record and we decline to rely on his testimony.

At their peak in the mid 1980's, when the dollar was high relative to other currencies, imports of dispersion PVC may have been as much as 8% to 11% of domestic supply. The record indicates that imports were limited to the low end, lower priced uses of dispersion resin and did not affect most of the domestic dispersion market. Even so, Occidental in October 1986 was able to increase prices of its low end dispersion resins, and the industry increased domestic dispersion prices generally in 1986 and 1987. We conclude that the record fully supports the conclusion of the administrative law judge that the United States is a relevant geographic market for dispersion PVC, and we affirm his conclusion.

Il. ENTRY If entry into the relevant market is easy, incumbent firms will be unable to sustain any exercise of market power. Entry into the relevant product markets is difficult. The Commission in Goodrich identified substantial5 1 4 1 4 3 1003 1716 148 35 96.615700 barriers5 1 4 1 4 4 1172 1718 68 34 96.410881 ands 1 4 1 4 5 1260 1718 251 45 96.387184 impediments5 1 4 1 4 6 1532 1726 36 29 96.787392 to5 1 4 1 4 7 1588 1722 117 44 96.238441 entry into the mass and suspension PVC market: four or five years to plan and build a new plant or expand an existing plant, including one to two years to obtain environmental permits, additional time to evaluate and obtain technology licenses and the need to comply with newly enacted environmental regulations. Goodrich, 110 FTC at 297-300. According to a Goodrich document, the leads 1 4 1 10 8 1439 2067 84 36 96.849541 times 1 4 1 10 9 1537 2069 161 45 96.617821 required5 1 4 1 10 10 1712 2069 56 35 96.841377 for5 1 4 1 10 11 1780 2070 97 45 96.860611 plant4 1 4 1 11 0 540 2121 1337 50 -1 5 1 4 1 11 1 540 2121 212 46 96.769508 expansions5 1 4 1 11 2 769 2123 67 35 96.745468 ands 1 4 1 11 3 850 2124 238 46 96.274307 constructing5 1 4 1 11 4 1102 2135 96 35 96.976906 grass5 1 4 1 11 5 1213 2131 76 29 96.990829 roots 1 4 1 11 6 1303 2126 91 35 96.438446 PVC5 1 4 1 11 7 1409 2126 113 45 90.602890 plants5 1 4 1 11 8 1539 2156 5 6 84.119392 .5 1 4 1 11 9 1563 2156 5 6 84.119392 .5 1 4 1 11 10 1589 2156 3 6 91.374527 .5 1 4 1 11 11 1608 2127 29 35 96.990601 is5 1 4 1 11 12 1652 2138 81 25 96.171288 now5 1 4 1 11 13 1748 2127 80 36 96.478165 four5 1 4 1 11 14 1841 2135 36 29 96.883865 to4 1 4 1 12 0 539 2179 1337 52 -1 5 1 4 1 12 1 539 2179 74 35 96.877396 five5 1 4 1 12 2 628 2190 100 35 96.329590 years5 1 4 1 12 3 744 2191 51 24 96.329590 vs.5 1 4 1 12 4 812 2181 57 34 96.797806 thes 1 4 1 12 5 884 2181 96 35 96.852554 three5 1 4 1 12 6 994 2193 101 34 96.866585 years5 1 4 1 12 7 1111 2182 168 46 96.960220 formerly5 1 4 1 12 8 1293 2184 161 46 96.674133 required5 1 4 1 12 9 1469 2184 68 35 96.969635 dues 1 4 1 12 10 1552 2191 36 29 96.502037 to5 1 4 1 12 11 1603 2185 57 35 96.502037 thes 1 4 1 12 12 1674 2185 202 46 96.323143 increasing4 1 4 1 13 0 539 2238 1334 51 -1 5 1 4 1 13 1 539 2238 151 35 96.467422 numbers 1 4 1 13 2 708 2238 42 35 96.467422 of5 1 4 1 13 3 765 2239 93 35 96.937080 local5 1 4 1 13 4 878 2240 69 34 96.879097 ands 1 4 1 13 5 966 2239 134 36 96.927719 federal5 1 4 1 13 6 1118 2241 219 35 96.951057 restrictions5 1 4 1 13 7 1357 2242 67 35 96.896339 ands 1 4 1 13 8 1443 2253 190 35 96.859528 necessary5 1 4 1 13 9 1652 2244 221 45 96.643562 approvals. Goodrich CX196A. Requirements of scale and sunk costs also may impede entry into the mass and suspension PVC market. I.D.F. 4 Mr. Beightol said that he kept5 1 6 1 1 8 1185 2515 128 29 95.752670 abreast of dispersion imports by traveling to5 1 7 1 1 2 595 2561 85 29 96.280396 those5 1 7 1 1 3 692 2562 165 29 93.389648 countries in which foreign producers are located. JX1(ID), Tr. 648-49. °° Complaint counsel's expert estimated that dispersion imports were 36.1 million pounds, JX1-4, PX140, Table 24; Occidental's estimate was 30-40 million pounds. I.D.F. 155; See note 44 supra. In contrast, Mr. Beightol thought that dispersion imports were 60 million pounds. JX1(ID, Tr. 690. Opinion 115 F.T.C.

237-48, 267-71 & 278-92; Goodrich, 110 FTC at 300 n.85.° Sunk costs represent 75% to 80% of the total cost of a suspension PVC plant, and total costs for an efficient-sized plant could exceed $100 million. I.D.F. 270.

Entry into either the copolymer market or the dispersion PVC market would be similarly difficult. 1.D.F. 239, 249-55, A copolymer or dispersion PVC plant requires a greater investment per pound of capacity than is required for a suspension homopolymer PVC plant.”” In addition, requirements of scale and sunk costs are significant impediments to entry into these markets.*8 I.D.F. 249-55, 267-72 (portion In Camera). The copolymer and dispersion markets are relatively small as compared to the minimum efficient scale of entry, which enhances the price-depressing effect of minimum scale entry. Demand for copolymer is declining so that entry would be unprofitable. I.D.F. 41 & 262; Schaefer, JX1(1), Tr. 586-87: Disch, JX1(IV), PX8 at 18. Dispersion PVC is considered a mature market, with demand flat or growing only slightly, which reduces the attractiveness of entry. 1.D.F. 42 & 263; Disch, JX1(IV), PX8 at 80; CX185E; RX197H In Camera (‘little or no growth"). °° The administrative law judge also concluded that vertical integration in the PVC industry increases the difficulty of entry into all three product markets. I.D.F. 273-77. Because we conclude, based on other evidence, that entry would be delayed for a period of years, we find it unnecessary to consider the effect of vertical integration on entry.

°’ Occidental estimated that a mass or suspension homopolymer plant would cost 30-40 cents per pound of annual capacity; for a copolymer plant, the cost would be 50-70 cents per pound and for a dispersion plant, 80 cents to $1 per pound. JX1(III), PX15 at 75-76. Occidental believed that de novo entry, from initial planning to production, would take 30-36 months, /d. at 83: actual construction (after permitting) would take 18-24 months. /d. at 76. 58 Occidental argues that these considerations are irrelevant, that the2 1 10 0 0 0 636 2495 1341 336 -1 3 1 10 1 0 0 636 2495 1341 336 -1 4 1 10 1 1 0 640 2495 1337 43 -1 5 1 10 1 1 1 640 2495 206 30 96.478264 Commissions 1 10 1 1 2 862 2497 52 29 96.478264 has5 1 10 1 1 3 931 2497 178 38 96.689598 recognized5 1 10 1 1 4 1126 2498 59 29 96.805298 that5 1 10 1 1 5 1201 2508 16 19 96.976410 a5 1 10 1 1 6 1232 2499 150 39 96.800194 declining5 1 10 1 1 7 1399 2501 111 29 96.946655 markets 1 10 1 1 8 1525 2502 73 29 96.714600 does5 1 10 1 1 9 1615 2508 49 23 96.799660 not5 1 10 1 1 10 1680 2509 96 23 96.204178 creates 1 10 1 1 11 1792 2512 16 21 96.359550 a5 1 10 1 1 12 1824 2503 109 30 96.789795 barriers 1 10 1 1 13 1948 2509 29 25 96.865158 to4 1 10 1 2 0 639 2544 1337 43 -1 5 1 10 1 2 1 639 2544 110 37 85.051331 entry. R.A.B. at 67-68, citing Echlin Manufacturing Co., 105 FTC 410, 488-89 (1985). Considerations of scale requirements and sunk costs in a declining market are not barriers to entry in the Stiglerian sense, as the Commission recognized in Echlin, but merger analysis properly is concerned with conditions, in addition to barriers, that delay entry and permit market power to be exercised in the interim, See 105 FTC at 486-87, or that decrease the likelihood that entry will occur, OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1243 1010 Opinion Expansion may be easier to accomplish than de novo entry, but expansion still requires a considerable amount of time and a substantial capital investment. Occidental's plans for expanding homopolymer capacity at Pasadena, for example, anticipated that production would not begin until two years after the expenditure had been authorized by management. RX1N In Camera. The estimated cost of the project was approximately $37 million. RXIZI16 Jn Camera. Tenneco estimated that any majors 1 3 1 8 7 1560 1033 198 46 96.138382 expansions 1 3 1 8 8 1786 1033 122 35 96.362831 would4 1 3 1 9 0 570 1091 1338 46 -1 5 1 3 1 9 1 570 1091 140 46 96.373192 requires 1 3 1 9 2 743 1097 72 30 96.688866 two5 1 3 1 9 3 847 1097 37 30 96.840820 to5 1 3 1 9 4 916 1091 97 36 96.728180 three5 1 3 1 9 5 1045 1102 101 35 96.347008 years5 1 3 1 9 6 1179 1097 36 30 96.253601 to5 1 3 1 9 7 1247 1102 47 35 96.196442 go5 1 3 1 9 8 1327 1092 151 45 96.196442 through5 1 3 1 9 9 1511 1092 57 34 96.469116 thes 1 3 1 9 10 1600 1092 205 45 96.244545 permitting5 1 3 1 9 11 1839 1092 69 34 96.896568 anda 1 3 1 10 0 570 1143 887 52 -1 5 1 3 1 10 1 570 1149 244 36 96.693008 construction5 1 3 1 10 2 829 1149 160 46 92.386971 phases. JX1-4, PX104 at E4.*° III. MARKET SHARE AND CONCENTRATION The fewer the competitors in a market, the easier it becomes for firms to coordinate price and output decisions. As the number of firms in an industry declines and concentration increases, the likelihood of anticompetitive effects from an acquisition also increases. United States v. Philadelphia National Bank, 374 U.S. 321, 363 (1963); Elders Grain, Inc., 868 F.2d at 905-07; Hospital Corporation of America, 807 F.2d at 1387; FTC v. PPG Industries, Inc., 798 F.2d 1500, 1503 (D.C. Cir. 1986); Goodrich, 110 FTC 303; Weyerhaeuser Co., 106 FTC 172, 278 (1985). When a market is Expansion by the incumbent firms may not have the same procompetitive effect as new entry but may simply maintain the status quo. Formosa said that we4 1 7 1 3 0 563 2305 1335 39 -1 5 1 7 1 3 1 563 2306 77 37 96.729797 hopes 1 7 1 3 2 651 2315 46 20 96.536606 we5 1 7 1 3 3 708 2315 47 20 96.435837 ares 1 7 1 3 4 767 2305 90 39 96.649216 doing5 1 7 1 3 5 868 2305 55 30 96.830292 this5 1 7 1 3 6 938 2306 185 38 96.128227 [expansion]5 1 7 1 3 7 1137 2306 28 29 96.418068 in5 1 7 1 3 8 1177 2306 70 29 96.792091 such5 1 7 1 3 9 1260 2315 16 20 96.624382 a5 1 7 1 3 10 1287 2315 66 29 96.711372 ways 1 7 1 3 11 1364 2315 30 20 96.705704 as5 1 7 1 3 12 1407 2311 49 24 96.462585 not5 1 7 1 3 13 1468 2311 28 24 96.462585 to5 1 7 1 3 14 1508 2306 50 30 96.764214 stir5 1 7 1 3 15 1568 2307 46 29 96.912743 thes 1 7 1 3 16 1627 2307 196 37 96.585991 marketplace5 1 7 1 3 17 1834 2307 64 37 95.040794 up. CX165B (Chemical Week, Nov. 4, 1987, at 58); RX222B. Vista announced that it was “tailoring [its] resin expansion program to match anticipated growth so that Vista will maintain its current 10% share of the overall PVC market." RX236A (J. Commerce, Dec. 14, 1987). Tenneco in a business plan said that [t]he5 1 7 1 7 13 1749 2500 150 38 96.004654 preferred4 1 7 1 8 0 563 2548 1337 38 -1 5 1 7 1 8 1 563 2548 121 30 96.790680 methods 1 7 1 8 2 704 2548 36 30 96.900986 of5 1 7 1 8 3 754 2548 165 38 96.446533 expansions 1 7 1 8 4 939 2548 100 30 96.139923 would5 1 7 1 8 5 1057 2548 37 30 96.373322 be5 1 7 1 8 6 1112 2548 48 29 96.373322 via5 1 7 1 8 7 1179 2548 178 38 96.463043 acquisitions 1 7 1 8 8 1376 2557 31 20 96.981781 as5 1 7 1 8 9 1426 2548 57 30 96.685036 this5 1 7 1 8 10 1502 2548 93 30 96.724518 offers5 1 7 1 8 11 1615 2548 153 30 96.706459 increased5 1 7 1 8 12 1788 2548 112 30 96.774734 market4 1 7 1 9 0 562 2596 1336 38 -1 5 1 7 1 9 1 562 2596 207 37 96.303711 participation5 1 7 1 9 2 787 2596 70 29 96.522774 with5 1 7 1 9 3 874 2605 38 20 96.522774 no5 1 7 1 9 4 928 2596 132 29 96.078850 increases 1 7 1 9 5 1076 2596 29 29 96.960251 in5 1 7 1 9 6 1121 2597 70 29 96.091362 totals 1 7 1 9 7 1209 2596 132 38 96.671318 industry5 1 7 1 9 8 1357 2596 160 38 64.902885 capacity. JX1-4, PX104 at E8.

Occidental in 1987 said that anticipated expansions by incumbent firms will5 1 7 1 10 12 1795 2645 104 29 96.792358 enable4 1 7 1 11 0 562 2693 1337 38 -1 5 1 7 1 11 1 562 2693 133 38 96.353645 industry5 1 7 1 11 2 713 2694 135 37 96.717369 capacity5 1 7 1 11 3 866 2699 30 23 96.618210 to5 1 7 1 11 4 913 2694 76 37 96.553612 keeps 1 7 1 11 5 1006 2702 73 29 96.553612 pace5 1 7 1 11 6 1097 2693 70 29 96.500488 with5 1 7 1 11 7 1184 2694 49 28 96.501709 thes 1 7 1 11 8 1249 2694 128 28 96.906036 demands 1 7 1 11 9 1396 2694 128 37 94.851669 growth and that its proposed expansion of Pasadena is5 1 7 1 12 5 1006 2751 157 28 96.458694 necessary5 1 7 1 12 6 1176 2742 47 28 92.987839 for5 1 7 1 12 7 1235 2742 166 37 92.349838 OxyChem5 1 7 1 12 8 1414 2747 30 23 96.952538 to5 1 7 1 12 9 1457 2741 141 30 94.907166 maintains 1 7 1 12 10 1612 2742 35 29 96.677872 its5 1 7 1 12 11 1660 2742 131 37 96.872047 positions 1 7 1 12 12 1805 2751 32 19 96.402390 as5 1 7 1 12 13 1851 2742 47 28 96.797806 thea 1 7 1 13 0 561 2790 761 37 -1 5 1 7 1 13 1 561 2790 178 37 96.589699 recognized5 1 7 1 13 2 753 2790 112 29 96.789482 markets 1 7 1 13 3 878 2790 123 29 85.091324 leader. RX1L Jn Camera.

Opinion 115 F.T.C.

moderately concentrated,” the Commission has said that an especially5 1 3 1 2 2 863 704 134 35 96.199074 careful5 1 3 1 2 3 1011 704 132 35 96.713448 reviews 1 3 1 2 4 1157 704 42 35 96.740204 of5 1 3 1 2 5 1212 715 19 23 96.596046 a5 1 3 1 2 6 1245 704 150 34 96.881859 numbers 1 3 1 2 7 1409 704 43 34 96.655334 of5 1 3 1 2 8 1463 704 159 45 96.561897 industry5 1 3 1 2 9 1638 703 281 35 96.524422 characteristics5 1 3 1 2 10 1935 703 36 34 96.524422 in4 1 3 1 3 0 634 761 1336 47 -1 5 1 3 1 3 1 634 763 160 36 93.088120 additions 1 3 1 3 2 834 770 35 28 95.559616 to5 1 3 1 3 3 908 762 285 36 89.174881 concentration is necessary to assess the likely competitive effects of the transaction. Weyerhaeuser, 106 FTC at 280. When a market is highly concentrated, the Commission examines the particular characteristics of the industry to determine whether the presumption of anticompetitive effects that arises from the market share and concentration data is rebutted, Olin Corporation, Docket 9196, slip op. at 22 (June 13, 1990), aff'd No. 90-70452 (9th Cir. Feb. 26, 1993), but the Commission has said that relatively4 1 3 1 11 0 634 1228 1336 49 -1 5 1 3 1 11 1 634 1238 121 39 96.677513 strong5 1 3 1 11 2 793 1231 175 35 96.421082 evidences 1 3 1 11 3 1006 1230 93 36 96.090050 from5 1 3 1 11 4 1137 1230 100 35 96.397049 others 1 3 1 11 5 1273 1229 131 36 96.174934 factors5 1 3 1 11 6 1443 1229 29 35 96.592178 is5 1 3 1 11 7 1511 1229 137 35 96.271248 needed5 1 3 1 11 8 1686 1235 35 29 96.271248 to5 1 3 1 11 9 1759 1229 101 34 95.995667 rebuts 1 3 1 11 10 1898 1228 72 35 95.820404 that4 1 3 1 12 0 632 1288 842 47 -1 5 1 3 1 12 1 632 1289 278 46 79.756226 presumption. Goodrich, 110 FTC at 314.

A. Mass and Suspension PVC Occidental's acquisition of Tenneco's PVC business increased the Herfindahl-Hirschmann Index ("HHI") in the moderately concentrated mass and suspension PVC market by 156 points to 1278, based on 1985 actual production (including PVC homopolymer and copolymer production), and increased the four-firm concentration ratio from approximately 54% to about 61%.°' In terms of operating capacity, the acquisition increased the HHI by 158 points to 1305 and 6° Herfindahl-Hirschmann Index ("HHI") thresholds of 1000 and 1800 correspond roughly to four-firm concentration ratios of 50% and 70%, respectively. Department of Justice, Merger Guidelines Section 3.1 (1984). Markets for which the HHI is between 1000 and 1800 points are considered moderately concentrated, and markets for which the HHI is more than 1800 points are considered highly concentrated. See Goodrich, 110 FTC at 305; Grand Union Co., 102 FTC at 1055. 61 When actual imports are included, the acquisition increases the HHI by more than 140 points to between 1164 and 1187 (depending on the number of import producers), and the four-firm concentration ratio increases from 51% to 58%. JX1-4, PX140, Table 23. Imports play a much smaller role in subsequent years: by 1987, when the record closed, imports accounted for less than one-third of the market share recorded in 1985 and were continuing a rapid decline. See text at notes 35-36 supra; I.D.F. 123-25. In any case, imports were excluded from concentration and market share calculations in Goodrich, 110 FTC at 306-11, so that for purposes of direct comparison, the figures in the text are appropriate. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1245 1010 Opinion the four firm concentration ratio from about 56% to about 63%. I.D. at 59-60; JX1-4, PX140, Tables 1 & 2.° Occidental argues that the finding of liability in the mass and suspension PVC market must fail, because the market share and concentration data cannot5 1 3 2 3 4 1085 841 45 36 96.636711 be5 1 3 2 3 5 1142 839 259 47 96.343552 distinguished5 1 3 2 3 6 1414 838 258 47 96.318001 meaningfully5 1 3 2 3 7 1685 837 93 36 96.718163 from5 1 3 2 3 8 1791 837 101 36 96.431389 those4 1 3 2 4 0 555 896 1335 51 -1 5 1 3 2 4 1 555 902 35 35 96.894524 in5 1 3 2 4 2 605 902 100 35 96.894524 others 1 3 2 4 3 718 901 159 46 96.873032 litigated5 1 3 2 4 4 892 911 100 25 96.398849 cases5 1 3 2 4 5 1008 900 35 34 96.398849 in5 1 3 2 4 6 1058 899 117 35 96.809502 which5 1 3 2 4 7 1190 899 57 35 96.745682 thes 1 3 2 4 8 1262 898 245 36 96.569633 Commissions 1 3 2 4 9 1522 897 112 35 96.553963 found5 1 3 2 4 10 1648 908 47 24 96.991745 no5 1 3 2 4 11 1711 896 143 36 96.318176 Sections 1 3 2 4 12 1870 896 20 34 96.816628 74 1 3 2 5 0 556 954 1336 50 -1 5 1 3 2 5 1 556 960 204 40 89.509987 violation, because the postacquisition HHI is5 1 3 2 5 7 1510 956 71 35 96.417824 still5 1 3 2 5 8 1599 955 239 45 96.507607 comfortably5 1 3 2 5 9 1856 954 36 35 96.742264 in4 1 3 2 6 0 555 1012 1337 48 -1 5 1 3 2 6 1 555 1019 59 34 96.707474 thes 1 3 2 6 2 631 1018 112 35 96.412018 lowers 1 3 2 6 3 757 1016 79 36 96.159409 half5 1 3 2 6 4 847 1016 43 36 96.159409 of5 1 3 2 6 5 902 1017 58 34 92.269295 thes 1 3 2 6 6 978 1016 227 44 92.061493 'moderately5 1 3 2 6 7 1222 1014 258 36 31.608582 concentrated’5 1 3 2 6 8 1497 1024 108 35 96.767715 ranges 1 3 2 6 9 1621 1013 218 35 96.415306 established5 1 3 2 6 10 1856 1012 36 35 96.929283 in4 1 3 2 7 0 556 1071 1336 45 -1 5 1 3 2 7 1 556 1077 57 34 96.911057 thes 1 3 2 7 2 632 1076 231 35 96.350723 Guidelines and because [t]he5 1 3 2 7 6 1273 1073 247 35 96.015839 Commissions 1 3 2 7 7 1538 1073 63 34 95.815521 has5 1 3 2 7 8 1621 1082 109 25 96.445442 never5 1 3 2 7 9 1746 1071 83 36 94.824341 held5 1 3 2 7 10 1848 1082 44 24 95.912712 an4 1 3 2 8 0 555 1129 1336 50 -1 5 1 3 2 8 1 555 1133 212 46 96.481537 acquisitions 1 3 2 8 2 781 1133 170 35 95.974724 unlawful5 1 3 2 8 3 966 1132 35 35 96.889297 in5 1 3 2 8 4 1015 1133 58 34 96.780472 thes 1 3 2 8 5 1087 1131 208 36 96.692932 Guidelines5 1 3 2 8 6 1309 1142 58 25 96.794846 era5 1 3 2 8 7 1381 1130 117 36 96.735512 where5 1 3 2 8 8 1511 1130 58 35 96.755157 thes 1 3 2 8 9 1582 1130 85 34 96.823647 HHI5 1 3 2 8 10 1681 1140 73 24 96.853859 was5 1 3 2 8 11 1768 1139 37 25 95.895119 as5 1 3 2 8 12 1820 1129 71 35 96.564011 low4 1 3 2 9 0 554 1187 1335 49 -1 5 1 3 2 9 1 554 1203 37 24 96.952789 as5 1 3 2 9 2 607 1192 25 35 96.161278 it5 1 3 2 9 3 644 1192 30 35 95.741592 is5 1 3 2 9 4 688 1192 82 35 95.741592 here5 1 3 2 9 5 784 1191 68 35 96.929390 ands 1 3 2 9 6 866 1190 180 36 96.767380 increased5 1 3 2 9 7 1060 1190 46 46 96.670685 by5 1 3 2 9 8 1122 1190 86 35 96.806816 such5 1 3 2 9 9 1222 1200 19 25 96.860222 a5 1 3 2 9 10 1255 1190 101 35 94.159576 small5 1 3 2 9 11 1372 1189 172 35 73.384995 amount. R.A.B. at 16-17.

These arguments ignore the principle that each case must be decided on its own facts. Market share and concentration data are important preliminary surrogate measures of market power, not infallible predictors of competitive effects. They are an5 1 3 3 4 9 1700 1416 190 46 96.717186 important4 1 3 3 5 0 554 1473 1335 48 -1 5 1 3 3 5 1 554 1476 144 45 96.945808 starting5 1 3 3 5 2 711 1476 100 45 96.969368 points 1 3 3 5 3 824 1475 35 34 96.968369 in5 1 3 3 5 4 873 1485 138 35 96.866188 mergers 1 3 3 5 5 1024 1474 166 46 96.434196 analysis,5 1 3 3 5 6 1207 1475 87 42 96.864838 [but]5 1 3 3 5 7 1310 1480 61 29 97.003212 not5 1 3 3 5 8 1384 1473 208 36 96.401993 conclusive5 1 3 3 5 9 1606 1473 34 35 96.778740 in5 1 3 3 5 10 1655 1473 234 45 96.635048 determining4 1 3 3 6 0 553 1529 1337 48 -1 5 1 3 3 6 1 553 1533 58 33 96.303391 thes 1 3 3 6 2 642 1532 146 45 95.729103 legality5 1 3 3 6 3 819 1531 42 35 96.845589 of5 1 3 3 6 4 888 1542 19 24 96.696228 a5 1 3 3 6 5 937 1542 140 34 96.704414 mergers 1 3 3 6 6 1105 1531 112 35 96.622734 under5 1 3 3 6 7 1247 1530 145 35 94.848816 Sections 1 3 3 6 8 1423 1530 52 35 94.848816 7. American Medical International Inc., 104 FTC 1, 200 (1984); Goodrich, 110 FTC at 305; See also Weyerhaeuser, 106 FTC at 278; Hospital Corporation of America, 106 FTC at 474; 1992 Merger Guidelines Section 1.51 ("a useful indicator of the likely potential competitive effect of a merger"). The next step is consideration of other characteristics of the market to assess likely competitive effects. See Weyerhaeuser, 106 FTC at 278. In each of the two cases cited by Occidental, Weyerhaeuser and Goodrich, the Commission recognized a rebuttable5 1 3 3 15 2 795 2039 245 47 96.184555 presumptions 1 3 3 15 3 1066 2039 42 35 96.500938 of5 1 3 3 15 4 1130 2038 305 46 96.242348 anticompetitive5 1 3 3 15 5 1460 2037 147 36 96.299286 effects from market share and concentration data. Goodrich, 110 FTC at 305; See Weyerhaeuser, 106 FTC at 278. In each case, the Commission then reviewed the particular characteristics of the markets involved. In neither case were market share and concentration data dispositive of the issue of competitive effects. The point of the analysis is not 6 These data include the capacity of higher cost, small reactor plants unable to undercut the cartel price of lower cost, large reactor plants that constitute by far the majority of mass and suspension capacity. See text at notes 18-21 supra & I.D.F. 597-602 (portion Jn Camera). In addition to the cost disadvantage, small reactor plants are, for the most part, owned by the same firms that own the large reactor plants and would have incentives not to undercut the cartel price. See RX197L & M In Camera.

Opinion 115 F.T.C.

whether the numbers are different, as Occidental asserts, but whether the particular facts of the case indicate that anticompetitive effects are or are not likely.

Occidental asserts several objections to the calculations of market share and concentration data cited in the Initial Decision. Occidental's principal objection is that the data cited by Judge Howder do not include practical production data, which, according to Occidental, were described by the Commission in Goodrich as thes 1 3 2 5 10 1723 1047 92 30 96.875999 most5 1 3 2 5 11 1828 1041 155 36 96.707100 relevant4 1 3 2 6 0 645 1097 1338 46 -1 5 1 3 2 6 1 645 1108 164 25 96.739319 measures 1 3 2 6 2 829 1097 42 36 96.695816 of5 1 3 2 6 3 885 1097 194 46 51.588654 capacity. R.A.B. at 18, citing Goodrich, 110 FTC at 327. This is incorrect. In Goodrich, the Commission cited and applied three measures of capacity and production -- nameplate capacity, practical production capacity and actual production -- to calculate market share and concentration, and it did not select one set of data over any other for this purpose.“ We reject Occidental's claim that the administrative law judge erred in this respect.® 6} Occidental quotes this phrase out of context: The Commission in Goodrich said that practical production capacity was thes 1 5 1 2 8 1414 1701 76 24 96.767250 most5 1 5 1 2 9 1501 1696 127 29 96.210091 relevant5 1 5 1 2 10 1641 1704 133 21 96.292358 measures 1 5 1 2 11 1786 1695 34 30 97.007133 of5 1 5 1 2 12 1828 1696 150 38 86.376900 capacity to assess capacity utilization levels in the industry, not to calculate market share and concentration. 110 FTC at 327. To buttress its argument that the Commission has a clears 1 5 1 5 3 782 1840 172 38 96.337784 preferences 1 5 1 5 4 968 1840 48 29 97.014183 for5 1 5 1 5 5 1028 1840 48 28 97.014290 thes 1 5 1 5 6 1090 1840 139 37 96.602959 practical5 1 5 1 5 7 1244 1840 175 37 96.594574 productions 1 5 1 5 8 1434 1840 134 36 96.594574 capacity5 1 5 1 5 9 1583 1839 160 33 86.164986 measure, R.A.B. at 19, Occidental also cites the Commission’s statement that [p]practical5 1 5 1 6 9 1803 1887 176 37 96.858009 production4 1 5 1 7 0 641 1935 1338 39 -1 5 1 5 1 7 1 641 1936 134 38 90.834602 capacity5 1 5 1 7 2 790 1959 45 6 69.529427 ...5 1 5 1 7 3 849 1935 137 38 96.897774 provides5 1 5 1 7 4 1000 1944 15 20 96.962715 a5 1 5 1 7 5 1027 1935 92 29 96.648933 better5 1 5 1 7 6 1130 1944 134 20 96.953453 measures 1 5 1 7 7 1276 1935 35 28 97.009163 of5 1 5 1 7 8 1321 1935 95 28 96.519653 actual5 1 5 1 7 9 1429 1935 175 37 96.734627 productions 1 5 1 7 10 1618 1935 191 28 80.806488 constraints than does nameplate capacity. R.A.B. at 18-19, citing Goodrich, 110 FTC at 306 n.118. This statement did not select one measure over another as the most relevant but rather described a difference between two of the three measures that the Commission cited and applied in Goodrich: nameplate (or design) capacity, practical production capacity and actual production.

6 All three measures yielded comparable results: the Goodrich acquisition increased the nameplate capacity HHI by 113 points to 1098 and the practical production capacity HHI by 112 points to 1079; the Commission estimated that the HHI for actual production increased by 110 points to 1020. 110 FTC at 309-10. 6 Occidental attempts in this appeal to present new market share and concentration data and claims that Tenneco erroneously overstated its production capacity. R.A.B. at 20 n.16. Occidental had the opportunity to present these data at the hearing, when complaint counsel could examine and test them, and it failed to do so. In any event, Occidental's proferred data, which purport to show that the acquisition increased the HHI for practical production capacity by 137 points to 1250 (or by 144 points to 1255, if Tenneco's data are used), are of the same order of magnitude as those cited by the administrative law judge. See note 66 infra. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1247 1010 Opinion Occidental also argues that the numbers in this case are indistinguishable from those in Goodrich, suggesting that the complaint should, therefore, be dismissed. The postacquisition HHIs in this case, however, are approximately 200 points higher than in Goodrich.© Occidental attempts to understate the difference between the numbers here and those in Goodrich by assigning to the Goodrich acquisition the capacity of plants that were not acquired by Goodrich but were closed by the acquired firm. R.A.B. at 16 & n12. Occidental's attempted comparison is factually incorrect. In Goodrich, the Commission declined to attribute the plant closures to the Goodrich acquisition and instead analyzed the acquisition on the basis of only those plants actually acquired by Goodrich. 110 FTC at 347.°7 Even if the market share and concentration data were identical, it does not necessarily follow that we should reach the same result -dismissal of the complaint -- in both cases. Market share and concentration data are “an important starting point in merger 66 For actual production, the HHI is 1278, 258 points higher than the 1020 points in Goodrich. Using Occidental's practical production figures, See note 65 supra, the HHI is 1250 points, compared to 1079 in Goodrich. For operating (nameplate) capacity, the HHI is 1305, compared to 1098 in Goodrich (although these figures are not strictly comparable, See C.A.B. at 45 (portion Jn Camera)). 67 Occidental asserts that [t]he5 1 6 1 1 6 1213 1944 153 29 96.348473 Goodrich5 1 6 1 1 7 1391 1944 204 29 96.348473 Commissions 1 6 1 1 8 1609 1944 148 29 95.592621 indicated5 1 6 1 1 9 1771 1944 60 29 96.450912 that5 1 6 1 1 10 1845 1944 48 29 96.450912 the2 1 7 0 0 0 549 1994 1347 804 -1 3 1 7 1 0 0 549 1994 1347 804 -1 4 1 7 1 1 0 556 1994 1338 40 -1 5 1 7 1 1 1 556 1995 181 39 96.336708 acquisitions 1 7 1 1 2 753 1995 101 30 96.014923 would5 1 7 1 1 3 869 1995 37 30 96.812302 be5 1 7 1 1 4 923 1995 108 39 96.343155 upheld5 1 7 1 1 5 1048 2004 75 20 96.626442 even5 1 7 1 1 6 1139 1995 26 29 96.213341 if5 1 7 1 1 7 1177 1995 151 29 93.300179 Diamonds 1 7 1 1 8 1345 1995 186 29 57.494740 Shamrock's5 1 7 1 1 9 1547 1995 117 37 96.346252 closings 1 7 1 1 10 1680 1994 35 29 96.970520 of5 1 7 1 1 11 1728 1994 67 29 96.989578 four5 1 7 1 1 12 1810 1994 84 29 96.536903 other4 1 7 1 2 0 556 2043 1336 39 -1 5 1 7 1 2 1 556 2044 78 30 96.786293 PVC5 1 7 1 2 2 651 2045 98 37 92.507317 plants5 1 7 1 2 3 768 2068 5 5 63.897903 .5 1 7 1 2 4 793 2068 4 5 63.897903 .5 1 7 1 2 5 817 2067 5 6 83.746368 .5 1 7 1 2 6 841 2052 61 21 96.728485 was5 1 7 1 2 7 919 2043 155 30 96.310593 attributed5 1 7 1 2 8 1091 2049 30 23 97.002777 to5 1 7 1 2 9 1137 2044 47 28 96.746872 thes 1 7 1 2 10 1202 2043 204 38 72.741158 acquisition. R.A.B. at 16n.12. This is incorrect. In discussing the presumption of anticompetitive effects based on market share evidence in Goodrich, the Commission compared the evidence in the record with that in Weyerhaeuser. The Commission said (1) that the increase in and level of HHI resulting from the acquisition (apart from the Deer Park and Delaware City plant closures) were about 100 points less than in Weyerhaeuser; (2) that, [a]4 1 7 1 8 0 549 2330 1347 42 -1 5 1 7 1 8 1 549 2334 135 38 96.605629 fortiori,5 1 7 1 8 2 709 2334 49 29 96.490952 thes 1 7 1 8 3 782 2333 222 29 96.648392 concentrations 1 7 1 8 4 1027 2333 67 29 83.979904 data5 1 7 1 8 5 1120 2357 4 5 55.903088 .5 1 7 1 8 6 1151 2356 5 6 55.903088 .5 1 7 1 8 7 1183 2356 4 5 69.700546 .5 1 7 1 8 8 1213 2337 97 25 96.756714 creates 1 7 1 8 9 1334 2341 35 20 96.911713 an5 1 7 1 8 10 1393 2340 75 21 96.470863 even5 1 7 1 8 11 1493 2331 117 30 96.680405 weaker5 1 7 1 8 12 1633 2331 204 38 96.550201 presumptions 1 7 1 8 13 1861 2330 35 30 96.835426 of4 1 7 1 9 0 557 2379 1335 41 -1 5 1 7 1 9 1 557 2382 250 38 96.190453 anticompetitive5 1 7 1 9 2 819 2382 121 30 90.136971 effects than in Weyerhaeuser; and (3) that, therefore, the rebuttal evidence needs 1 7 1 10 3 815 2436 49 24 96.881165 not5 1 7 1 10 4 875 2430 37 30 96.881165 be5 1 7 1 10 5 924 2439 31 20 96.982597 as5 1 7 1 10 6 968 2435 98 32 96.517509 strong5 1 7 1 10 7 1078 2439 31 20 96.588936 as5 1 7 1 10 8 1123 2430 19 29 96.691376 it5 1 7 1 10 9 1154 2438 60 21 96.904800 was5 1 7 1 10 10 1227 2430 28 28 96.859795 in5 1 7 1 10 11 1268 2429 255 38 86.852058 Weyerhaeuser. 110 FTC at 311. The Commission in Goodrich also observed that [e]ven5 1 7 1 11 8 1494 2476 36 30 72.151543 if”5 1 7 1 11 9 1553 2477 47 29 96.526360 thes 1 7 1 11 10 1621 2476 79 29 96.824150 Deer5 1 7 1 11 11 1719 2476 73 29 96.502281 Parks 1 7 1 11 12 1812 2476 81 37 96.502281 plant4 1 7 1 12 0 556 2524 1336 40 -1 5 1 7 1 12 1 556 2528 133 29 96.688248 closures5 1 7 1 12 2 707 2536 78 21 96.712044 were5 1 7 1 12 3 802 2527 154 29 96.812500 attributed5 1 7 1 12 4 973 2532 29 24 96.483994 to5 1 7 1 12 5 1018 2527 48 28 96.181221 thes 1 7 1 12 6 1082 2526 187 38 96.642982 acquisition,5 1 7 1 12 7 1287 2527 47 27 96.895836 thes 1 7 1 12 8 1351 2526 129 37 96.734818 changes5 1 7 1 12 9 1496 2525 29 29 96.546265 in5 1 7 1 12 10 1542 2525 70 29 93.946503 HHI5 1 7 1 12 11 1629 2525 93 29 96.388771 levels5 1 7 1 12 12 1739 2524 101 30 96.539818 would5 1 7 1 12 13 1855 2524 37 30 96.934143 be4 1 7 1 13 0 557 2572 1336 42 -1 5 1 7 1 13 1 557 2576 117 38 93.581970 barely comparable" to those in Weyerhaeuser, but the Commission did not determine that the plant closures should be attributed to the acquisition (Goodrich maintained that they should not, /d.), and it did not speculate about what its conclusion concerning liability might have been had the plant closures been attributed to Goodrich. See also 110 FTC at 309 n.125 & 311.130. Opinion 115 F.T.C.

analysis," Goodrich, 110 FTC at 305, quoting American Medical International, 104 FTC at 200, not infallible predictors of competitive effects. Occidental's numerical approach would make market shares dispositive of liability under Section 7, an approach that the Commission specifically has declined to follow. E.g., Goodrich, 110 FTC at 305; Weyerhaeuser, 106 FTC at 278. B. PVC Copolymer Occidental's acquisition of the PVC business of Tenneco increased the HHI for operating capacity in the PVC copolymer market by 1360 points to 3504. The combined firm has approximately 52% of the market, and the four firm concentration ratio is 87%. Based on actual production, the acquisition increased the HHI by 1577 points to 4368, the combined firm has 59% of the market and the four firm concentration ratio is 100%. I.D.F. 201-10; ID. at 63 (chart). This market is highly concentrated.™ C. Dispersion PVC The acquisition increased the HHI for operating capacity in the dispersion PVC market by 331 points to 2051. The combined firm has almost 28% of the market, and the four firm concentration ratio is 87%. Based on actual production and including imports, the acquisition increased the HHI by 330 points to 1938; Occidental is the largest firm with almost 32% of the market and the four firm 68 Occidental's own documents suggest the same conclusion. In planning for the acquisition, Mr. Schaeffer, Occidental's Executive Vice President responsible for PVC, reported:

In the copolymer business [after the acquisition], there would essentially be only two major producers: Occidental and Borden. This [acquisition] would provide us with almost half the market together with the major supply position to the record industry. This would significantly enhance the profitability of the Pottsdown suspension plant.

JX), PX12 at 151333.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1249 1010 Opinion concentration ratio is 80%. JI.D.F. 219-22; I.D. at 66-67. By Occidental's reckoning, the acquisition increased the HHI for the dispersion market by 336 points to 1746, the combined firm has about 30% of the market and four firm concentration is about 76%. R.A.B. at 79. Occidental's computations are flawed, and the HHI calculated in the Initial Decision appears better supported by the evidence.” We find that the dispersion PVC market is highly concentrated.

IV. INDUSTRY CHARACTERISTICS The question in any Section 7 case is whether the acquisition creates or enhances market power or facilitates its exercise. In this case, because Occidental likely could not exercise market power unilaterally, the question is whether the acquisition creates, enhances or facilitates the ability of firms in the market to collude, either tacitly or expressly. See Hospital Corporation of America, 807 F.2d at 1386. Because market share and concentration data are only imprecise predictors, we examine other characteristics of the markets to determine whether anticompetitive effects are likely.” 6° Based on actual domestic production, without including imports, the acquisition increased the HHI by 448 points to 2201. 70 For example, Occidental's computation double-counts B.F. Goodrich's Mexican production, treating it separately as an import after it already had been included in the market share assigned to Goodrich. Compare R.A.B. 79 with Beightol, JXI(II), Tr. 692, and JX1-4, PX140, Table 24 ("B.F. Goodrich figure includes dispersion imports from [its] Canadian and Mexican affiliates as reported in [its] subpoena return"). Eliminating this double-counting from Occidental's computations boosts the post-acquisition HHI to the highly concentrated range (over 1800), as Occidental virtually concedes. R.R.B. at 81 n.58. Any additional adjustments to replace Mr. Beightol's assumptions with more credible estimates, See text at notes 53-55 supra, would further increase the post-acquisition HHI calculated by Occidental.

7! “The more compelling the prima facie case [based on market share and concentration data], the more evidence the defendant must present to rebut it successfully." United States v. Baker Hughes, Inc., 908 F.2d 981, 991 (D.C. Cir. 1990); See Goodrich, 110 FTC at 305-06; Grand Union Co., 102 FTC at 1055. Opinion 115 F.T.C.

Collusion is easier to establish and maintain and, therefore, more likely to occur in a market that is concentrated on the seller side and in which products are homogeneous, demand is inelastic, conditions are stable, sellers have similar costs, buyers are unable to constrain prices, transactions are numerous and frequent and information about price and other competitive variables is readily available. See Goodrich, 110 FTC at 315- 28; R.A. Posner, Antitrust Law, An Economic Perspective 55-71 (1976) ("Posner"). In Goodrich, the Commission concluded that conditions in the market for mass and suspension PVC are conducive to collusion, except for product homogeneity (i.e., with respect to product quality and transportation costs), production costs and the elasticity of demand for vinyl products. Occidental is referring to these conditions when it asserts that there5 1 3 1 14 3 901 1390 29 36 96.499359 is5 1 3 1 14 4 968 1401 47 24 95.991661 no5 1 3 1 14 5 1052 1391 174 35 96.476295 evidences 1 3 1 14 6 1264 1392 72 34 96.317421 that5 1 3 1 14 7 1372 1392 100 35 96.635941 these5 1 3 1 14 8 1509 1392 131 35 96.730171 factors5 1 3 1 14 9 1679 1392 91 35 96.532356 have5 1 3 1 14 10 1808 1392 163 46 96.299599 changed4 1 3 1 15 0 635 1449 1336 46 -1 5 1 3 1 15 1 635 1449 239 46 96.526749 significantly5 1 3 1 15 2 888 1449 35 36 96.990692 in5 1 3 1 15 3 937 1450 57 35 96.351349 thes 1 3 1 15 4 1008 1450 95 35 97.005280 short5 1 3 1 15 5 1116 1450 84 35 96.340736 times 1 3 1 15 6 1214 1450 96 35 96.418564 since5 1 3 1 15 7 1325 1450 56 35 91.481483 thes 1 3 1 15 8 1395 1451 244 34 91.481483 Commissions 1 3 1 15 9 1653 1451 209 34 96.618469 considered5 1 3 1 15 10 1876 1452 95 34 96.912567 them4 1 3 1 16 0 634 1508 1336 36 -1 5 1 3 1 16 1 634 1508 36 35 95.964912 in5 1 3 1 16 2 688 1508 215 35 91.263222 Goodrich. R.A.B. at 46. Each of these conditions is discussed below.

A. Product Homogeneity Collusion is facilitated when the relevant product is relatively homogeneous and undifferentiated, because the number of dimensions on which the members of the cartel must agree is reduced.” See Posner at 59-60. Collusion may be more complicated and, therefore, more difficult when products are less standard, when 2 “Product homogeneity implies that the offerings of rival sellers are. . . virtually perfect substitutes [and] there remains only one dimension along which rivalrous actions and counteractions can take place: price." F.M. Scherer, Industrial Market Structure and Economic Performance 200 (2d ed. 1980). In some circumstances, sellers with market power may collude on product dimensions other than price, e.g., product quality or service, but the theory in this case focuses on price.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 125] 1010 Opinion a schedule of prices may be more complex.” When collusion is likely to be more difficult, it is less likely to occur or to persist. The degree to which the relevant product is homogeneous is important here, because the Commission in Goodrich concluded that mass and suspension PVC homopolymer was relatively5 1 3 2 3 8 1727 853 138 35 92.424881 hetero-4 1 3 2 4 0 529 908 1337 46 -1 5 1 3 2 4 1 529 908 179 43 93.052002 geneous (as compared to vinyl chloride monomer), Goodrich, 110 FTC at 347, based on the different grades of PVC, a perception of quality differences within grade, and different transportation and production costs among producers. /d. at 316. The crucial5 1 3 2 7 10 1742 1085 120 46 96.286705 point about these differences, according to the Commission in Goodrich, was that determining and enforcing a consensus price could be complicated: Instead5 1 3 2 10 3 1007 1257 42 36 96.638367 of5 1 3 2 10 4 1068 1258 235 46 96.966278 establishing5 1 3 2 10 5 1326 1269 19 24 96.809784 a5 1 3 2 10 6 1369 1259 114 46 96.554886 singles 1 3 2 10 7 1505 1259 97 46 96.966454 prices 1 3 2 10 8 1624 1259 57 36 97.001762 for5 1 3 2 10 9 1702 1271 21 25 96.969246 a5 1 3 2 10 10 1746 1260 116 47 96.238884 single4 1 3 2 11 0 524 1313 1337 48 -1 5 1 3 2 11 1 524 1313 275 46 96.592125 homogeneous5 1 3 2 11 2 818 1316 162 45 96.597054 product,5 1 3 2 11 3 1000 1316 101 36 96.678467 firms5 1 3 2 11 4 1121 1323 94 29 96.426117 must5 1 3 2 11 5 1234 1317 171 36 96.784416 establish5 1 3 2 11 6 1425 1319 68 34 95.594452 ands 1 3 2 11 7 1513 1319 169 35 95.594452 maintains 1 3 2 11 8 1703 1330 19 24 96.705338 a5 1 3 2 11 9 1742 1320 119 36 95.860680 whole4 1 3 2 12 0 525 1372 1335 50 -1 5 1 3 2 12 1 525 1372 110 35 97.005569 series5 1 3 2 12 2 657 1373 43 34 96.950462 of5 1 3 2 12 3 716 1373 117 45 96.766838 prices5 1 3 2 12 4 854 1374 57 35 96.063515 for5 1 3 2 12 5 930 1385 19 24 96.915367 a5 1 3 2 12 6 970 1375 117 35 96.495461 whole5 1 3 2 12 7 1108 1375 109 35 96.850029 series5 1 3 2 12 8 1238 1375 43 35 96.686996 of5 1 3 2 12 9 1296 1377 150 45 96.873924 products 1 3 2 12 10 1465 1377 157 45 71.771263 grades. Jd. at 316 n.151. These complicating5 1 3 2 13 4 1134 1434 163 40 96.071266 factors, together with the possible constraining effect of the price elasticity of demand for vinyl end use products, were deemed sufficient to refutes 1 3 2 15 7 1378 1551 56 34 96.795448 thes 1 3 2 15 8 1448 1552 101 35 96.718010 weak5 1 3 2 15 9 1561 1553 244 45 96.718010 presumptions 1 3 2 15 10 1820 1554 42 34 96.454239 of4 1 3 2 16 0 522 1603 1335 50 -1 5 1 3 2 16 1 522 1603 307 46 96.208374 anticompetitive5 1 3 2 16 2 850 1605 129 35 96.696274 effects5 1 3 2 16 3 1000 1606 36 35 96.592163 in5 1 3 2 16 4 1056 1607 58 34 96.592163 thes 1 3 2 16 5 1138 1607 108 42 96.244431 [mass5 1 3 2 16 6 1268 1608 68 35 96.721596 ands 1 3 2 16 7 1358 1609 227 44 96.320282 suspension]5 1 3 2 16 8 1607 1610 93 35 95.621681 PVC5 1 3 2 16 9 1722 1611 135 35 96.340904 market4 1 3 2 17 0 520 1662 1034 45 -1 5 1 3 2 17 1 520 1662 141 34 96.581367 created5 1 3 2 17 2 676 1662 48 45 96.782021 by5 1 3 2 17 3 740 1663 58 34 96.526039 thes 1 3 2 17 4 813 1664 266 35 96.436272 concentrations 1 3 2 17 5 1095 1665 110 35 68.031250 data. 110 FTC at 347.

Occidental maintains that there5 1 3 3 1 5 1237 1723 29 36 97.004112 is5 1 3 3 1 6 1281 1734 46 25 96.449211 no5 1 3 3 1 7 1342 1725 171 36 95.903313 evidences 1 3 3 1 8 1527 1725 71 36 96.922142 that5 1 3 3 1 9 1612 1726 99 36 97.005989 these5 1 3 3 1 10 1724 1727 131 36 96.490250 factors4 1 3 3 2 0 519 1777 1336 48 -1 5 1 3 3 2 1 519 1777 92 35 96.521858 have5 1 3 3 2 2 628 1779 165 44 96.712944 changed5 1 3 3 2 3 811 1779 244 46 96.604881 significantly5 1 3 3 2 4 1073 1781 35 34 96.951721 in5 1 3 3 2 5 1126 1782 58 34 96.877701 thes 1 3 3 2 6 1201 1782 96 35 96.978996 short5 1 3 3 2 7 1314 1783 85 35 96.968536 times 1 3 3 2 8 1417 1784 98 34 96.188896 since5 1 3 3 2 9 1532 1785 58 34 96.413437 thes 1 3 3 2 10 1607 1785 248 36 96.413437 Commission4 1 3 3 3 0 519 1835 1336 49 -1 5 1 3 3 3 1 519 1835 215 37 96.541710 considered5 1 3 3 3 2 755 1837 97 35 96.853027 them5 1 3 3 3 3 872 1837 36 35 96.390945 in5 1 3 3 3 4 930 1837 194 43 93.293732 Goodrich,5 1 3 3 3 5 1165 1839 133 36 92.134430 R.A.B.5 1 3 3 3 6 1322 1847 33 29 96.450371 at5 1 3 3 3 7 1375 1835 89 47 80.711395 46,”5 1 3 3 3 8 1485 1842 79 41 96.568985 and,5 1 3 3 3 9 1587 1842 188 42 96.677605 therefore,5 1 3 3 3 10 1797 1844 58 35 96.763565 thea 1 3 3 4 0 519 1896 1335 51 -1 5 1 3 3 4 1 519 1896 210 35 96.419266 conclusions 1 3 3 4 2 744 1896 42 35 97.014038 of5 1 3 3 4 3 796 1896 58 36 97.014183 thes 1 3 3 4 4 869 1897 277 36 96.526108 administrative5 1 3 3 4 5 1161 1899 68 34 96.716103 laws 1 3 3 4 6 1238 1899 112 46 96.666565 judges 1 3 3 4 7 1364 1900 72 35 96.809555 that5 1 3 3 4 8 1449 1911 94 24 96.973969 mass5 1 3 3 4 9 1558 1902 68 34 96.489822 ands 1 3 3 4 10 1641 1902 213 45 96.425652 suspension4 1 3 3 5 0 518 1953 1336 47 -1 5 1 3 3 5 1 518 1953 94 34 96.349510 PVC5 1 3 3 5 2 641 1953 30 34 96.333420 is5 1 3 3 5 3 702 1965 19 22 96.333420 a5 1 3 3 5 4 749 1954 272 45 96.548714 homogeneous5 1 3 3 5 5 1049 1956 150 44 96.516861 products 1 3 3 5 6 1227 1963 94 29 95.934517 must5 1 3 3 5 7 1348 1958 44 34 95.934517 be5 1 3 3 5 8 1421 1957 183 36 95.719681 incorrect.5 1 3 3 5 9 1660 1959 119 35 96.551636 Based5 1 3 3 5 10 1807 1971 47 23 96.432533 on4 1 3 3 6 0 519 2011 1334 51 -1 5 1 3 3 6 1 519 2011 192 36 96.962135 additional5 1 3 3 6 2 727 2012 172 35 96.837791 evidences 1 3 3 6 3 913 2013 72 35 96.706352 that5 1 3 3 6 4 1000 2024 72 25 96.977592 was5 1 3 3 6 5 1087 2020 61 29 96.926903 not5 1 3 3 6 6 1161 2014 35 35 96.736580 in5 1 3 3 6 7 1211 2015 58 35 96.991531 thes 1 3 3 6 8 1283 2016 123 34 96.956924 records 1 3 3 6 9 1420 2016 35 34 96.703728 in5 1 3 3 6 10 1471 2016 193 42 96.865166 Goodrich,5 1 3 3 6 11 1679 2028 56 24 96.889038 we5 1 3 3 6 12 1750 2028 103 34 96.745728 agree4 1 3 3 7 0 517 2068 673 49 -1 5 1 3 3 7 1 517 2068 85 36 96.332443 with5 1 3 3 7 2 619 2069 58 35 96.968590 thes 1 3 3 7 3 693 2070 280 36 96.629753 administrative5 1 3 3 7 4 990 2071 67 35 96.525642 laws 1 3 3 7 5 1068 2071 122 46 96.859009 judge.2 1 4 0 0 0 514 2255 595 15 -1 3 1 4 1 0 0 514 2255 595 15 -1 4 1 4 1 1 0 514 2255 595 15 -1 5 1 4 1 1 1 514 2255 595 15 95.000000 2 1 5 0 0 0 513 2301 1339 295 -1 3 1 5 1 0 0 513 2301 1339 295 -1 4 1 5 1 1 0 590 2301 1261 55 -1 5 1 5 1 1 1 590 2301 190 43 0.000000 Products 1 5 1 1 2 792 2314 211 39 96.664482 homogeneity5 1 5 1 1 3 1016 2315 24 29 96.920601 is5 1 5 1 1 4 1054 2316 91 37 96.822716 likely5 1 5 1 1 5 1158 2321 29 24 96.752846 to5 1 5 1 1 6 1200 2316 37 29 96.752846 be5 1 5 1 1 7 1249 2316 158 38 96.712013 important5 1 5 1 1 8 1420 2317 28 29 96.712013 in5 1 5 1 1 9 1462 2318 149 38 96.854889 assessing5 1 5 1 1 10 1624 2319 49 28 97.008522 thes 1 5 1 1 11 1686 2319 165 29 96.334114 likelihood4 1 5 1 2 0 515 2363 1336 43 -1 5 1 5 1 2 1 515 2363 35 29 95.322250 of5 1 5 1 2 2 559 2364 150 29 95.322250 collusion5 1 5 1 2 3 722 2365 71 37 96.797142 only5 1 5 1 2 4 807 2365 85 29 96.667839 when5 1 5 1 2 5 905 2365 49 29 96.916046 thes 1 5 1 2 6 967 2365 130 30 96.850662 relevant5 1 5 1 2 7 1109 2366 123 38 96.838699 products 1 5 1 2 8 1246 2367 25 29 96.307175 is5 1 5 1 2 9 1284 2376 71 29 96.307175 very5 1 5 1 2 10 1367 2367 243 38 93.298805 heterogeneous,5 1 5 1 2 11 1624 2378 67 28 90.913452 e.g.,5 1 5 1 2 12 1713 2377 8 21 96.730469 a5 1 5 1 2 13 1734 2374 117 24 96.730469 custom4 1 5 1 3 0 514 2413 1336 42 -1 5 1 5 1 3 1 514 2413 122 37 96.636917 products 1 5 1 3 2 649 2413 59 30 95.183647 that5 1 5 1 3 3 721 2413 23 30 95.183647 is5 1 5 1 3 4 757 2413 138 30 96.792488 different5 1 5 1 3 5 907 2414 77 29 96.660385 from5 1 5 1 3 6 996 2415 84 28 96.873093 orders 1 5 1 3 7 1091 2420 30 24 96.988838 to5 1 5 1 3 8 1132 2415 92 29 96.523170 order.5 1 5 1 3 9 1248 2416 55 29 96.785576 Sees 1 5 1 3 10 1315 2416 109 29 96.822716 Posner5 1 5 1 3 11 1435 2421 27 25 96.854675 at5 1 5 1 3 12 1474 2416 103 30 96.854675 59-60.5 1 5 1 3 13 1601 2418 23 28 93.416176 It5 1 5 1 3 14 1637 2417 24 29 93.416176 is5 1 5 1 3 15 1675 2418 133 37 96.393539 unlikely5 1 5 1 3 16 1821 2423 29 24 96.985603 to4 1 5 1 4 0 514 2461 1338 42 -1 5 1 5 1 4 1 514 2461 36 28 96.985039 be5 1 5 1 4 2 567 2461 158 37 96.801140 important5 1 5 1 4 3 741 2470 72 21 96.775291 overs 1 5 1 4 4 827 2470 15 21 96.775291 a5 1 5 1 4 5 859 2462 171 38 96.417648 significant5 1 5 1 4 6 1044 2463 111 29 96.607307 middle5 1 5 1 4 7 1171 2473 88 28 96.607307 ranges 1 5 1 4 8 1274 2464 36 29 97.014221 of5 1 5 1 4 9 1321 2464 123 38 97.004417 products 1 5 1 4 10 1460 2464 150 30 96.061882 variation.5 1 5 1 4 11 1639 2466 56 29 96.804443 Sees 1 5 1 4 12 1709 2467 143 36 96.802490 Hospital4 1 5 1 5 0 515 2509 1334 39 -1 5 1 5 1 5 1 515 2509 203 37 96.637520 Corporations 1 5 1 5 2 742 2510 36 37 96.622849 of5 1 5 1 5 3 790 2512 140 28 93.257484 Americas 1 5 1 5 4 953 2521 22 19 89.078400 v.5 1 5 1 5 5 999 2512 83 33 96.330048 FTC,5 1 5 1 5 6 1106 2512 57 29 96.478348 8075 1 5 1 5 7 1185 2512 73 29 96.112663 F.2d5 1 5 1 5 8 1277 2518 30 23 96.679855 at5 1 5 1 5 9 1332 2513 77 29 96.245422 13905 1 5 1 5 10 1430 2513 109 35 96.239815 (there is no established threshold of complexity beyond which [collusion] is infeasible"). ™ The complaint in this case was issued a year after the evidentiary record in Goodrich was closed, and the record in this case, which was closed three years after the record in Goodrich was closed, includes extensive documents and testimony that were not available in Goodrich. Opinion 115 F.T.C.

The analysis of the Commission in Goodrich emphasized that the market share and concentration data for the mass and suspension PVC market in that case create[d]5 1 3 1 3 7 1431 728 85 45 96.638023 only5 1 3 1 3 8 1540 739 19 24 96.459526 a5 1 3 1 3 9 1582 728 102 36 96.459526 weak5 1 3 1 3 10 1706 728 247 46 96.736740 presumptions 1 3 1 3 11 1977 729 42 35 96.951385 of4 1 3 1 4 0 677 784 1339 46 -1 5 1 3 1 4 1 677 784 234 46 96.766739 competitive5 1 3 1 4 2 932 784 135 46 85.995476 injury”5 1 3 1 4 3 1090 785 79 41 96.518135 and,5 1 3 1 4 4 1191 785 187 41 96.411903 therefore,5 1 3 1 4 5 1400 786 73 35 96.525940 that5 1 3 1 4 6 1492 786 59 35 96.901184 thes 1 3 1 4 7 1571 785 174 36 96.296791 evidences 1 3 1 4 8 1765 792 37 29 96.707298 to5 1 3 1 4 9 1822 787 101 34 96.614738 rebuts 1 3 1 4 10 1943 787 73 35 97.007782 that4 1 3 1 5 0 676 843 1339 48 -1 5 1 3 1 5 1 676 843 242 46 96.149910 presumptions 1 3 1 5 2 932 844 90 35 96.254211 needs 1 3 1 5 3 1035 849 61 30 96.511581 not5 1 3 1 5 4 1109 843 45 36 96.511581 be5 1 3 1 5 5 1168 854 37 25 96.588646 as5 1 3 1 5 6 1221 850 117 40 96.588646 strong5 1 3 1 5 7 1353 854 36 25 97.005539 as5 1 3 1 5 8 1405 844 119 35 96.361443 would5 1 3 1 5 9 1537 845 44 34 96.592026 be5 1 3 1 5 10 1595 844 159 47 96.394142 required5 1 3 1 5 11 1768 844 32 36 96.417267 if5 1 3 1 5 12 1810 845 58 35 96.499084 thes 1 3 1 5 13 1881 845 134 36 96.899826 market4 1 3 1 6 0 677 902 1336 43 -1 5 1 3 1 6 1 677 912 94 25 96.735313 were5 1 3 1 6 2 790 912 100 25 96.557549 more5 1 3 1 6 3 907 902 262 35 95.554733 concentrated.5 1 3 1 6 4 1209 902 67 35 95.554733 1105 1 3 1 6 5 1293 902 88 35 96.420776 FTC5 1 3 1 6 6 1399 908 33 29 95.825760 at5 1 3 1 6 7 1451 902 83 41 95.825760 311;5 1 3 1 6 8 1552 903 67 35 96.111626 Sees 1 3 1 6 9 1636 902 81 36 96.487152 also5 1 3 1 6 10 1736 903 129 36 95.676674 Grand5 1 3 1 6 11 1884 904 129 41 95.676674 Union,4 1 3 1 7 0 681 960 1331 48 -1 5 1 3 1 7 1 681 961 67 36 96.834900 1025 1 3 1 7 2 760 960 88 36 96.825172 FTC5 1 3 1 7 3 863 966 33 30 96.809059 at5 1 3 1 7 4 914 960 89 36 96.689224 10555 1 3 1 7 5 1019 961 74 43 90.224022 (In general, the higher the concentration levels . . . the greater the evidence the Commission will require to rebut the prima facie showing."). If the same analysis were applied here, because the mass and suspension PVC market is somewhat more concentrated than it was in Goodrich, the presumption of competitive injury would be somewhat stronger than that in Goodrich, and the evidence to rebut that presumption also would need to be somewhat stronger than it was in Goodrich; given the greater concentration, the same evidentiary showing that sufficed to rebut the prima facie case in Goodrich would not necessarily be sufficient in this case. We need not and do not attempt to weigh the relative strengths and weaknesses of the evidence in Goodrich against the market share and concentration data in this proceeding, because evidence that was not in the record in Goodrich shows that mass and suspension PVC homopolymer is not heterogeneous in any sense relevant to the ability to collude.

1. Product Quality The primary indicia of homogeneity among products are the substitutability among products of different producers and the inability of any producer to obtain a premium price for his product. Documents and testimony that were not in the record in Goodrich show that even for the more sophisticated grades of PVC, substitutions can be and are readily made and no producer can obtain a premium price for his resin as compared to that of any other producer.

The Commission in Goodrich regarded the evidence concerning the homogeneity of mass and suspension PVC homopolymer as mixed. 110 FTC at 315. The Commission found that commodity4 1 5 2 4 0 672 2699 1336 50 -1 5 1 5 2 4 1 672 2703 146 46 96.042755 grades of PVC, homogeneous products sold primarily on price, accounted for about 75% of mass and suspension PVC sales. The OCCIDENTAL PETROLEUM CORPORATION, ETAL. = 1253 1010 Opinion Commission also concluded that it5 1 3 1 1 6 1258 626 30 35 96.833969 is5 1 3 1 1 7 1303 626 159 35 96.595528 difficult5 1 3 1 1 8 1476 632 35 29 95.989197 to5 1 3 1 1 9 1526 627 130 45 95.989197 charges 1 3 1 1 10 1672 638 19 24 96.998901 a5 1 3 1 1 11 1705 627 179 46 96.259369 premium4 1 3 1 2 0 547 681 1335 50 -1 5 1 3 1 2 1 547 681 57 36 96.457855 for5 1 3 1 2 2 627 692 68 36 96.653793 any5 1 3 1 2 3 719 682 108 46 96.630547 given5 1 3 1 2 4 850 683 108 45 96.374641 grades 1 3 1 2 5 982 683 42 36 96.466545 of5 1 3 1 2 6 1042 683 124 42 93.563103 PVC, Jd. at 316, implying a substantial degree of homogeneity. Despite this evidence, the Commission thought that the existence of different grades of PVC and the perception of some quality differences within grade among different producers implied some degree of heterogeneity that would require a cartel to establish a number of different prices instead of a single collusive price. /d. at 316 n.151.

Mass and suspension PVC homopolymer is produced in three different grades, pipe grade, general purpose grade and specialty grade, each of which has different properties and is used to make different end products.” Pipe grade and general purpose grade mass and suspension PVC homopolymer is made in large reactor plants. Specialty homopolymer resins are made in small reactor plants, which comprise a diminishing part of the total suspension homopolymer market.” Copolymer and dispersion PVC also are produced in different grades that have different properties and are used to make different end products. Copolymer is made in flooring grade, calendering grade and record grade. J XI(IV), PX9 at 18. The grades of dispersion PVC are general purpose grade, copolymer dispersion grade and flooring grade. See JX1(IV), PX9 at 88; JX1(IV), PX32.

The various properties that distinguish the different grades of PVC, such as molecular weight and particle size, are achieved by controlling the temperature, pressure and chemical additives in processing batches of PVC. JX1(IV), PX8 at 10; See Goodrich, 110 FTC at 316.

7° The Commission in Goodrich believed that small reactor suspension PVC capacity constituted about 1/3 of total capacity. 110 FTC at 321. Because a number of small reactor plants have been closed over time, small reactor capacity should be a smaller proportion of total capacity today. I.D.F. 595-96 (portion Jn Camera).

Opinion 115 F.T.C, The record shows that all three types of PVC are homogeneous within grade.”’ Occidental and Tenneco officials testified in 1986, in this proceeding,” that PVC made by different producers is a commodity product, readily interchangeable within grade with no significant quality differences among producers, and that no producer can obtain a premium price. Mr. Schaefer of Occidental testified in April 1986 that suspension PVC homopolymer is a commodity business: the product is5 1 3 1 8 5 1195 1021 135 46 96.257294 largely5 1 3 1 8 6 1349 1022 310 49 96.597832 interchangeable5 1 3 1 8 7 1678 1027 94 37 96.577164 from5 1 3 1 8 8 1791 1030 159 45 96.650558 suppliers 1 3 1 8 9 1967 1038 36 29 96.749016 to4 1 3 1 9 0 666 1073 1336 58 -1 5 1 3 1 9 1 666 1073 166 46 96.923775 supplier,5 1 3 1 9 2 848 1075 79 35 96.925888 sold5 1 3 1 9 3 941 1075 36 36 96.679832 in5 1 3 1 9 4 991 1076 84 46 96.839340 high5 1 3 1 9 5 1090 1079 175 42 96.839340 volumes,5 1 3 1 9 6 1279 1081 97 45 96.934410 prices 1 3 1 9 7 1390 1082 106 46 96.939163 beings 1 3 1 9 8 1510 1094 19 25 96.979309 a5 1 3 1 9 9 1543 1095 84 36 96.990997 very5 1 3 1 9 10 1641 1086 114 45 96.164474 majors 1 3 1 9 11 1768 1087 113 37 96.472954 factors 1 3 1 9 12 1894 1088 36 37 95.960434 in5 1 3 1 9 13 1944 1090 58 35 95.960434 thea 1 3 1 10 0 663 1132 1336 58 -1 5 1 3 1 10 1 663 1132 217 47 96.958496 purchasing5 1 3 1 10 2 903 1133 194 38 58.046986 decision. JX1-4, PX136 at 11; See also JX1(D, Tr.

559-61. Mr. Bailey of Occidental testified in 1986 that almost5 1 3 1 11 11 1953 1207 46 34 95.842087 all4 1 3 1 12 0 662 1247 1337 52 -1 5 1 3 1 12 1 662 1247 127 46 96.780197 grades5 1 3 1 12 2 806 1248 44 36 97.010658 of5 1 3 1 12 3 861 1249 93 36 93.296951 PVC5 1 3 1 12 4 970 1251 88 43 86.576271 a[re]5 1 3 1 12 5 1076 1253 285 43 74.018547 commodities, that the PVC resins of different producers are essentially5 1 3 1 13 4 1227 1312 329 48 94.745583 interchangeable and that Occidental cannot obtain a price premium for any of its PVC resins, whether5 1 3 1 14 13 1972 1380 25 35 96.987579 it4 1 3 1 15 0 659 1422 1335 58 -1 5 1 3 1 15 1 659 1422 44 36 96.991753 be5 1 3 1 15 2 723 1423 213 47 96.795738 dispersion,5 1 3 1 15 3 957 1428 211 45 96.826714 copolymer5 1 3 1 15 4 1185 1440 41 24 96.144829 or5 1 3 1 15 5 1243 1430 305 47 89.647217 homopolymer. JX1(IV), PX6 at 42, 104-05. Mr. Sacks of Occidental testified in 1986 that Tajlmost5 1 3 1 16 11 1949 1497 46 34 96.755142 all4 1 3 1 17 0 657 1539 1336 54 -1 5 1 3 1 17 1 657 1539 43 36 97.009415 of5 1 3 1 17 2 709 1541 58 35 96.806435 thes 1 3 1 17 3 781 1541 94 36 96.979713 PVC5 1 3 1 17 4 890 1542 164 36 96.622543 business5 1 3 1 17 5 1070 1544 30 35 96.908211 is5 1 3 1 17 6 1116 1546 241 47 94.602524 commodity with little5 1 3 1 17 9 1597 1551 217 37 96.510895 differences5 1 3 1 17 10 1831 1553 162 37 96.154678 between4 1 3 1 18 0 656 1599 1335 64 -1 5 1 3 1 18 1 656 1599 233 45 96.513313 competitive5 1 3 1 18 2 923 1602 188 45 94.650352 products and very5 1 3 1 18 5 1394 1606 88 36 96.180244 little5 1 3 1 18 6 1517 1608 198 37 96.059868 differences 1 3 1 18 7 1750 1611 36 35 96.059868 in5 1 3 1 18 8 1820 1607 171 56 93.976601 pricing. JX1(IV), PX7 at 13-14. Mr. Disch of Tenneco testified in 1986 that in5 1 3 1 20 2 722 1723 94 29 96.119347 most5 1 3 1 20 3 829 1716 175 37 96.932350 instances5 1 3 1 20 4 1018 1719 111 36 97.007286 resins5 1 3 1 20 5 1144 1731 65 24 96.657120 cans 1 3 1 20 6 1224 1721 44 35 96.959702 be5 1 3 1 20 7 1282 1722 306 48 96.689041 interchangeably5 1 3 1 20 8 1603 1727 86 34 96.300652 used5 1 3 1 20 9 1703 1728 46 44 96.901825 by5 1 3 1 20 10 1763 1731 225 33 95.887947 customers. JX1(IV), PX8 at 11. Mr. Stevens, Tenneco's director of marketing, testified in 1986 that suspension PVC homopolymer produced in large reactors is5 1 3 1 23 4 1016 1893 58 34 96.833122 thes 1 3 1 23 5 1094 1900 95 29 96.356361 most5 1 3 1 23 6 1209 1895 128 35 96.356361 classics 1 3 1 23 7 1359 1898 221 45 96.426414 commodity5 1 3 1 23 8 1600 1900 150 44 96.979836 products 1 3 1 23 9 1771 1901 71 35 96.944450 that5 1 3 1 23 10 1863 1902 14 33 95.894829 I5 1 3 1 23 11 1897 1903 91 35 95.914116 have2 1 4 0 0 0 645 2249 596 20 -1 3 1 4 1 0 0 645 2249 596 20 -1 4 1 4 1 1 0 645 2249 596 20 -1 5 1 4 1 1 1 645 2249 596 20 95.000000 2 1 5 0 0 0 640 2297 1342 349 -1 3 1 5 1 0 0 640 2297 1342 349 -1 4 1 5 1 1 0 720 2297 1262 60 -1 5 1 5 1 1 1 720 2297 26 20 28.148773 ”5 1 5 1 1 2 781 2309 55 29 73.244576 Sees 1 5 1 1 3 850 2310 107 30 96.504257 United5 1 5 1 1 4 965 2311 96 30 93.071152 States5 1 5 1 1 5 1072 2322 21 19 90.796455 v.5 1 5 1 1 6 1110 2313 162 30 96.459686 Containers 1 5 1 1 7 1282 2315 86 37 96.709167 Corp.5 1 5 1 1 8 1382 2316 34 37 96.923409 of5 1 5 1 1 9 1420 2317 145 34 96.015678 America,5 1 5 1 1 10 1578 2317 56 30 96.015678 3935 1 5 1 1 11 1647 2319 68 29 95.044205 U.S.5 1 5 1 1 12 1729 2319 66 34 96.963913 333,5 1 5 1 1 13 1808 2319 58 31 96.862846 3365 1 5 1 1 14 1879 2321 103 36 96.832100 (1969)4 1 5 1 2 0 645 2358 1336 50 -1 5 1 5 1 2 1 645 2358 128 35 77.490128 (While containers vary as to dimensions, weight, color, and so on, they are substantially identical, no matter who produces them, when made to particular specifications.”),; FTC v. Bass Brothers Enterprises, Inc., 1984-1 Trade Cas. (CCH) { 66,041, at 68,612 (N.D. Ohio 1984) ("Carbon black is a homogeneous, fungible product. Although it is produced in numerous different grades . . . in fact all of the producers produce basically the same grades and types."). 8 This testimony, which was given approximately a year after the record in Goodrich had closed, was not in the Goodrich record and was not considered by the Commission in its decision in Goodrich.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. — 1255 1010 Opinion seen,"”’ that the copolymer resins produced by different firms are “very similar" and that prices of PVC resins within grade ares 1 3 1 2 12 1820 690 59 36 96.417671 thea 1 3 1 3 0 542 747 668 44 -1 5 1 3 1 3 1 542 747 129 35 92.525352 same. JXI(IV), PX9 at 13 & 32.

Customers also testified in 1986 and in 1987 and 1988 that PVC from different domestic producers is interchangeable. E.g., Stuart, RX245B ("PVC resin is a commodity product that basically has uniform quality among all producers.); Marcus, RX242C In Camera ("all suppliers' copolymer resins are uniform in quality"); Byrnes, JX1(UD), Tr. 624-27; Beveridge, JX1(1), Tr. 85, 88-89 (copolymer and dispersion resins of different suppliers can be used interchangeably); Witsken, JX1(I), Tr. 602-03 (the major suppliers all5 1 3 2 8 9 1678 1216 151 46 96.611938 provides 1 3 2 8 10 1854 1227 19 24 97.015236 a4 1 3 2 9 0 535 1271 1336 46 -1 5 1 3 2 9 1 535 1271 152 45 96.222916 products 1 3 2 9 2 706 1272 72 35 95.522148 that5 1 3 2 9 3 796 1272 31 34 95.522148 is5 1 3 2 9 4 846 1273 256 44 95.908508 acceptable); Bailey, JX1(IV), PX6 at 62; Stevens, JX1(IV), PX9 at 112. Customers prefer to maintain several regular sources of supply for PVC, implying that PVC is a homogeneous product, not a differentiated one.* See, e.g., Byrnes, JXI(II), Tr. 624- 25; Beveridge, JX1(I), Tr. 91 (copolymer and dispersion); Gmach, RX252B; Boulay, CX189C; David, CX194A-B; van Haaren, CX187D; Weimar, CX192E; Hamilton, CX206B; Pomerantz, RX244A-B In Camera; Baker, CX205C (dispersion); Stuart, RX245B & CX201D.®! ” Occidental documents also describe suspension PVC homopolymer as a commodity. According to Occidental, [p]rice5 1 6 1 1 6 1355 2017 24 30 96.805443 is5 1 6 1 1 7 1398 2018 49 29 96.805443 thes 1 6 1 1 8 1466 2018 127 38 96.380821 primary5 1 6 1 1 9 1613 2019 108 37 96.952164 selling5 1 6 1 1 10 1740 2019 62 28 96.952164 tools 1 6 1 1 11 1822 2019 46 28 96.981964 fora 1 6 1 2 0 531 2062 1336 42 -1 5 1 6 1 2 1 531 2062 186 38 96.662109 Suspension5 1 6 1 2 2 733 2063 252 38 96.750999 [homopolymer]5 1 6 1 2 3 1000 2064 118 29 92.414520 resins: although [p]erformance5 1 6 1 2 6 1551 2067 52 28 96.817604 has5 1 6 1 2 7 1616 2066 111 38 96.563568 impacts 1 6 1 2 8 1739 2067 30 28 96.916801 in5 1 6 1 2 9 1783 2076 84 20 96.437790 some4 1 6 1 3 0 529 2110 1338 42 -1 5 1 6 1 3 1 529 2110 103 37 96.582092 higher5 1 6 1 3 2 643 2111 57 29 96.883400 ends 1 6 1 3 3 712 2112 127 28 93.071861 markets5 1 6 1 3 4 853 2135 4 5 51.990662 .5 1 6 1 3 5 873 2135 5 5 51.990662 .5 1 6 1 3 6 893 2135 5 5 84.865021 .5 1 6 1 3 7 911 2112 173 37 96.788666 productions 1 6 1 3 8 1097 2113 177 37 96.590485 technology5 1 6 1 3 9 1288 2113 23 29 96.688187 is5 1 6 1 3 10 1324 2113 111 30 96.779655 similar5 1 6 1 3 11 1446 2115 175 36 96.621971 throughout5 1 6 1 3 12 1633 2115 48 28 96.621559 thes 1 6 1 3 13 1693 2115 131 37 96.850937 industry5 1 6 1 3 14 1837 2121 30 23 97.014534 to4 1 6 1 4 0 529 2157 1336 40 -1 5 1 6 1 4 1 529 2157 83 31 96.756355 forces 1 6 1 4 2 628 2158 115 39 96.604713 pricing5 1 6 1 4 3 757 2164 31 24 96.930626 to5 1 6 1 4 4 802 2159 37 29 96.976601 be5 1 6 1 4 5 853 2159 49 29 96.742302 thes 1 6 1 4 6 916 2160 79 28 96.742302 mains 1 6 1 4 7 1012 2160 76 29 96.753838 sales5 1 6 1 4 8 1103 2160 112 29 75.599289 tactic. JX1(III), PX13 at 452734 (1985-1988 Strategic Plan).

80 Multiple sources of supply are preferred even for purchases for a single plant. Compare, e.g., Beveridge, JX1(I), Tr. 84-85, 88-89 (uses resins of different suppliers interchangeably), with Goodrich, 110 FTC at 326 (customers fills 1 8 1 2 11 1792 2382 75 29 96.978416 their4 1 8 1 3 0 528 2428 1320 39 -1 5 1 8 1 3 1 528 2428 213 38 96.851402 requirements5 1 8 1 3 2 754 2428 47 30 96.893227 for5 1 8 1 3 3 813 2437 16 21 96.788780 a5 1 8 1 3 4 841 2428 89 39 96.275131 given5 1 8 1 3 5 943 2429 80 38 96.651741 plants 1 8 1 3 6 1036 2429 77 29 96.762695 from5 1 8 1 3 7 1126 2438 57 20 95.946899 ones 1 8 1 3 8 1196 2430 169 37 95.946899 supplier), and Goodrich 1.D.F. 220-21.

81 One customer that buys PVC from five domestic suppliers also buys a unique copolymer from a foreign source. Rutland, JXI(I), Tr. 733-36. The existence of one or a few resins uniquely qualified for a particular customer's use does not change our conclusion that the vast majority of mass and suspension homopolymer, copolymer and dispersion PVC is homogeneous. These few unique resins need not complicate the ability to collude but instead could be outside any cartel. See Hospital Corporation of America v. FTC, 807 F.2d at 1390. Opinion 115 F.T.C.

Reports of sales calls from Occidental and other suppliers show that customers often buy their PVC requirements from more than one supplier. E.g., RX218Z23, Z36, Z64-65, Z88, Z110, Z128-29, Z135, Z204 & Z206; RX216H. The willingness of customers to use PVC from more than one supplier suggests that customers do not perceive important quality differences among the PVC from different suppliers.” The willingness of suppliers to meet lower prices offered by their competitors implies that customer threats to switch suppliers are credible.* These threats would not be credible if important quality differences (or perceived quality differences) among the PVC of different suppliers deterred customers from changing their sources of supply.™ Many customers prefer to buy PVC from more than one supplier, to ensure a steady supply and to protect their ability to negotiate on 82 The Commission in Goodrich said, based on the evidence of record in that case, that switching5 1 6 1 1 4 1006 1765 144 38 96.869797 suppliers5 1 6 1 1 5 1163 1764 35 30 96.500305 of5 1 6 1 1 6 1207 1773 16 21 96.500305 a5 1 6 1 1 7 1235 1764 87 38 96.347801 given5 1 6 1 1 8 1335 1765 88 37 96.355042 grades 1 6 1 1 9 1435 1764 103 30 96.796074 entails5 1 6 1 1 10 1552 1764 167 38 96.541061 significant5 1 6 1 1 11 1732 1764 104 33 92.028175 costs, 110 FTC at 316, and that customers would not switch when5 1 6 1 2 10 1486 1812 169 38 96.754433 competing5 1 6 1 2 11 1666 1813 94 37 96.983459 prices5 1 6 1 2 12 1773 1821 47 20 95.610046 ares 1 6 1 2 13 1831 1812 163 29 92.758575 identical. Id. at 326. As discussed below, the record in this case shows that most PVC buyers prefer to buy from several suppliers and that the costs of switching are for most buyers not significant.

8 F. g., RX217Z (customer ordered after Occidental met competitive5 1 7 1 1 11 1874 2030 120 38 75.710899 price); RX218Z237 (Occidental reduced price % cent to meet offer and “obtain order"); RX218Z83 (Occidental reduced price 2 cents to meet offer for large-scales 1 7 1 3 12 1915 2128 80 38 96.768997 plant4 1 7 1 4 0 658 2176 1336 38 -1 5 1 7 1 4 1 658 2178 106 35 92.935707 trial); RX218Z258 (Occidental reduced price 1 cent to meet offer and regain4 1 7 1 5 0 658 2224 1336 39 -1 5 1 7 1 5 1 658 2226 135 30 96.793823 business5 1 7 1 5 2 807 2235 45 20 96.926979 we5 1 7 1 5 3 866 2226 56 29 96.893654 lost5 1 7 1 5 4 936 2226 28 29 96.893654 in5 1 7 1 5 5 976 2226 67 37 93.298317 July5 1 7 1 5 6 1057 2225 166 38 90.927048 re-price); RX218Z77 (1 cent reduction to meet Tenneco price and regain5 1 7 1 6 4 958 2273 179 35 93.296295 business); RX218Z24 (meet competitive price to “reestablish ourselves at this account"); RX216M ("Occidental lost two bulk truckloads [of business] keeping price at 33 cents/Ib” instead of 32 cents). 8* Occidental and other PVC suppliers frequently offer their customers volume rebate incentives, ¢.g., a one cent rebate for purchases of 13 million pounds during the year, to gain business. E.g., RX217Z39-40; RX173A In Camera; RX217Z42. If customers were tied to a particular supplier for all their PVC needs -- because the product was uniquely qualified for the customer's purposes and the cost of switching suppliers was high, See Goodrich, 110 FTC at 326 -- customer demand would be predictable, and there would be no need to offer volume purchase discounts to retain a customer's business. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1257 1010 Opinion price.® E.g., Marcus, RX242B & E In Camera; Byrnes, JX\(ID), Tr. 624-25. Documents in the record indicate that qualifying or testing PVC resins from different suppliers is a regular and frequent part of business. Occidental's monthly reports reflect frequent product testing by both prospective and existing customers. For example, in June 1986, sixteen firms were testing Occidental PVC resins. RX217Z19-22; See also RX217X-Z. This experience also is reflected in the documents of other PVC producers. See, e.g., RXI66A In Camera; RX173A In Camera.

Occidental witnesses testified that product trials often can be run quickly and easily. Carlon, which buys 224 million pounds of PVC pipe resin annually from a number of producers (including Occidental and Tenneco), tests a new resin in the laboratory and then run[s]5 1 3 2 4 13 1844 1320 26 34 96.993340 it4 1 3 2 5 0 530 1367 1338 55 -1 5 1 3 2 5 1 530 1367 149 44 96.967873 through5 1 3 2 5 2 693 1378 20 23 96.672173 a5 1 3 2 5 3 725 1368 207 44 96.672173 productions 1 3 2 5 4 946 1369 70 35 96.895470 lines 1 3 2 5 5 1030 1377 35 28 96.895470 to5 1 3 2 5 6 1078 1371 192 36 96.134132 determines 1 3 2 5 7 1284 1373 70 34 96.134132 that5 1 3 2 5 8 1367 1374 42 34 96.584419 its5 1 3 2 5 9 1423 1385 63 24 96.873474 uses 1 3 2 5 10 1498 1375 86 35 96.739754 does5 1 3 2 5 11 1600 1382 59 28 96.299477 not5 1 3 2 5 12 1672 1376 127 46 96.818321 impairs 1 3 2 5 13 1811 1377 57 35 96.818321 thea 1 3 2 6 0 531 1425 1336 49 -1 5 1 3 2 6 1 531 1425 225 35 96.278183 smoothness5 1 3 2 6 2 772 1425 41 36 96.816711 of5 1 3 2 6 3 824 1437 64 24 96.035942 ours 1 3 2 6 4 901 1428 214 44 85.794083 operation. JX1(II), Tr. 626. These trials, from4 1 3 2 7 0 529 1481 1336 56 -1 5 1 3 2 7 1 529 1481 220 37 96.018044 notifications 1 3 2 7 2 764 1489 35 29 96.018044 to5 1 3 2 7 3 813 1494 19 24 96.771446 a5 1 3 2 7 4 846 1485 134 34 96.534859 vendors 1 3 2 7 5 992 1485 70 35 96.534859 that5 1 3 2 7 6 1077 1497 54 24 96.840385 we5 1 3 2 7 7 1145 1488 118 33 96.538460 would5 1 3 2 7 8 1278 1488 70 35 94.346458 likes 1 3 2 7 9 1363 1495 34 29 96.744019 to5 1 3 2 7 10 1412 1494 64 30 96.148529 tests 1 3 2 7 11 1490 1490 88 35 96.809128 theirs 1 3 2 7 12 1590 1491 110 35 92.557419 resin through completion of the testing, cans 1 3 2 8 6 1179 1545 45 36 96.133530 all5 1 3 2 8 7 1246 1546 44 35 96.752579 be5 1 3 2 8 8 1311 1547 93 35 96.542542 done5 1 3 2 8 9 1425 1547 35 36 96.588127 in5 1 3 2 8 10 1481 1559 19 24 96.588127 a5 1 3 2 8 11 1521 1556 126 28 96.841537 matters 1 3 2 8 12 1666 1549 43 36 96.944511 of5 1 3 2 8 13 1725 1551 88 45 93.213562 days5 1 3 2 8 14 1835 1572 28 5 90.654053 --4 1 3 2 9 0 527 1598 1337 52 -1 5 1 3 2 9 1 527 1598 174 46 96.559479 certainly5 1 3 2 9 2 718 1600 107 34 96.511574 much5 1 3 2 9 3 842 1600 70 35 96.986633 less5 1 3 2 9 4 930 1601 83 35 96.433296 than5 1 3 2 9 5 1030 1612 19 24 96.575089 a5 1 3 2 9 6 1065 1603 133 35 83.267921 week. Jd. at 627.°” Another witness, a PVC compounder that buys homopolymer, copolymer and dispersion PVC resins, testified that general purpose resins can be qualified by “plug[ging] it into the computer." In some5 1 3 2 12 8 1438 1781 207 43 96.049713 instances, qualifying a new resin could5 1 3 2 13 5 949 1835 80 35 95.957710 takes 1 3 2 13 6 1055 1846 19 24 95.552376 a5 1 3 2 13 7 1100 1836 72 35 95.552376 few5 1 3 2 13 8 1197 1837 107 35 94.999092 hours5 1 3 2 13 9 1330 1838 35 35 94.999092 in5 1 3 2 13 10 1392 1839 58 35 95.801132 thes 1 3 2 13 11 1476 1839 88 36 42.283020 Jab. For certain4 1 3 2 14 0 524 1889 1335 55 -1 5 1 3 2 14 1 524 1889 237 46 96.826836 applications5 1 3 2 14 2 778 1893 67 33 96.988396 ands 1 3 2 14 3 861 1893 151 46 96.707443 perhaps5 1 3 2 14 4 1028 1894 132 35 96.630035 certain5 1 3 2 14 5 1176 1901 101 40 96.876740 types5 1 3 2 14 6 1294 1896 43 35 96.494965 of5 1 3 2 14 7 1347 1897 113 35 96.494965 resins5 1 3 2 14 8 1475 1897 27 35 96.843414 it5 1 3 2 14 9 1516 1899 114 45 96.819641 might5 1 3 2 14 10 1645 1900 80 35 96.966232 takes 1 3 2 14 11 1741 1900 118 41 96.455475 hours,2 1 4 0 0 0 520 2174 594 19 -1 3 1 4 1 0 0 520 2174 594 19 -1 4 1 4 1 1 0 520 2174 594 19 -1 5 1 4 1 1 1 520 2174 594 19 95.000000 2 1 5 0 0 0 595 2220 1261 57 -1 3 1 5 1 0 0 595 2220 1261 57 -1 4 1 5 1 1 0 595 2220 1261 57 -1 5 1 5 1 1 1 595 2220 25 22 78.996063 855 1 5 1 1 2 656 2233 77 30 90.240562 PVC5 1 5 1 1 3 744 2240 161 25 96.833481 customers5 1 5 1 1 4 918 2241 91 25 96.834969 asserts 1 5 1 1 5 1022 2237 143 38 92.386711 meeting competition" and favored5 1 5 1 1 9 1614 2243 114 29 95.812157 nation clauses in PVC supply contracts to ensure that they get the best prices from their suppliers. E.g., Stuart, RX245C. The clauses, which typically apply only to PVC of equal4 1 6 1 3 0 518 2380 1338 47 -1 5 1 6 1 3 1 518 2380 135 37 83.902847 quality, See JX1-4, PX94 at 2 & PX93 at 4, would have little meaning unless other suppliers offered PVC of comparable quality. 86 A PVC producer may run tests to analyze and match a resin used by a potential customer. E.g., RXI74A-B In Camera. 7 inj uly 1985, Carlon cancelled its supply contracts with its PVC suppliers and began relying on monthly negotiations to keep suppliers a5 1 10 1 1 11 1528 2683 70 29 93.803253 little5 1 10 1 1 12 1609 2683 160 38 60.103714 hungrier. The negotiations may5 1 10 1 2 3 836 2727 107 29 96.605766 extends 1 10 1 2 4 962 2736 72 21 95.848610 overs 1 10 1 2 5 1051 2737 16 21 96.456284 a5 1 10 1 2 6 1086 2729 160 29 96.285278 two-weeks 1 10 1 2 7 1264 2730 102 37 96.361267 periods 1 10 1 2 8 1384 2739 89 30 96.451630 every5 1 10 1 2 9 1492 2732 128 29 68.735443 month. JX1(II), Tr. 624-25.

Opinion 115 F.T.C.

if not days, of laboratory work to qualify a resin." JX1(II), Tr. 725B &C.

Another PVC compounder testified that an5 1 3 2 1 7 1619 754 147 36 96.933090 internal5 1 3 2 1 8 1780 755 94 36 96.724342 resins 1 3 2 1 9 1886 756 135 46 96.647644 quality4 1 3 2 2 0 682 808 1338 52 -1 5 1 3 2 2 1 682 808 113 34 96.924080 checks 1 3 2 2 2 808 808 73 36 97.016556 that5 1 3 2 2 3 893 808 74 36 96.944633 will5 1 3 2 2 4 982 809 82 46 96.930962 gives 1 3 2 2 5 1078 820 40 25 96.401306 us5 1 3 2 2 6 1132 809 247 36 93.248398 information about the chemical and physical characteristics is sufficient to place the new resin in a compound most5 1 3 2 4 2 807 925 42 35 96.796539 of5 1 3 2 4 3 859 926 58 34 96.458664 thes 1 3 2 4 4 930 926 113 35 85.432159 time. Rutland, JX1(II), Tr. 734. On5 1 3 2 4 10 1673 929 57 36 96.235893 thes 1 3 2 4 11 1744 941 74 24 96.924980 rare5 1 3 2 4 12 1832 930 186 36 96.364555 occasions4 1 3 2 5 0 680 983 1339 52 -1 5 1 3 2 5 1 680 983 103 36 96.870537 when5 1 3 2 5 2 786 979 20 60 96.466873 a5 1 3 2 5 3 830 983 131 37 93.232788 critical5 1 3 2 5 4 976 985 90 35 92.963814 U.V.5 1 3 2 5 5 1081 985 200 36 96.324677 evaluations 1 3 2 5 6 1294 986 120 36 96.865570 would5 1 3 2 5 7 1427 986 90 37 97.013000 have5 1 3 2 5 8 1531 993 34 30 97.009911 to5 1 3 2 5 9 1579 987 44 36 96.979744 be5 1 3 2 5 10 1636 988 114 41 96.445305 made,5 1 3 2 5 11 1765 999 55 25 96.919479 we5 1 3 2 5 12 1833 999 82 36 96.745483 may5 1 3 2 5 13 1928 989 91 37 96.623924 have4 1 3 2 6 0 680 1043 1338 48 -1 5 1 3 2 6 1 680 1048 36 29 96.383896 to5 1 3 2 6 2 733 1052 63 25 96.383896 runs 1 3 2 6 3 814 1043 157 45 95.967308 samples5 1 3 2 6 4 988 1043 36 34 96.135818 in5 1 3 2 6 5 1041 1043 208 46 96.135818 equipments 1 3 2 6 6 1266 1050 35 29 92.710815 to5 1 3 2 6 7 1319 1045 281 46 91.968880 accelerate-ages 1 3 2 6 8 1616 1046 26 35 97.017220 it5 1 3 2 6 9 1659 1046 68 35 96.415894 ands 1 3 2 6 10 1745 1053 36 28 96.864258 to5 1 3 2 6 11 1798 1047 122 35 96.504906 obtains 1 3 2 6 12 1938 1048 80 35 96.931564 data4 1 3 2 7 0 679 1100 1339 50 -1 5 1 3 2 7 1 679 1100 123 35 96.480995 before5 1 3 2 7 2 817 1112 55 24 96.928673 we5 1 3 2 7 3 886 1101 79 35 95.552750 takes 1 3 2 7 4 980 1112 20 25 96.975494 a5 1 3 2 7 5 1014 1101 134 36 96.922661 chances 1 3 2 7 6 1162 1113 47 24 96.260429 on5 1 3 2 7 7 1224 1103 206 46 96.503441 submitting5 1 3 2 7 8 1444 1103 26 36 96.992722 it5 1 3 2 7 9 1484 1110 35 29 96.779953 to5 1 3 2 7 10 1534 1104 57 36 96.993050 thes 1 3 2 7 11 1606 1105 268 45 82.735474 marketplace. These tests normally would be completed in a5 1 3 2 8 8 1498 1163 130 44 96.599030 couples 1 3 2 8 9 1643 1163 43 34 96.485336 of5 1 3 2 8 10 1698 1163 140 34 96.809814 weeks at a cost of about $500 to $1000. Id. at 734-35.° Other evidence is consistent with the conclusion that PVC is a homogeneous product. Occidental and Tenneco both published catalogues describing their PVC resins. CX84A-Z34 & RX211Q-W (Occidental); CX111A-G (Tenneco).” These catalogues suggest that customers can meet their needs from the stock products listed and are inconsistent with the notion that thes 1 3 3 6 7 1411 1571 157 46 96.936134 industry5 1 3 3 6 8 1583 1572 30 35 96.936134 is5 1 3 3 6 9 1627 1572 198 46 96.315948 producing5 1 3 3 6 10 1840 1584 19 24 96.793892 a5 1 3 3 6 11 1873 1579 141 29 96.893517 custom4 1 3 3 7 0 674 1627 1341 48 -1 5 1 3 3 7 1 674 1628 149 45 96.548523 products 1 3 3 7 2 838 1627 35 35 96.918335 in5 1 3 3 7 3 888 1628 58 35 96.785973 thes 1 3 3 7 4 961 1639 103 24 95.958549 senses 1 3 3 7 5 1078 1629 158 35 96.510834 relevant5 1 3 3 7 6 1251 1635 35 29 96.783600 to5 1 3 3 7 7 1302 1629 58 36 96.927902 thes 1 3 3 7 8 1375 1629 195 46 96.927902 feasibility5 1 3 3 7 9 1586 1630 42 35 96.899460 of5 1 3 3 7 10 1639 1631 211 34 84.077988 collusion. Posner at 60. Occidental also published charts showing for its PVC resins the equivalent products of other PVC producers. E.g., JXI(IV), PX47 88 After the acquisition of Tenneco, Occidental required many of its customers to qualify new resins, because Occidental changed the sourcing plant of those customers: In October 1986, Occidental reported that [a]l]5 1 6 1 2 9 1652 1990 162 24 96.928764 customers5 1 6 1 2 10 1828 1986 131 28 96.553520 affected5 1 6 1 2 11 1972 1986 39 37 97.018074 by4 1 6 1 3 0 673 2031 1338 42 -1 5 1 6 1 3 1 673 2032 48 29 96.918610 thes 1 6 1 3 2 741 2032 204 38 96.429947 change-overs 1 6 1 3 3 964 2031 77 31 93.291061 from5 1 6 1 3 4 1063 2032 223 36 77.340195 [Occidental's]5 1 6 1 3 5 1307 2033 96 29 96.910408 Addis5 1 6 1 3 6 1423 2038 30 24 93.276260 to5 1 6 1 3 7 1474 2034 186 36 91.524658 [Tenneco's]5 1 6 1 3 8 1682 2034 152 30 96.279961 Pasadena5 1 6 1 3 9 1854 2043 48 21 96.810844 ares 1 6 1 3 10 1921 2034 90 39 96.713654 being4 1 6 1 4 0 673 2080 1337 41 -1 5 1 6 1 4 1 673 2080 120 30 96.466568 advised5 1 6 1 4 2 805 2080 57 30 96.912689 ands 1 6 1 4 3 874 2080 131 39 96.891182 sampled5 1 6 1 4 4 1018 2080 66 36 96.963318 [sic]5 1 6 1 4 5 1097 2081 47 29 96.998528 thes 1 6 1 4 6 1155 2090 104 29 96.431984 proper5 1 6 1 4 7 1270 2081 90 30 96.980820 resins5 1 6 1 4 8 1372 2081 46 30 96.923317 for5 1 6 1 4 9 1429 2082 162 38 88.050270 approval. RX220Z6. This suggests that the cost of switching suppliers (i.e., the production source of resin) is not high. This is consistent with Occidental documents showing the willingness of customers to change suppliers. See text at notes 80-85 supra. 8 Other tests can be more expensive. One buyer of PVC for use in flooring said that product qualification tests can take up to a year and cost as much as $20,000. These costs do not restrict the ability of these customers to buy from more than one supplier, however, because the resins of most major domestic producers already are qualified with these customers. £.g., Marcus, RX242B, C & E In Camera; Boulay, CX189C.

*° The Occidental Data Sheets provide a General5 1 9 1 1 9 1570 2609 203 38 96.197594 Description of the resin and list Typical5 1 9 1 2 4 998 2657 224 38 95.371170 Applications and Typical5 1 9 1 2 7 1473 2658 189 38 93.417633 Properties, including viscosity, specific gravity and particle size. For example, Occidental FPC5 1 9 1 3 10 1722 2707 78 29 96.759972 94185 1 9 1 3 11 1813 2707 24 28 96.716270 is5 1 9 1 3 12 1858 2716 7 19 96.230515 a5 1 9 1 3 13 1876 2707 132 28 96.230515 medium4 1 9 1 4 0 669 2754 1337 38 -1 5 1 9 1 4 1 669 2754 165 28 96.041954 molecular5 1 9 1 4 2 854 2754 110 37 96.041954 weights 1 9 1 4 3 985 2754 77 29 94.208641 PVC5 1 9 1 4 4 1082 2755 231 37 94.883110 homopolymer5 1 9 1 4 5 1332 2755 77 28 95.952072 resins 1 9 1 4 6 1430 2755 150 37 96.746536 primarily5 1 9 1 4 7 1601 2755 144 37 96.770004 designed5 1 9 1 4 8 1766 2755 47 28 96.843933 for5 1 9 1 4 9 1832 2755 77 37 96.588028 rigid5 1 9 1 4 10 1929 2755 77 29 96.516769 PVC4 1 9 1 5 0 669 2802 1196 38 -1 5 1 9 1 5 1 669 2802 223 37 86.583076 applications, such as siding, pipe and conduit and windows. CX84Z20. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1259 1010 Opinion at 228496-97 ("Competitive Homopolymer Resins"); JX1-4, PX4B at 200339-40 ("Competitive Copolymer Resins"). These charts, which were intended to be used as sales tools by its salesmen, show that Occidental viewed its PVC products as interchangeable with the PVC of other producers.

Even the so-called specialty mass and suspension homopolymer resins are not custom products. The Commission observed in Goodrich that it is difficult to charge a premium price even for these specialty grades.”’ 110 FTC at 316. According to Occidental, the specialty5 1 3 2 5 2 749 1132 95 36 96.708061 resins 1 3 2 5 3 868 1134 234 45 96.855370 competitions 1 3 2 5 4 1126 1135 154 36 97.010506 consists5 1 3 2 5 5 1304 1136 42 36 96.659233 of5 1 3 2 5 6 1366 1137 175 36 96.659233 domestic5 1 3 2 5 7 1564 1139 193 45 96.122528 producers5 1 3 2 5 8 1782 1140 86 36 96.122528 with4 1 3 2 6 0 502 1189 1365 47 -1 5 1 3 2 6 1 502 1220 1 3 59.058830 .5 1 3 2 6 2 530 1189 105 35 41.731915 malls 1 3 2 6 3 652 1196 138 30 96.669716 reactors 1 3 2 6 4 805 1190 200 37 73.997879 facilities. JX1(II), DX12 at 102643 In Camera. The fact that fewer suppliers make specialty resins -- Occidental in 1985 estimated that four producers, Occidental, Georgia Gulf, Formosa and Keysor, comprises 1 3 2 9 3 908 1366 87 35 96.996475 90%5 1 3 2 9 4 1011 1367 43 35 96.986359 of5 1 3 2 9 5 1066 1368 56 34 96.986359 thes 1 3 2 9 6 1140 1368 188 46 96.852638 [specialty5 1 3 2 9 7 1343 1371 214 45 96.716660 suspension5 1 3 2 9 8 1572 1368 290 55 96.019005 homopolymer]4 1 3 2 10 0 526 1421 1339 52 -1 5 1 3 2 10 1 526 1421 148 42 96.799698 market,5 1 3 2 10 2 691 1422 86 36 96.892311 with5 1 3 2 10 3 795 1434 47 24 96.458481 no5 1 3 2 10 4 859 1434 69 24 96.458481 ones 1 3 2 10 5 944 1425 108 45 96.546654 beings 1 3 2 10 6 1068 1427 226 46 96.617615 particularly5 1 3 2 10 7 1311 1428 215 42 76.313538 dominant, JXI(II), DX12 at 102643 In Camera -- would tend to make collusion with respect to the specialty homopolymer resins easier than for the nine producers of commodity homopolymer resins.

We conclude that PVC is a homogeneous product within grade, with no significant quality differences among the PVC made by domestic producers.

2. Pricing The Commission in Goodrich believed that collusion in the mass and suspension PVC market would be complicated to some extent by the existence of different grades of PVC. The Commission said that [i]nstead5 1 5 1 4 2 730 2169 42 34 96.904999 of5 1 5 1 4 3 788 2169 234 47 96.832878 establishing5 1 5 1 4 4 1043 2182 19 24 96.877251 a5 1 5 1 4 5 1082 2172 115 46 96.697021 singles 1 5 1 4 6 1215 2173 98 45 96.697021 prices 1 5 1 4 7 1333 2174 56 35 96.930962 for5 1 5 1 4 8 1408 2185 19 24 96.930962 a5 1 5 1 4 9 1447 2175 115 46 96.952049 singles 1 5 1 4 10 1582 2176 272 46 96.746681 homogeneous4 1 5 1 5 0 517 2226 1337 55 -1 5 1 5 1 5 1 517 2226 162 45 96.617683 product,5 1 5 1 5 2 698 2226 101 37 96.478256 firms5 1 5 1 5 3 816 2235 94 29 96.804909 must5 1 5 1 5 4 925 2229 171 37 96.526230 establish5 1 5 1 5 5 1114 2230 67 36 96.804962 ands 1 5 1 5 6 1198 2231 171 37 96.847275 maintains 1 5 1 5 7 1386 2243 19 24 96.964470 a5 1 5 1 5 8 1421 2233 118 36 96.339020 whole5 1 5 1 5 9 1557 2234 108 35 96.254524 series5 1 5 1 5 10 1683 2235 42 35 96.254524 of5 1 5 1 5 11 1736 2235 118 46 96.943214 prices4 1 5 1 6 0 516 2283 1336 52 -1 5 1 5 1 6 1 516 2283 57 37 96.381264 for5 1 5 1 6 2 599 2295 19 25 96.611382 a5 1 5 1 6 3 644 2286 120 35 96.611382 whole5 1 5 1 6 4 790 2286 109 36 96.851410 series5 1 5 1 6 5 926 2287 43 36 96.980751 of5 1 5 1 6 6 991 2289 150 45 96.948883 products 1 5 1 6 7 1165 2290 158 45 72.607910 grades. 110 FTC at 316 n.151.

Evidence that was not available in Goodrich shows that PVC producers do not maintain complicated pricing schedules for different 7! Occidental suggested the possibility of some customized specialty resins in its 1986-1989 Strategic Plan: we5 1 8 1 1 7 1106 2629 114 29 96.811157 believes 1 8 1 1 8 1231 2630 77 29 97.004135 there5 1 8 1 1 9 1320 2631 23 28 96.957954 is5 1 8 1 1 10 1356 2640 15 20 96.752686 a5 1 8 1 1 11 1382 2636 114 24 96.836174 customs 1 8 1 1 12 1508 2638 131 31 96.845459 segments 1 8 1 1 13 1651 2633 95 29 96.800262 where5 1 8 1 1 14 1758 2634 94 37 96.530876 major4 1 8 1 2 0 512 2674 1335 41 -1 5 1 8 1 2 1 512 2681 82 21 96.997459 users5 1 8 1 2 2 610 2674 77 28 96.997459 have5 1 8 1 2 3 702 2675 95 28 96.994041 resins5 1 8 1 2 4 812 2675 123 29 96.785576 tailored5 1 8 1 2 5 951 2681 29 23 96.952637 to5 1 8 1 2 6 995 2676 75 30 96.587379 theirs 1 8 1 2 7 1084 2677 124 38 92.667885 specifics 1 8 1 2 8 1224 2678 239 37 85.357849 requirements.. RX197M In Camera.

This limited evidence of some custom products does not change the homogeneity of the vast majority of PVC.

Opinion HIS FTC.

grades of PVC. Instead, the prices of mass and suspension homopolymer resins (the commodity resins that account for more than 85% of PVC produced in the United States) are keyed to the price of a single grade -- pipe grade PVC, the lowest priced resin” -- with other grades generally one or two pennies higher. I.D.F. 570. This practice would tend to simplify collusion.” General purpose mass and suspension homopolymer PVC usually is priced a penny higher than pipe resin, and film grade resin is a penny or two higher than that. For example, a price announcement by one producer shows pipe grade resin at 33 cents, general purpose resin at 34 cents and film grade resin at 35 cents. CX93A.™ Tenneco, in a contemporaneous announcement, also priced its pipe grade resin at 33 cents and general purpose grades at 34 cents. CX92. B.F. Goodrich announced that its pipe grade resin would increase to 33 cents and general purpose resin would increase to 34 cents, effective the same date. CX87 & CX91; See also CX9A; RX293B. In early 1986, an industry journal reported: another round of polyvinyl chloride price increases, producers say... . [B.F. Goodrich's] January pipe grade price is 30 cents per pound, while general purpose resin firms to 31 cents. Special purpose and wire and cable grades are at 32 cents per pound, .. . and film grades are one cent higher. Shintech Inc. has posted similar prices . . . Tenneco Inc. has also raised its pipe grade price to 30 cents per pound....

2 Pipe grade resin accounts for about 40% of annual consumption of mass and suspension PVC homopolymer. I.D.F. 372 (portion In Camera). 3 The use of fixed price differentials simplifies collusion by eliminating any need to agree on a complicated schedule of prices. Collusion need not be either complex or perfect to raise prices, benefit the colluding firms and harm consumers. See 1992 Merger Guidelines Section 2.11.

The pricing of PVC resins tends to be consistent within grade. For example, one producer price sheet shows only three prices for three resin grades comprising eighteen different product numbers: one pipe grade resin, priced at 33 cents, ten general purpose grade resins, all priced at 34 cents, and seven film grade resins, all priced at 35 cents. CX93B; See also JX\(IV), PX27, PX30, PX37 & PX45 ("published industry consensus" on price); JX1-4, PX78 at 900132. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1261 1010 Opinion RX209A.” This evidence is consistent with B.F. Goodrich's observation that [t]he5 1 3 1 2 4 1001 700 165 46 96.709221 majority5 1 3 1 2 5 1185 701 42 35 93.306229 of5 1 3 1 2 6 1242 701 184 45 76.824509 G[general]5 1 3 1 2 7 1447 704 187 45 90.980156 P[urpose]5 1 3 1 2 8 1654 705 127 45 96.777733 grades5 1 3 1 2 9 1801 705 69 35 96.851364 anda 1 3 1 3 0 532 756 1337 47 -1 5 1 3 1 3 1 532 767 89 24 96.663940 even5 1 3 1 3 2 636 756 169 47 96.851868 specialty5 1 3 1 3 3 819 758 123 45 96.847801 grades5 1 3 1 3 4 956 769 57 25 96.880341 ares 1 3 1 3 5 1027 759 79 35 96.928314 sold5 1 3 1 3 6 1119 765 32 29 96.928314 at5 1 3 1 3 7 1165 760 195 36 96.754784 traditional5 1 3 1 3 8 1375 761 229 36 96.760109 differentials5 1 3 1 3 9 1618 763 131 36 96.832741 related5 1 3 1 3 10 1762 770 36 29 97.009338 to5 1 3 1 3 11 1811 764 58 36 96.967865 thea 1 3 1 4 0 532 814 1336 49 -1 5 1 3 1 4 1 532 814 85 34 96.942192 bases 1 3 1 4 2 633 815 98 45 96.621941 prices 1 3 1 4 3 749 815 42 35 96.627037 of5 1 3 1 4 4 804 816 222 46 96.735542 commodity5 1 3 1 4 5 1042 817 85 46 96.843140 pipes 1 3 1 4 6 1143 818 108 45 96.915497 grades 1 3 1 4 7 1268 819 124 35 95.948151 resin. Goodrich RX6391; See also Goodrich Tr. 1750-51 (H. Wheeler).*° The same pricing practice applies for copolymer and dispersion resins. Copolymer PVC is sold in three grades, flooring, calendering and record grades, with prices keyed to the lowest priced grade: From5 1 3 2 4 2 682 1105 157 47 95.906960 flooring5 1 3 2 4 3 868 1113 35 29 93.217010 to5 1 3 2 4 4 931 1108 229 46 91.949104 calendering5 1 3 2 4 5 1188 1109 30 35 96.926720 is5 1 3 2 4 6 1247 1120 20 24 96.920105 a5 1 3 2 4 7 1294 1121 118 34 96.246796 penny5 1 3 2 4 8 1440 1121 47 35 96.335159 up5 1 3 2 4 9 1515 1112 130 45 96.518875 charges 1 3 2 4 10 1673 1113 69 34 96.051231 ands 1 3 2 4 11 1770 1113 94 35 95.228912 from4 1 3 2 5 0 526 1163 1336 49 -1 5 1 3 2 5 1 526 1163 232 46 92.495682 calendering5 1 3 2 5 2 775 1170 35 29 96.896797 to5 1 3 2 5 3 826 1165 143 35 96.660545 records5 1 3 2 5 4 987 1176 19 24 96.956390 a5 1 3 2 5 5 1021 1166 151 46 79.704041 penny. Stevens, JX3, PX9 at 23, 18; See also CX69; CX68B. Within grade, the prices of copolymer resins produced by different producers are thes 1 3 2 7 7 1378 1286 128 34 93.286217 same. JX3, PX9 at 32; Weimar, CX192E. Dispersion resin prices also generally follow three levels, depending on grade. Stevens, JX3, PX9 at 88; JX1(IV), PX32 at 204187; See also CX70A-B; CX67A; JX1-4, PX55 at 200148-49, PX56 at 200150-53, PX57 at 200170. Based on this evidence, we conclude that the pricing of PVC is not complex and that the existence of different grades of PVC is not likely to complicate collusion.

°° Another example is a newsletter report, also in 1986, that PVC producers were increasing prices to5 1 5 1 2 5 943 2101 93 30 96.978325 29-305 1 5 1 2 6 1046 2102 46 29 96.998451 for5 1 5 1 2 7 1102 2103 68 37 96.958755 pipes 1 5 1 2 8 1181 2104 88 37 96.874687 grades 1 5 1 2 9 1281 2104 70 30 97.012512 with5 1 5 1 2 10 1362 2105 116 38 97.013832 general5 1 5 1 2 11 1490 2115 126 28 96.772362 purposes 1 5 1 2 12 1628 2112 27 24 96.888680 at5 1 5 1 2 13 1666 2106 88 30 96.778549 30-315 1 5 1 2 14 1770 2103 91 34 86.911736 cents4 1 5 1 3 0 516 2148 1200 42 -1 5 1 5 1 3 1 516 2148 56 28 93.297684 ands 1 5 1 3 2 586 2148 223 38 92.658615 specialty/films 1 5 1 3 3 823 2150 104 37 96.583923 grades5 1 5 1 3 4 940 2155 27 24 96.446358 at5 1 5 1 3 5 981 2150 92 30 96.913353 32-335 1 5 1 3 6 1087 2152 107 29 5.294769 cents. RX293B (Tecnon, Oct. 1986).

76 According to Occidental, specialty homopolymer resins “are priced approximately $.07-$.12 above General Purpose resins." RX197M In Camera. The specialty5 1 7 1 2 2 689 2319 94 29 91.996269 resin referred to in RXI97M is suspension PVC homopolymer that is made in small reactors and cannot5 1 7 1 3 7 1103 2370 220 40 96.967476 economically5 1 7 1 3 8 1336 2378 136 32 96.989868 competes 1 7 1 3 9 1486 2373 28 29 96.461372 in5 1 7 1 3 10 1528 2373 48 29 96.461372 thes 1 7 1 3 11 1589 2374 118 38 96.730362 general5 1 7 1 3 12 1721 2383 129 30 96.730362 purpose4 1 7 1 4 0 514 2415 1334 46 -1 5 1 7 1 4 1 514 2416 124 29 89.784515 sectors of the PVC market. Jd. In other contexts, the term specialty5 1 7 1 4 13 1672 2422 94 30 96.653214 resin may have a different connotation. For example, the term sometimes is used to distinguish between mass and suspension homopolymer resins made in large reactors ("commodity resin") and dispersion, copolymer and small-reactor suspension homopolymer resins. See RX]97K Jn Camera (Occidental's specialty4 1 7 1 9 0 510 2657 1336 44 -1 5 1 7 1 9 1 510 2657 109 29 95.138931 resins are solution, copolymer, small-reactor suspension homopolymer and blending resins). The term also is used to refer to large-reactor mass and suspension homopolymer resins that are “higher end" or higher5 1 7 1 11 10 1664 2761 122 33 94.096619 return, as compared to pipe grade resin. See RX197T In Camera. Opinion 115 F.T.C.

3. Transportation Costs The Commission in Goodrich also said, based on the evidence of record in that case, that transportation cost differences among PVC producers could complicate5 1 4 1 3 4 1262 860 58 34 96.650826 thes 1 4 1 3 5 1336 857 273 37 96.560326 determinations 1 4 1 3 6 1626 857 68 35 96.598732 ands 1 4 1 3 7 1711 857 247 34 96.337250 enforcement5 1 4 1 3 8 1974 854 43 36 97.014465 of4 1 4 1 4 0 675 913 1337 53 -1 5 1 4 1 4 1 675 931 200 26 96.317680 consensus5 1 4 1 4 2 891 919 146 47 96.476036 prices, because PVC producing plants are scattered5 1 4 1 4 9 1966 913 46 35 96.521416 all4 1 4 1 5 0 676 971 1336 52 -1 5 1 4 1 5 1 676 991 87 25 96.696663 overs 1 4 1 5 2 784 979 58 35 96.689751 thes 1 4 1 5 3 865 977 179 46 62.393021 country. 110 FTC at 316-17 & n.152. The record in Goodrich showed that mass and suspension PVC is sold on a delivered price basis, but it did not show whether that price was uniform throughout the United States. /d. at 317 n.152 & 322." The record in this case shows that PVC is sold on a uniform delivered price basis throughout the United States, usually with a two cent premium for customers west of the Rockies. See, e.g., CX90. The costs of PVC producers to ship to customers will vary, depending on the location of the shipping plant, the location of the customer and the volume of PVC shipped, but transportation costs are a small part of the selling price of PVC, and transportation cost differences would necessarily be even less.” To reach a consensus on price, PVC producers would not need to make complicated, transaction-specific adjustments for transportation costs or allocate markets on the basis of natural freight advantages but could establish a single benchmark delivered price.

*7 The Commission in Goodrich said that uniform delivered pricing can have the effect of eliminating price differences based on location. 110 FTC at 322. °8 One analysis estimated that PVC market prices generally5 1 7 1 1 10 1764 2165 117 29 93.306206 includes 1 7 1 1 11 1894 2163 122 33 91.727287 $0.015-4 1 7 1 2 0 680 2214 1337 49 -1 5 1 7 1 2 1 680 2225 108 33 93.064743 $0.0205 1 7 1 2 2 799 2234 52 29 96.406281 pers 1 7 1 2 3 860 2224 99 39 96.406281 pounds 1 7 1 2 4 971 2223 45 30 96.829681 for5 1 7 1 2 5 1027 2221 219 39 96.631325 transportation5 1 7 1 2 6 1259 2220 102 30 92.758141 costs. RX21U-V (Dean Witter Reynolds, June 16, 1987) (5%-7% of selling price). In 1986, Tenneco’s freight costs were about 7.71% of its average selling price of PVC resins. CX47Z14 In Camera. Air Products’ 1985 average distribution costs were about 9% of selling price (1.8 cents to 2.6 cents per pound). RX178Z13 In Camera. CX54 shows 1983 shipping costs ranging from 0.6 cents per pound from New Jersey to New York to 2.67 cents per pound from Oklahoma City to New Jersey; shipments from Louisiana and Mississippi to New Jersey cost 2.45 cents and 2.06 cents per pound, respectively. Assuming that pipe grade resin sold for 22 cents per pound in 1983 (See Goodrich Tr. at 2161), these freight costs were 2.7% to 12% of the delivered price of PVC. B.F. Goodrich's average PVC freight costs in 1982, weighted by customer and volume, ranged from less than one cent to about 2.5 cents per pound. Goodrich RX245M &N.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1263 1010 Opinion The locational differences among PVC producing plants do not appear to be significant. See I.D.F. 612-16 (portion In Camera). Each of the eight PVC producers that, according to Occidental, comprise 99% of the [suspension PVC homopolymer] market" -- Occidental, Goodrich, Shin-Tech, Georgia Gulf, Vista, Borden, Formosa and Air Products -- has a large reactor plant in the Gulf Coast area. RX197S-U In Camera; See RX168Z45-46 In Camera.” In general, these firms share the same locational advantages or disadvantages with respect to PVC buyers.!° Only Goodrich has large reactor suspension PVC homopolymer plants both in the Gulf Coast area and elsewhere in the United States.'°' Goodrich may have some locational advantages with respect to some customers who are closer to its plant in New Jersey than they are to the Gulf Coast producers,’” but any advantage with respect to shipping PVC may °° Three PVC producers do not have Gulf Coast plants: Keysor-Century, which makes specialty PVC homopolymer and copolymer in a small reactor plant in California, RX144B & K In Camera; Goodyear, which makes dispersion resins at Niagara Falls, New York, RX148C-D Jn Camera; and Vygen, which makes homopolymer and copolymer in a small reactor plant in Ashtabula, Ohio. RX177Z1 & Z12 In Camera; See RX168Z46 In Camera (map). 100 Some PVC pipe producers, the major purchasers of commodity suspension homopolymer resin produced in large reactor PVC plants, have moved their plants from the midwestern United States to the Sun5 1 8 1 2 10 1439 2251 81 30 95.651962 Belt region, particularly Texas, to be closer to the areas of demand. RX38E Jn Camera, '©! Goodrich has large reactor capacity in New Jersey and Texas. RX180Z1 & Z24 In Camera. Goodrich's plant in Louisville, RX180H Jn Camera, and a Borden plant in Illiopolis, Illinois, RX143X% Jn Camera, have reactors slightly smaller than the 18,000 gallon minimum usually cited to define large reactors. See note 18 supra.

102 A locational advantage does not necessarily mean a price advantage. Borden, with a plant in Illinois, was the high bidder (at 30 cents a pound) for a PVC customer in Northbrook, Iinois. Two other producers bid 28 cents, and one bid 29 cents. RX142A In Camera.

Opinion 115 F.T.C.

be offset by the cost of shipping VCM, the principal input for PVC. In addition to the fact that its New Jersey plant does not have a clear cost advantage, because it has a plant in the Gulf Coast area, Goodrich would have substantial incentives to avoid undercutting any cartel price.

A number of PVC plants are clustered in the northeast.!“ I.D.F. 613 & 616 (portion In Camera). Most of these are small reactor plants that make specialty resins (specialty homopolymer, copolymer and dispersion PVC, for example) that do not compete with suspension PVC homopolymer made in large reactors.’ Because these plants make products that do not compete with suspension PVC homopolymer, their location as compared to the Gulf Coast plants is irrelevant. To the extent that they compete with one another, the locational differences among them are minor: no small reactor PVC plants are located in any other part of the country, except for Keysor-Century in California.

We conclude that transportation cost differences, to the extent that they may exist, are not sufficient to complicate collusion and thereby to decrease the likelihood of anticompetitive effects stemming from this acquisition.

103 ‘An Occidental document shows that the PVC freight advantage for a PVC producer in the northeast over a Gulf Coast producer with respect to a customer in the northeast is offset by the additional cost of shipping VCM from the Gulf Coast to the northeast. The cost for shipping VCM from Louisiana to New Jersey is $0.0230 per pound; the cost for shipping PVC from Louisiana to New Jersey is $0.0245 per pound. CX54.

104 In 1983, 55% of all PVC was consumed within 350 miles of New York City, according to Occidental. CX54.

105 These include Formosa's Delaware City, Delaware, plant, RX168Z63 In Camera; Occidental's Burlington, New Jersey, and Pottstown, Pennsylvania, plants; and Georgia Gulf's Delaware City, Delaware, plant. RX]79T, U & Z]1 In Camera. Goodrich has small reactor capacity at plants in Avon Lake, Ohio, Henry, Illinois, and Pedricktown, New Jersey. RX180 Jn Camera. Borden has small reactor capacity at Illiopolis, Illinois. RXI43U In Camera. See also note 101 supra. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1265 1010 Opinion B. Production Costs Large reactor PVC plants have comparable manufacturing costs. See Goodrich, 110 FTC at 321. These are the most efficient, low-cost plants in the industry, and they produce the lower priced, high volume, commodity grades of suspension homopolymer PVC.'% According to Occidental, [t]he5 1 3 1 5 5 1136 976 173 36 96.772797 domestic5 1 3 1 5 6 1323 977 218 46 96.433052 Suspension5 1 3 1 5 7 1557 977 297 46 96.317978 [homopolymer]4 1 3 1 6 0 519 1032 1335 48 -1 5 1 3 1 6 1 519 1032 137 35 96.462669 markets 1 3 1 6 2 671 1032 30 36 96.783592 is5 1 3 1 6 3 718 1032 206 36 96.159203 dominated5 1 3 1 6 4 940 1033 46 45 96.527046 by5 1 3 1 6 5 1002 1033 86 46 93.269585 high5 1 3 1 6 6 1103 1034 234 35 92.939262 volume/lows 1 3 1 6 7 1353 1040 77 30 75.509674 costs 1 3 1 6 8 1457 1035 397 45 87.771568 producers.RX197S In Camera.'™’ Evidence that was not available in Goodrich shows that small reactor plants that have higher production costs have turned to production of grades of PVC that are sold as specialty grades, as compared to pipe and general purpose grades, for higher prices. RX197M In Camera. Occidental reported in its 1986-1989 Strategic Plan that [n]umerous5 1 3 2 6 4 953 1436 60 34 96.390778 olds 1 3 2 6 5 1027 1436 101 34 94.428673 small5 1 3 2 6 6 1142 1443 137 28 96.952934 reactors 1 3 2 6 7 1291 1437 199 45 96.698708 operations5 1 3 2 6 8 1505 1438 90 35 96.888329 have5 1 3 2 6 9 1608 1439 125 34 96.426125 closed5 1 3 2 6 10 1745 1440 106 33 96.318985 down4 1 3 2 7 0 515 1492 1337 48 -1 5 1 3 2 7 1 515 1500 87 24 94.818954 overs 1 3 2 7 2 642 1497 120 28 95.283783 recent5 1 3 2 7 3 802 1502 101 34 96.486389 years5 1 3 2 7 4 945 1492 68 35 95.915565 dues 1 3 2 7 5 1054 1498 35 29 95.915565 to5 1 3 2 7 6 1130 1492 90 35 96.249237 theirs 1 3 2 7 7 1258 1493 163 46 96.249237 inability5 1 3 2 7 8 1462 1500 36 29 96.450462 to5 1 3 2 7 9 1538 1501 166 39 96.066330 competes 1 3 2 7 10 1745 1506 47 24 96.406273 on5 1 3 2 7 11 1833 1506 19 24 96.902344 a4 1 3 2 8 0 514 1547 1336 51 -1 5 1 3 2 8 1 514 1547 339 45 92.632507 cost/performances 1 3 2 8 2 867 1548 106 35 96.771629 basis.5 1 3 2 8 3 1001 1548 118 36 96.839363 Those5 1 3 2 8 4 1135 1549 69 35 96.539497 still5 1 3 2 8 5 1220 1549 35 35 96.676987 in5 1 3 2 8 6 1270 1550 184 45 96.595840 operations 1 3 2 8 7 1470 1561 57 25 96.464867 ares 1 3 2 8 8 1542 1551 208 46 96.527191 competing5 1 3 2 8 9 1765 1553 85 45 96.619888 only4 1 3 2 9 0 514 1601 1336 53 -1 5 1 3 2 9 1 514 1603 35 35 96.723625 in5 1 3 2 9 2 565 1603 170 47 96.950607 specialty5 1 3 2 9 3 751 1605 153 35 71.599709 niches. RX197S In Camera.'® According to Occiden- 106 In 1982, Occidental estimated that the costs to seven producers of manufacturing suspension PVC homopolymer ranged only from 22.1 cents to 23.6 cents per pound. CX52G In Camera. The administrative law judge found that the cost of converting VCM to PVC varied only $.004 among 7 of 9 large reactor plants and less than $.012 among 8 of 9 large reactor plants identified in Goodrich RX1168A. I.D.F. 602 (portion In Camera). Conversion costs are derived from Goodrich RX1168A by subtracting the cost of VCM from the operating costs for each plant. This approach is consistent with CX52G In Camera, which assumes that all producers have the same cost for VCM. '°7 Mr. Schaefer of Occidental (JXI(1), Tr. 560-61) attributed the increasingly commodity nature of the PVC industry to large-reactor technology: In the early 1970's, there was a real technological breakthrough, which . . . consists of these very large reactors which are used to make commodity grade PVC resin. And as the business has grown and become more commodity oriented, a number of producers invested in large reactor capacity in order to maintain a competitive position in the commodity business. . . . [W]e are talking about something that maybe started in the early seventies and ran through the late seventies and perhaps the very early eighties. 108 As a result of the closing of small reactor plants over time, small reactors likely represent a smaller proportion of total capacity today than at the time of the Goodrich decision. See note 76 supra.

Opinion 115 F.T.C.

tal, the suspension PVC resins produced at small reactor plants, due4 1 3 1 2 0 682 678 1337 46 -1 5 1 3 1 2 1 682 685 36 28 96.106956 to5 1 3 1 2 2 742 689 86 35 96.693474 very5 1 3 1 2 3 851 678 86 46 96.852509 high5 1 3 1 2 4 961 678 286 46 96.735100 manufacturing5 1 3 1 2 5 1271 686 96 28 96.644508 costs5 1 3 1 2 6 1391 680 201 34 96.799454 associated5 1 3 1 2 7 1615 680 85 34 96.733322 with5 1 3 1 2 8 1725 680 104 34 95.683716 small5 1 3 1 2 9 1852 686 167 34 96.955063 reactors,4 1 3 1 3 0 681 735 1337 47 -1 5 1 3 1 3 1 681 742 133 28 96.562248 cannot5 1 3 1 3 2 844 735 265 46 96.443184 economically5 1 3 1 3 3 1140 742 166 40 96.819794 competes 1 3 1 3 4 1336 736 36 34 96.427811 in5 1 3 1 3 5 1402 736 59 35 96.427811 thes 1 3 1 3 6 1492 737 142 45 96.588135 general5 1 3 1 3 7 1664 747 156 35 96.452538 purposes 1 3 1 3 8 1852 737 166 35 83.561340 sectors. RX197M Jn Camera. Instead, the specialty PVC resins made at small reactor plants are priced5 1 3 1 5 5 1217 851 282 46 93.111397 approximately5 1 3 1 5 6 1521 849 186 41 92.207886 $.07-$.125 1 3 1 5 7 1728 851 116 36 96.897614 above5 1 3 1 5 8 1864 851 154 36 96.406898 General4 1 3 1 6 0 681 908 1336 47 -1 5 1 3 1 6 1 681 909 160 45 96.778656 Purposes 1 3 1 6 2 856 908 113 36 96.514038 resins5 1 3 1 6 3 986 908 69 36 96.975769 ands 1 3 1 6 4 1071 908 177 36 96.402412 therefore5 1 3 1 6 5 1264 908 136 36 96.883804 delivers 1 3 1 6 6 1415 919 20 25 96.921417 a5 1 3 1 6 7 1450 915 115 30 96.921417 returns 1 3 1 6 8 1582 920 86 25 96.493095 overs 1 3 1 6 9 1682 908 90 37 96.454697 theirs 1 3 1 6 10 1786 908 87 47 96.835846 high5 1 3 1 6 11 1889 909 128 36 94.940262 costs. Id. Also according to Occidental, [t]he5 1 3 1 7 7 1486 966 172 47 96.708252 specialty5 1 3 1 7 8 1673 967 95 35 96.456543 resins 1 3 1 7 9 1783 966 236 46 96.420082 competition4 1 3 1 8 0 680 1023 1336 46 -1 5 1 3 1 8 1 680 1023 156 36 96.361305 consists5 1 3 1 8 2 875 1023 42 36 96.665451 of5 1 3 1 8 3 952 1023 176 36 94.991531 domestic5 1 3 1 8 4 1165 1024 193 45 96.760880 producers5 1 3 1 8 5 1398 1024 85 35 95.874649 with5 1 3 1 8 6 1521 1024 103 35 95.519958 small5 1 3 1 8 7 1662 1029 137 30 94.669540 reactors 1 3 1 8 8 1836 1023 180 36 94.669540 facilities.4 1 3 1 9 0 680 1080 1338 47 -1 5 1 3 1 9 1 680 1081 257 43 91.218491 O[ccidental],5 1 3 1 9 2 961 1080 157 46 96.740646 Georgia5 1 3 1 9 3 1140 1080 99 42 93.294212 Gulf,5 1 3 1 9 4 1261 1081 82 35 89.752808 B.F.5 1 3 1 9 5 1366 1081 196 40 96.568909 Goodrich,5 1 3 1 9 6 1585 1081 68 35 92.832077 ands 1 3 1 9 7 1675 1081 142 46 92.750572 Keysor5 1 3 1 9 8 1837 1080 181 46 96.635475 comprise4 1 3 1 10 0 679 1137 561 37 -1 5 1 3 1 10 1 679 1139 88 35 96.315559 90%5 1 3 1 10 2 783 1138 43 35 96.510643 of5 1 3 1 10 3 837 1138 58 35 96.510643 thes 1 3 1 10 4 910 1138 208 35 17.237762 market...5 1 3 1 10 5 1138 1138 25 35 17.237762 . Id.

In this industry, then, the difference in reactor size has led to two tiers of products, a lower cost, commodity tier and a higher cost, specialty tier, rather than disparate costs among producers." PVC that is made in the higher cost, small reactors is not in a position to undercut the price of PVC produced in the large reactors. In addition, most of the small reactor capacity remaining in the industry is owned by the same firms that also are the major, large reactor producers and would have incentives to avoid undermining a collusive price. C. Elasticity of Demand The price elasticity of demand for a product measures the extent to which an increase in the price of the product will produce a decrease in demand for it. When the price elasticity of demand is low, the price of a product can be increased without losing a significant quantity of sales."!!° The administrative law judge made detailed findings concerning the price elasticity of demand for PVC and for the viny] products made from PVC and concluded that the elasticity of demand for PVC is low. I.D.F. 361-548 (portion Jn Camera). We agree.

109 Tenneco estimated that the cost of producing suspension homopolymer PVC is 25.2 cents per pound in a world5 1 8 1 1 10 1360 2470 79 29 96.067009 scales 1 8 1 1 11 1452 2470 79 37 96.973633 large5 1 8 1 1 12 1544 2474 113 24 96.919525 reactors 1 8 1 1 13 1668 2469 95 38 93.300697 plant and 29.2 cents per pound in a “typical small reactor plant." JX1-4, PX131 at 1349; See notes 18 & 19 supra.

110 Because PVC is a raw material used to manufacture other products, its price elasticity will increase to the extent that other raw materials can be substituted for it and to the extent that consumers can substitute away from finished vinyl products.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1267 1010 Opinion The Commission in Goodrich observed that the price elasticity for mass and suspension PVC resin is relatively low, for three reasons. First, there are no practical substitutes for PVC in the manufacture of vinyl products. Second, with the exception of pipe made from PVC, PVC resin accounts for only a small proportion of the cost of finished vinyl products. Third, although the elasticity of demand for finished vinyl products varies substantially, it is relatively low for most finished vinyl products. Goodrich, 110 FTC at 318-20. The Commission nevertheless concluded that although5 1 3 1 9 6 1671 1077 58 35 89.061279 thes 1 3 1 9 7 1766 1078 98 45 86.333549 price4 1 3 1 10 0 525 1124 1338 55 -1 5 1 3 1 10 1 525 1124 175 47 96.973984 elasticity5 1 3 1 10 2 715 1125 42 36 96.971146 of5 1 3 1 10 3 767 1127 153 36 96.520927 demands 1 3 1 10 4 934 1127 57 37 96.644875 for5 1 3 1 10 5 1003 1129 94 35 96.644875 PVC5 1 3 1 10 6 1111 1129 41 43 96.980583 is,5 1 3 1 10 7 1168 1140 46 26 96.927422 on5 1 3 1 10 8 1228 1130 159 43 96.723137 balance,5 1 3 1 10 9 1402 1132 183 47 96.723137 relatively5 1 3 1 10 10 1600 1134 82 42 96.849442 low,5 1 3 1 10 11 1698 1145 44 25 96.669334 an5 1 3 1 10 12 1756 1135 107 36 96.995209 effort4 1 3 1 11 0 524 1183 1338 58 -1 5 1 3 1 11 1 524 1193 46 25 96.447136 on5 1 3 1 11 2 583 1183 58 36 96.952248 thes 1 3 1 11 3 652 1191 76 39 96.958199 parts 1 3 1 11 4 739 1184 43 36 96.958199 of5 1 3 1 11 5 790 1185 94 36 96.932594 PVC5 1 3 1 11 6 895 1187 190 46 96.866257 producers5 1 3 1 11 7 1099 1194 35 30 94.811562 to5 1 3 1 11 8 1146 1190 89 34 94.811562 raises 1 3 1 11 9 1248 1190 93 37 96.918343 PVC5 1 3 1 11 10 1353 1190 113 47 97.001678 prices5 1 3 1 11 11 1480 1197 36 31 93.303879 to5 1 3 1 11 12 1529 1194 333 47 92.094818 supracompetitive4 1 3 1 12 0 523 1241 1337 58 -1 5 1 3 1 12 1 523 1241 114 37 96.893425 levels5 1 3 1 12 2 666 1253 82 36 96.929199 may5 1 3 1 12 3 776 1244 45 35 96.781685 be5 1 3 1 12 4 848 1246 227 36 96.540009 constrained5 1 3 1 12 5 1102 1253 36 29 96.541771 to5 1 3 1 12 6 1166 1258 102 26 96.391640 some5 1 3 1 12 7 1294 1249 130 46 96.391640 degrees 1 3 1 12 8 1451 1250 47 46 96.996384 by5 1 3 1 12 9 1526 1251 58 35 97.004333 thes 1 3 1 12 10 1611 1252 127 46 96.449654 higher5 1 3 1 12 11 1763 1253 97 46 96.449654 price4 1 3 1 13 0 523 1300 1337 54 -1 5 1 3 1 13 1 523 1300 172 47 96.791107 elasticity5 1 3 1 13 2 708 1301 42 36 96.921066 of5 1 3 1 13 3 760 1302 151 36 96.623283 demands 1 3 1 13 4 925 1304 55 35 96.230560 for5 1 3 1 13 5 992 1315 105 35 96.887779 many5 1 3 1 13 6 1111 1306 91 36 96.549660 PVC5 1 3 1 13 7 1216 1308 69 34 96.940514 ends 1 3 1 13 8 1298 1319 63 24 96.842323 uses 1 3 1 13 9 1372 1309 177 45 96.768761 products,5 1 3 1 13 10 1564 1311 68 35 96.996643 ands 1 3 1 13 11 1645 1312 104 35 96.882675 made5 1 3 1 13 12 1762 1323 98 25 96.626465 more4 1 3 1 14 0 521 1356 1337 64 -1 5 1 3 1 14 1 521 1356 160 38 93.572212 difficult5 1 3 1 14 2 695 1359 48 46 96.924057 by5 1 3 1 14 3 758 1359 192 38 96.997818 variations5 1 3 1 14 4 967 1362 36 35 96.461365 in5 1 3 1 14 5 1018 1363 97 45 96.461365 prices 1 3 1 14 6 1130 1364 177 47 96.527115 elasticity5 1 3 1 14 7 1323 1365 92 36 96.238556 from5 1 3 1 14 8 1431 1377 68 25 96.238556 ones 1 3 1 14 9 1515 1368 93 35 96.794830 PVC5 1 3 1 14 10 1624 1370 69 34 96.956490 ends 1 3 1 14 11 1708 1365 150 55 96.831123 product4 1 3 1 15 0 520 1418 1337 54 -1 5 1 3 1 15 1 520 1422 35 29 96.241562 to5 1 3 1 15 2 571 1418 175 35 84.251717 another. 110 FTC at 339. At the same time, the Commission in Goodrich concluded that thes 1 3 1 16 5 1179 1481 154 36 95.092400 demands 1 3 1 16 6 1362 1482 57 36 95.092400 for5 1 3 1 16 7 1447 1484 94 35 92.650642 PVC5 1 3 1 16 8 1572 1484 29 36 92.650642 is5 1 3 1 16 9 1633 1481 223 56 96.946579 sufficiently4 1 3 1 17 0 518 1531 1337 58 -1 5 1 3 1 17 1 518 1531 164 37 96.081253 inelastic5 1 3 1 17 2 710 1540 35 29 96.554901 to5 1 3 1 17 3 772 1535 105 35 96.554901 makes 1 3 1 17 4 903 1536 26 34 96.797096 it5 1 3 1 17 5 955 1536 111 46 96.894142 likely5 1 3 1 17 6 1092 1539 72 34 96.394562 that5 1 3 1 17 7 1190 1549 44 25 96.394562 an5 1 3 1 17 8 1260 1539 160 36 96.480911 increases 1 3 1 17 9 1447 1542 36 34 92.515518 in5 1 3 1 17 10 1510 1542 110 36 91.885468 VCM5 1 3 1 17 11 1645 1544 116 45 96.481628 prices5 1 3 1 17 12 1789 1557 66 24 96.481628 can4 1 3 1 18 0 517 1590 1275 50 -1 5 1 3 1 18 1 517 1590 193 45 96.631935 profitably5 1 3 1 18 2 727 1591 44 35 96.430450 be5 1 3 1 18 3 784 1593 132 44 96.409447 passed5 1 3 1 18 4 931 1593 107 47 96.449036 along5 1 3 1 18 5 1053 1601 36 29 96.788002 to5 1 3 1 18 6 1104 1596 93 36 96.891930 PVC5 1 3 1 18 7 1213 1599 229 35 89.797539 customers.”5 1 3 1 18 8 1476 1599 67 36 89.797539 1105 1 3 1 18 9 1558 1601 88 36 95.424850 FTC5 1 3 1 18 10 1662 1608 33 29 93.194359 at5 1 3 1 18 11 1707 1602 85 36 93.194359 338.3 1 3 2 0 0 510 1648 1344 576 -1 4 1 3 2 1 0 590 1648 1264 57 -1 5 1 3 2 1 1 590 1648 183 37 96.678024 Evidences 1 3 2 1 2 785 1651 73 35 96.678024 that5 1 3 2 1 3 871 1662 73 25 96.681282 was5 1 3 2 1 4 958 1659 61 29 96.939865 not5 1 3 2 1 5 1031 1653 36 35 96.939865 in5 1 3 2 1 6 1080 1653 58 36 96.594604 thes 1 3 2 1 7 1150 1655 124 35 96.982361 records 1 3 2 1 8 1288 1656 36 35 96.490379 in5 1 3 2 1 9 1337 1656 183 37 96.577675 Goodrich5 1 3 2 1 10 1534 1666 163 39 95.180061 suggests5 1 3 2 1 11 1711 1661 72 35 96.724167 that5 1 3 2 1 12 1796 1662 58 36 97.000534 thea 1 3 2 2 0 515 1705 1338 56 -1 5 1 3 2 2 1 515 1705 96 45 96.949028 prices 1 3 2 2 2 625 1707 176 46 96.698303 elasticity5 1 3 2 2 3 816 1709 42 35 96.934448 of5 1 3 2 2 4 868 1710 154 36 96.785645 demands 1 3 2 2 5 1036 1710 56 36 97.000320 for5 1 3 2 2 6 1105 1712 154 37 96.859192 finished5 1 3 2 2 7 1275 1714 96 47 58.447792 vinyl5 1 3 2 2 8 1385 1716 168 45 96.787514 products5 1 3 2 2 9 1568 1716 29 37 96.787514 is5 1 3 2 2 10 1612 1718 70 36 96.370445 less5 1 3 2 2 11 1699 1719 81 36 95.637924 than5 1 3 2 2 12 1796 1720 57 36 95.637924 thea 1 3 2 3 0 516 1763 1337 52 -1 5 1 3 2 3 1 516 1763 247 39 96.692459 Commissions 1 3 2 3 2 779 1767 83 36 93.253204 then5 1 3 2 3 3 877 1764 241 41 36.291290 believed.’"’ In Goodrich witnesses testified that when the price of pipe grade resin reached 33 cents to 34 cents, PVC pipe would lose business to pipes made from other materials. I.D.F. 430 (portion In Camera). PVC price increases in subsequent years have shown this prediction to be incorrect. Although the price of pipe grade PVC resin increased from 23 cents per pound in J anuary 1986 to approximately 38 to 40 cents per pound in January 1988, Wilhite, CX179B; Porter, CX198A-B Jn Camera: RX310D, the sales In5 1 5 1 1 2 696 2331 161 35 91.852280 Goodrich,5 1 5 1 1 3 868 2333 48 29 95.967926 thes 1 5 1 1 4 927 2333 202 32 96.451126 Commissions 1 5 1 1 5 1141 2335 92 30 96.754318 found5 1 5 1 1 6 1244 2337 60 29 97.012512 that5 1 5 1 1 7 1314 2337 47 30 96.959869 thes 1 5 1 1 8 1372 2338 79 38 96.959869 prices 1 5 1 1 9 1462 2338 145 40 96.838768 elasticity5 1 5 1 1 10 1618 2340 36 30 96.892609 of5 1 5 1 1 11 1662 2340 127 31 96.614731 demands 1 5 1 1 12 1800 2342 46 29 96.307076 for2 1 6 0 0 0 502 2376 1343 434 -1 3 1 6 1 0 0 502 2376 1343 434 -1 4 1 6 1 1 0 508 2376 1336 49 -1 5 1 6 1 1 1 508 2376 131 31 93.295479 finished5 1 6 1 1 2 653 2379 81 37 38.344532 viny]5 1 6 1 1 3 748 2380 139 37 96.717659 products5 1 6 1 1 4 901 2381 25 29 96.749252 is5 1 6 1 1 5 939 2382 105 30 96.595261 lowest5 1 6 1 1 6 1058 2382 29 30 96.881462 in5 1 6 1 1 7 1099 2383 49 29 96.881462 thes 1 6 1 1 8 1160 2384 71 29 96.789093 wires 1 6 1 1 9 1244 2385 56 29 96.616936 ands 1 6 1 1 10 1314 2385 94 35 96.449814 cable,5 1 6 1 1 11 1422 2386 167 39 96.178406 packaging5 1 6 1 1 12 1602 2387 66 30 96.944717 films 1 6 1 1 13 1681 2389 58 29 96.656403 ands 1 6 1 1 14 1753 2390 91 33 96.396881 sheet,4 1 6 1 2 0 506 2426 1338 45 -1 5 1 6 1 2 1 506 2426 195 39 93.769768 phonographs 1 6 1 2 2 736 2429 104 29 96.629913 records 1 6 1 2 3 875 2430 57 29 95.235420 ands 1 6 1 2 4 967 2430 127 30 95.235420 medical5 1 6 1 2 5 1128 2432 140 37 95.889656 products5 1 6 1 2 6 1304 2439 150 32 92.469040 segments5 1 6 1 2 7 1489 2435 175 35 92.469040 (21%-23%5 1 6 1 2 8 1699 2437 36 29 96.786354 of5 1 6 1 2 9 1766 2437 78 30 96.462906 PVC4 1 6 1 3 0 507 2475 1337 43 -1 5 1 6 1 3 1 507 2475 229 37 95.546082 consumption).5 1 6 1 3 2 760 2476 79 30 96.984009 With5 1 6 1 3 3 852 2483 114 32 96.153297 respects 1 6 1 3 4 977 2483 30 24 96.153297 to5 1 6 1 3 5 1020 2479 47 29 96.932762 thes 1 6 1 3 6 1081 2479 76 30 96.998665 PVC5 1 6 1 3 7 1170 2480 78 38 96.529594 pipe,5 1 6 1 3 8 1263 2481 106 37 96.658936 siding,5 1 6 1 3 9 1382 2481 80 30 96.316338 floors 1 6 1 3 10 1474 2482 49 30 96.726570 tiles 1 6 1 3 11 1537 2484 56 28 96.640755 ands 1 6 1 3 12 1607 2484 129 29 96.649910 windows 1 6 1 3 13 1751 2485 93 29 96.155670 frame4 1 6 1 4 0 506 2524 1337 47 -1 5 1 6 1 4 1 506 2529 148 31 93.306229 segments5 1 6 1 4 2 667 2524 173 36 90.168198 (53%-55%5 1 6 1 4 3 852 2525 34 30 97.012077 of5 1 6 1 4 4 893 2527 78 29 96.388542 PVC5 1 6 1 4 5 982 2528 229 38 96.142937 consumption),5 1 6 1 4 6 1223 2530 48 28 96.182411 thes 1 6 1 4 7 1282 2530 202 30 96.561684 Commissions 1 6 1 4 8 1497 2531 62 29 96.927277 said5 1 6 1 4 9 1570 2533 59 29 96.898529 that5 1 6 1 4 10 1640 2533 48 29 96.898529 thes 1 6 1 4 11 1699 2533 144 38 96.970528 elasticity4 1 6 1 5 0 505 2570 1337 47 -1 5 1 6 1 5 1 505 2570 35 29 96.994545 of5 1 6 1 5 2 549 2572 126 29 94.639313 demands 1 6 1 5 3 688 2572 24 30 96.839256 is5 1 6 1 5 4 724 2572 104 39 96.804077 higher5 1 6 1 5 5 839 2575 50 29 96.193565 but5 1 6 1 5 6 901 2575 57 29 93.168442 still5 1 6 1 5 7 971 2575 150 39 96.772095 relatively5 1 6 1 5 8 1134 2576 67 34 96.360924 low,5 1 6 1 5 9 1214 2577 91 38 96.770996 citing5 1 6 1 5 10 1326 2587 6 20 96.770996 a5 1 6 1 5 11 1345 2578 150 30 96.981583 Goodrich5 1 6 1 5 12 1509 2580 85 37 95.929169 study5 1 6 1 5 13 1606 2581 60 28 95.929169 that5 1 6 1 5 14 1678 2582 164 29 96.758812 concluded4 1 6 1 6 0 504 2620 1337 46 -1 5 1 6 1 6 1 504 2620 60 29 94.807137 that5 1 6 1 6 2 581 2620 93 30 94.807137 PVC pipe manufacturers appear to have plenty of room for price increases before approaching the price levels of most competing materials." The elasticity of demand for rigid and flexible calendered products and bottles (21%-27% of PVC consumption) was thought to be considerably5 1 6 1 9 7 1301 2771 128 39 81.381775 higher. 110 FTC at 319-20. Opinion 115 F.T.C.

of PVC resin in5 1 3 1 1 5 1060 641 58 36 97.002831 thes 1 3 1 1 6 1139 641 84 47 96.757217 pipes 1 3 1 1 7 1246 650 115 28 88.017441 sectors 1 3 1 1 8 1384 673 5 6 87.287331 .5 1 3 1 1 9 1420 674 1 6 86.270187 .5 1 3 1 1 10 1453 674 1 6 86.270187 .5 1 3 1 1 11 1476 646 183 36 94.492043 remained5 1 3 1 1 12 1680 648 224 47 96.509354 remarkably5 1 3 1 1 13 1927 650 97 46 96.725662 good4 1 3 1 2 0 686 698 1338 50 -1 5 1 3 1 2 1 686 698 137 45 96.259308 despite5 1 3 1 2 2 839 709 100 25 96.747002 some5 1 3 1 2 3 953 698 93 37 96.747002 fears5 1 3 1 2 4 1061 700 72 35 96.922050 that5 1 3 1 2 5 1146 701 94 36 96.778976 PVC5 1 3 1 2 6 1255 701 82 46 97.002434 pipes 1 3 1 2 7 1351 704 221 44 96.302124 penetration5 1 3 1 2 8 1588 706 120 35 96.922516 would5 1 3 1 2 9 1725 707 90 35 96.906906 slows 1 3 1 2 10 1831 708 108 35 96.437981 downs 1 3 1 2 11 1954 709 70 35 96.518600 due4 1 3 1 3 0 686 757 1337 52 -1 5 1 3 1 3 1 686 762 36 29 96.339409 to5 1 3 1 3 2 737 757 235 46 96.833794 competitions 1 3 1 3 3 988 758 94 36 96.975334 from5 1 3 1 3 4 1096 759 101 36 96.975334 others 1 3 1 3 5 1212 767 100 39 96.919052 types5 1 3 1 3 6 1328 761 42 36 96.977295 of5 1 3 1 3 7 1381 761 114 46 75.622299 pipe. RX309D; RX308C (with pipe grade PVC prices at 38-40 cents, [s]o5 1 3 1 4 9 1533 821 53 36 97.011002 far5 1 3 1 4 10 1599 822 95 36 96.977150 there5 1 3 1 4 11 1708 834 57 25 95.619957 ares 1 3 1 4 12 1778 835 47 25 97.003387 no5 1 3 1 4 13 1840 824 96 46 96.925156 signs5 1 3 1 4 14 1951 825 72 36 96.925156 that4 1 3 1 5 0 684 875 1335 53 -1 5 1 3 1 5 1 684 875 94 34 96.812820 PVC5 1 3 1 5 2 799 875 85 45 96.813873 pipes 1 3 1 5 3 905 875 115 46 96.465836 prices5 1 3 1 5 4 1042 887 58 24 96.962601 ares 1 3 1 5 5 1122 878 148 45 96.637756 moving5 1 3 1 5 6 1291 884 60 29 96.972290 too5 1 3 1 5 7 1372 878 54 36 96.761787 far5 1 3 1 5 8 1446 880 112 35 96.682297 ahead5 1 3 1 5 9 1579 881 43 35 96.659576 of5 1 3 1 5 10 1639 881 58 36 95.640327 thes 1 3 1 5 11 1736 883 283 45 95.640327 competition). Another trade journal, observing the increase in pipe grade resin sales in 1987, predicted that sales of PVC pipe grade resin would remain4 1 3 1 8 0 683 1049 1337 52 -1 5 1 3 1 8 1 683 1049 150 45 71.791237 strong, because of continuing expenditures on municipal water and sewage treatment systems. RX307A. The replacement of outdated4 1 3 1 10 0 681 1166 1335 52 -1 5 1 3 1 10 1 681 1172 110 28 96.819466 waters 1 3 1 10 2 805 1166 85 46 96.466682 pipes 1 3 1 10 3 906 1166 105 36 96.418785 made5 1 3 1 10 4 1027 1166 94 37 96.872253 from5 1 3 1 10 5 1138 1168 161 36 96.634323 asbestos5 1 3 1 10 6 1316 1177 151 34 96.575462 cement,5 1 3 1 10 7 1486 1172 85 34 96.957779 steels 1 3 1 10 8 1590 1182 40 24 96.956566 or5 1 3 1 10 9 1645 1172 79 46 96.761482 clays 1 3 1 10 10 1742 1173 85 35 96.589233 with5 1 3 1 10 11 1844 1175 172 35 91.567795 PVC...4 1 3 1 11 0 679 1224 1338 53 -1 5 1 3 1 11 1 679 1224 164 45 96.963455 provides5 1 3 1 11 2 858 1235 19 25 96.963455 a5 1 3 1 11 3 890 1226 150 34 96.897209 demands 1 3 1 11 4 1054 1226 55 35 96.389008 for5 1 3 1 11 5 1121 1226 94 46 96.389008 large5 1 3 1 11 6 1228 1227 166 36 96.899231 diameters 1 3 1 11 7 1405 1229 82 45 96.378632 pipes 1 3 1 11 8 1501 1229 115 36 96.755028 which5 1 3 1 11 9 1629 1230 98 46 96.682060 helps5 1 3 1 11 10 1742 1238 35 28 96.589874 to5 1 3 1 11 11 1791 1239 226 38 96.958794 compensate4 1 3 1 12 0 679 1282 1337 50 -1 5 1 3 1 12 1 679 1282 57 35 96.600304 for5 1 3 1 12 2 749 1293 69 34 96.600304 any5 1 3 1 12 3 833 1283 113 35 96.599747 losses5 1 3 1 12 4 962 1283 227 36 65.820663 elsewhere. RX304C. Pipe manufacturers attributed the absence of substitution away from PVC pipe to its lower installed cost, as compared to pipe made of other materials. Wilhite, CX179A-C; Porter, CX198B-C In Camera; Alberti, CX199F-G In Camera; Pflugrath, CX177B In Camera; Heath, CX178B. The cost advantage of PVC pipe historically is reduced in some applications, primarily larger diameter pipes, because the walls of PVC pipe must be thicker. For these applications, some pipe producers thought that “further significant increases in the price of suspension PVC homopolymer resin could result in some substitution to other [pipe] materials." Alberti, CX199F In Camera; Porter, RX261B In Camera; Heath, CX178B-C. But, in August 1988, almost eight months after the price of pipe grade PVC resin had reached 40 cents per pound, that substitution had not occurred. Porter, RX261C In Camera."'” 12" Mr. Porter signed two affidavits, seven months apart. In January 1988, Mr. Porter said that his company, Porter Plastics, a PVC pipe producer, was paying 40 cents per pound for pipe grade PVC resin; that, despite the price increase, PVC pipe was still5 1 5 1 4 3 828 2322 100 38 96.533096 priced5 1 5 1 4 4 940 2323 202 38 96.427185 substantially5 1 5 1 4 5 1153 2324 97 29 96.982224 below5 1 5 1 4 6 1262 2324 47 29 96.840782 thes 1 5 1 4 7 1320 2325 78 37 96.987129 prices 1 5 1 4 8 1410 2325 35 28 96.986931 of5 1 5 1 4 9 1453 2325 168 30 96.886551 alternatives 1 5 1 4 10 1633 2327 173 34 93.971992 materials; and that the price increases5 1 5 1 5 3 948 2372 82 35 90.565453 ha[d]5 1 5 1 5 4 1048 2377 50 24 96.605827 not5 1 5 1 5 5 1115 2372 202 38 96.736176 significantly5 1 5 1 5 6 1333 2373 129 29 96.330025 affected5 1 5 1 5 7 1478 2374 48 29 96.894966 thes 1 5 1 5 8 1542 2374 105 30 96.530685 choices 1 5 1 5 9 1663 2384 38 20 96.953674 on5 1 5 1 5 10 1717 2375 48 29 96.953674 thes 1 5 1 5 11 1781 2381 62 32 96.983940 parts 1 5 1 5 12 1858 2376 36 28 97.014526 of5 1 5 1 5 13 1907 2376 99 29 96.977577 Porter4 1 5 1 6 0 669 2418 1335 34 -1 5 1 5 1 6 1 669 2418 128 29 91.055038 Plastics'5 1 5 1 6 2 808 2424 163 25 96.094658 customers5 1 5 1 6 3 983 2419 35 30 96.154900 of5 1 5 1 6 4 1026 2420 77 29 96.936653 PVC5 1 5 1 6 5 1114 2420 120 29 96.998825 relatives 1 5 1 6 6 1245 2426 29 23 96.965294 to5 1 5 1 6 7 1286 2421 81 28 97.004234 others 1 5 1 6 8 1378 2421 170 30 86.292442 materials. CX198A-B In Camera. In August 1988, Mr. Porter told the respondent's counsel that PVC pipe cannot4 1 5 1 8 0 667 2516 1339 42 -1 5 1 5 1 8 1 667 2521 139 33 96.327744 competes 1 5 1 8 2 823 2524 37 21 96.709412 on5 1 5 1 8 3 867 2512 17 50 96.780548 a5 1 5 1 8 4 907 2521 65 24 96.952667 costs 1 5 1 8 5 987 2516 80 29 96.977325 basis5 1 5 1 8 6 1083 2516 71 29 96.065742 with5 1 5 1 8 7 1168 2522 63 24 96.065742 casts 1 5 1 8 8 1246 2517 63 29 96.146362 irons 1 5 1 8 9 1323 2518 69 38 96.324577 pipes 1 5 1 8 10 1408 2518 28 29 96.324577 in5 1 5 1 8 11 1452 2518 157 30 96.986237 diameters5 1 5 1 8 12 1624 2519 36 29 96.909386 of5 1 5 1 8 13 1676 2519 35 29 96.703308 105 1 5 1 8 14 1726 2519 103 30 96.703308 inches5 1 5 1 8 15 1844 2529 33 20 96.979080 or5 1 5 1 8 16 1892 2527 114 31 97.001709 greater4 1 5 1 9 0 667 2564 1336 41 -1 5 1 5 1 9 1 667 2565 86 28 96.737640 when5 1 5 1 9 2 765 2564 68 38 96.302109 pipes 1 5 1 9 3 844 2566 87 36 96.302109 grades 1 5 1 9 4 943 2565 76 29 96.745148 PVC5 1 5 1 9 5 1031 2566 76 28 96.494202 resins 1 5 1 9 6 1120 2566 118 29 91.857361 reaches5 1 5 1 9 7 1252 2590 4 4 90.732117 .5 1 5 1 9 8 1270 2590 5 5 90.732117 .5 1 5 1 9 9 1288 2567 109 28 94.871490 around5 1 5 1 9 10 1409 2567 36 29 95.602104 375 1 5 1 9 11 1458 2572 80 24 97.011002 cents5 1 5 1 9 12 1549 2576 52 29 97.006943 pers 1 5 1 9 13 1610 2569 115 36 95.569138 pound and that because pipe grade resin prices have5 1 5 1 10 6 1155 2614 70 37 96.852753 only5 1 5 1 10 7 1238 2614 129 38 96.688606 recently5 1 5 1 10 8 1380 2623 77 29 96.919991 gone5 1 5 1 10 9 1471 2615 95 29 96.740341 above5 1 5 1 10 10 1580 2615 37 30 96.833214 375 1 5 1 10 11 1631 2621 81 24 96.981216 cents5 1 5 1 10 12 1726 2625 52 28 96.978905 pers 1 5 1 10 13 1789 2617 111 37 93.281441 pound,5 1 5 1 10 14 1915 2641 4 4 89.233315 .5 1 5 1 10 15 1936 2641 4 5 89.233315 .5 1 5 1 10 16 1955 2617 48 29 96.996361 thea 1 5 1 11 0 667 2661 1334 40 -1 5 1 5 1 11 1 667 2661 92 29 96.476799 effects 1 5 1 11 2 778 2661 34 29 96.951218 of5 1 5 1 11 3 828 2662 59 28 96.832840 that5 1 5 1 11 4 904 2661 130 38 84.263031 pricing”5 1 5 1 11 5 1055 2671 39 20 96.909416 on5 1 5 1 11 6 1113 2662 237 38 96.168915 large-diameters 1 5 1 11 7 1367 2663 68 38 96.168915 pipes 1 5 1 11 8 1456 2663 67 30 93.825760 has yet to occur." RX261C Jn Camera. Notwithstanding these predictions, Mr. Porter also said in August 1988 that because of the shortage of domestic resin, he was buying imported resin at 52 cents per pound and finding it profitable to do so. RX261B In Camera. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1269 1010 Opinion Evidence in this case indicates that the price elasticity of demand for PVC used for calendering and bottles is lower than the Commission in Goodrich believed. One PVC customer testified that the demands 1 2 1 4 3 780 802 55 34 96.760521 for5 1 2 1 4 4 847 802 91 34 96.813339 PVC5 1 2 1 4 5 952 802 35 34 96.752838 in5 1 2 1 4 6 1000 802 57 34 96.752838 thes 1 2 1 4 7 1069 802 109 34 96.706909 bottles 1 2 1 4 8 1192 802 230 45 96.671066 applications5 1 2 1 4 9 1436 801 35 35 96.671066 in5 1 2 1 4 10 1484 802 116 34 96.580307 which5 1 2 1 4 11 1614 802 24 34 96.591316 it5 1 2 1 4 12 1651 802 29 34 96.591316 is5 1 2 1 4 13 1694 802 87 34 96.864067 used5 1 2 1 4 14 1795 802 67 34 96.904938 anda 1 2 1 5 0 523 860 1339 46 -1 5 1 2 1 5 1 523 860 183 46 96.765396 preferred5 1 2 1 5 2 727 860 28 36 96.564301 is5 1 2 1 5 3 775 860 185 46 96.244278 relatively5 1 2 1 5 4 979 860 211 35 96.571060 insensitive5 1 2 1 5 5 1208 866 36 29 96.617241 to5 1 2 1 5 6 1264 860 178 36 96.814445 increases5 1 2 1 5 7 1462 860 35 35 96.834702 in5 1 2 1 5 8 1517 860 58 36 96.834595 thes 1 2 1 5 9 1593 860 98 46 95.812500 prices 1 2 1 5 10 1710 860 44 36 96.359367 of5 1 2 1 5 11 1768 860 94 36 96.359367 PVC4 1 2 1 6 0 523 918 1337 41 -1 5 1 2 1 6 1 523 918 124 36 89.521751 resin. Friedman, CX191B. Occidental identifies PVC bottle compound as a specialty5 1 2 1 7 5 970 976 105 35 96.827827 niche5 1 2 1 7 6 1096 977 99 42 92.762505 [that]5 1 2 1 7 7 1218 1005 5 6 65.918510 .5 1 2 1 7 8 1245 1005 5 7 65.918510 .5 1 2 1 7 9 1273 1005 6 7 85.633148 .5 1 2 1 7 10 1298 977 177 46 80.829849 permit[s]5 1 2 1 7 11 1494 977 177 46 96.639153 premiums 1 2 1 7 12 1688 977 171 46 81.878304 pricing. RX197Y In Camera. This ability to obtain a price premium for PVC bottle compound suggests that the price elasticity of demand for PVC for this purpose is low.

Specialty PVC homopolymer and copolymer resins are used in calendering applications. RX197L-M In Camera. According to Occidental, homopolymer resin for calendering obtains a premium price over general purpose homopolymer resin (7 cents to 10 cents per pound) and therefore5 1 2 2 5 4 1009 1441 185 44 89.614784 deliver[s]5 1 2 2 5 5 1225 1452 19 25 96.562386 a5 1 2 2 5 6 1271 1449 116 28 96.144234 returns 1 2 2 5 7 1415 1453 86 25 96.747757 overs 1 2 2 5 8 1531 1443 71 42 95.440567 [its]5 1 2 2 5 9 1632 1443 86 46 96.907539 high5 1 2 2 5 10 1747 1443 107 36 96.205391 cost. RX197M In Camera, The price for copolymer resin used for calendering averages5 1 2 2 7 3 988 1557 93 36 93.272713 from5 1 2 2 7 4 1105 1557 82 39 91.895737 $.055 1 2 2 7 5 1213 1565 35 28 89.449654 to5 1 2 2 7 6 1273 1557 84 40 89.449654 $.105 1 2 2 7 7 1381 1560 114 34 96.682747 above5 1 2 2 7 8 1519 1560 154 35 96.522354 General5 1 2 2 7 9 1698 1560 158 45 96.793762 Purpose4 1 2 2 8 0 522 1615 1333 50 -1 5 1 2 2 8 1 522 1615 121 42 96.069016 [resin]5 1 2 2 8 2 661 1615 169 46 60.892147 pricing. RX197L In Camera. The ability to obtain a price premium for PVC sold in the calendering segment is consistent with the conclusion that the price elasticity of demand for PVC is low. See 1.D.F. 475 (citing testimony from manufacturer that passed4 1 2 2 12 0 517 1848 1336 48 -1 5 1 2 2 12 1 517 1848 153 45 96.033806 through5 1 2 2 12 2 692 1854 36 29 96.033806 to5 1 2 2 12 3 748 1849 209 44 96.970161 purchasers5 1 2 2 12 4 979 1848 42 36 96.425423 of5 1 2 2 12 5 1038 1849 58 35 93.297783 thes 1 2 2 12 6 1117 1850 211 35 92.931923 calendered5 1 2 2 12 7 1350 1851 167 45 96.753349 products5 1 2 2 12 8 1539 1851 25 35 96.335793 it5 1 2 2 12 9 1585 1852 187 44 96.818993 produces,5 1 2 2 12 10 1795 1852 58 35 96.537270 thea 1 2 2 13 0 520 1907 1330 47 -1 5 1 2 2 13 1 520 1907 119 42 96.657349 [PVC]5 1 2 2 13 2 656 1907 96 46 96.461220 prices 1 2 2 13 3 767 1907 177 35 90.233307 increases5 1 2 2 13 4 961 1936 5 6 50.892380 .5 1 2 2 13 5 988 1936 2 6 31.323906 .5 1 2 2 13 6 1015 1936 1 7 31.323906 .5 1 2 2 13 7 1031 1907 254 46 96.445274 implemented5 1 2 2 13 8 1300 1909 213 45 96.319267 throughout5 1 2 2 13 9 1532 1909 90 35 96.812416 19875 1 2 2 13 10 1639 1910 70 34 96.181145 ands 1 2 2 13 11 1729 1910 121 40 96.657745 1988, with no5 1 2 2 14 3 698 1965 225 36 96.480194 substitutions 1 2 2 14 4 941 1965 59 46 96.860992 [by5 1 2 2 14 5 1015 1965 43 36 96.550278 its5 1 2 2 14 6 1073 1973 196 29 96.550278 customers5 1 2 2 14 7 1286 1973 34 29 96.506920 to5 1 2 2 14 8 1335 1967 68 35 96.506920 ends 1 2 2 14 9 1418 1977 63 25 96.803719 uses 1 2 2 14 10 1495 1968 166 45 96.498306 products5 1 2 2 14 11 1677 1968 121 42 96.405281 made)5 1 2 2 14 12 1814 1968 42 35 96.827179 of4 1 2 2 15 0 517 2024 1333 46 -1 5 1 2 2 15 1 517 2024 205 35 96.273506 alternatives 1 2 2 15 2 735 2024 194 35 89.531006 materials occurring by5 1 2 2 15 5 1225 2036 125 24 96.325905 reasons 1 2 2 15 6 1365 2025 184 43 91.491127 thereof); I.D.F. 476-77. The additional evidence in this record leads us to conclude that the elasticity of demand for PVC is lower and varies less among end use products than the Commission in Goodrich thought. We agree with the administrative law judge that the price elasticity of demand for PVC is sufficiently low that a collusive price increase would be profitable.

D. Other Considerations Other characteristics of a market also are relevant to the ability of firms to collude. These include the number and nature of buyers, the nature of transactions and the availability of information. We hold Opinion 115 F.T.C.

that these characteristics in the three relevant product markets are likely to facilitate collusion.

The concentration of the market on the buying side is relevant to whether buyers may have the ability to constrain the exercise of market power by their suppliers. In all three relevant product markets, the large number of customers relative to the small number of producers facilitates the likelihood of collusion. I.D.F. 619-42 (portion In Camera). In Goodrich, the Commission concluded that PVC purchasers likely could not, by5 1 3 2 7 7 1445 1095 114 36 96.924965 virtues 1 3 2 7 8 1575 1094 42 36 96.752785 of5 1 3 2 7 9 1630 1094 89 36 96.752785 theirs 1 3 2 7 10 1735 1094 85 41 96.828278 size,5 1 3 2 7 11 1838 1094 180 36 96.897804 constrain4 1 3 2 8 0 682 1152 1335 48 -1 5 1 3 2 8 1 682 1156 58 35 96.754097 thes 1 3 2 8 2 755 1154 161 36 96.533760 exercises 1 3 2 8 3 931 1154 43 36 96.939751 of5 1 3 2 8 4 985 1154 136 35 96.933006 markets 1 3 2 8 5 1135 1165 123 35 96.865204 powers 1 3 2 8 6 1271 1154 48 45 96.685631 by5 1 3 2 8 7 1333 1154 94 34 96.009064 PVC5 1 3 2 8 8 1442 1154 223 45 93.096992 producers. 110 FTC at 324.

The record in this case also shows that customers in the mass and suspension PVC homopolymer market and the dispersion market are relatively small and numerous, and copolymer buyers, although fewer in number, lack any leverage against their suppliers. I.D.F. 619-42 (portion In Camera).

Collusion also is facilitated when transactions are numerous and frequent, because the incentives for cheating on the cartel in any single transaction are reduced and the opportunities for detecting and retaliating against cheating are increased. PVC resin orders generally are placed on a monthly, weekly and sometimes daily basis, and the size of individual orders is small compared to the total market. I.D.F. 638.5 Long term customer-supplier relationships in the PVC industry and the high probability of repeat sales are likely to enhance the ability of producers to police a collusive agreement, increasing its stability and, therefore, its likelihood. I.D.F. 643-51 (portion Jn Camera). The Commission in Goodrich concluded that longterm customer-supplier relationships and thes 1 3 3 12 5 1552 2142 195 45 96.636452 frequency5 1 3 3 12 6 1777 2141 69 35 96.889702 ands 1 3 3 12 7 1876 2140 74 36 95.015511 sizes 1 3 3 12 8 1978 2140 43 36 96.880821 of4 1 3 3 13 0 681 2198 1340 41 -1 5 1 3 3 13 1 681 2203 234 36 96.429276 transactions5 1 3 3 13 2 957 2202 36 35 96.484726 in5 1 3 3 13 3 1033 2202 58 34 96.280357 thes 1 3 3 13 4 1132 2202 93 34 96.115303 PVC5 1 3 3 13 5 1265 2201 135 35 96.115303 markets 1 3 3 13 6 1440 2200 160 35 96.331718 increases 1 3 3 13 7 1640 2200 58 34 96.033485 thes 1 3 3 13 8 1738 2199 200 34 96.439529 likelihood5 1 3 3 13 9 1979 2198 42 35 96.439529 of4 1 3 3 14 0 682 2256 1335 51 -1 5 1 3 3 14 1 682 2261 307 46 96.483215 anticompetitive5 1 3 3 14 2 1006 2260 129 36 96.354988 effects5 1 3 3 14 3 1152 2259 94 35 96.311691 from5 1 3 3 14 4 1263 2259 58 35 97.011986 thes 1 3 3 14 5 1339 2258 244 47 69.165573 acquisition,”5 1 3 3 14 6 1606 2257 67 36 96.358902 1105 1 3 3 14 7 1690 2257 88 36 95.413322 FTC5 1 3 3 14 8 1796 2263 33 30 96.923981 at5 1 3 3 14 9 1847 2256 82 41 96.779724 326,5 1 3 3 14 10 1949 2256 68 35 96.945343 and2 1 4 0 0 0 680 2359 594 10 -1 3 1 4 1 0 0 680 2359 594 10 -1 4 1 4 1 1 0 680 2359 594 10 -1 5 1 4 1 1 1 680 2359 594 10 95.000000 2 1 5 0 0 0 758 2396 1260 49 -1 3 1 5 1 0 0 758 2396 1260 49 -1 4 1 5 1 1 0 758 2396 1260 49 -1 5 1 5 1 1 1 758 2396 39 21 56.491341 135 1 5 1 1 2 839 2407 78 30 72.180771 pvc5 1 5 1 1 3 932 2406 107 39 96.494774 supply5 1 5 1 1 4 1054 2411 146 25 95.998360 contracts5 1 5 1 1 5 1216 2414 67 29 96.516685 may5 1 5 1 1 6 1299 2410 50 24 96.926323 not5 1 5 1 1 7 1364 2405 115 38 96.830971 specify5 1 5 1 1 8 1495 2405 47 29 97.020790 thes 1 5 1 1 9 1557 2404 131 39 97.009560 quantity5 1 5 1 1 10 1704 2403 35 30 96.978508 of5 1 5 1 1 11 1750 2403 78 30 96.741493 PVC5 1 5 1 1 12 1843 2403 79 29 96.599289 resins 1 5 1 1 13 1936 2409 31 23 96.599289 to5 1 5 1 1 14 1981 2403 37 29 96.635361 be2 1 6 0 0 0 681 2452 1337 376 -1 3 1 6 1 0 0 681 2452 1337 376 -1 4 1 6 1 1 0 682 2452 1335 43 -1 5 1 6 1 1 1 682 2457 138 38 96.704590 supplied5 1 6 1 1 2 836 2456 155 38 96.637825 (although5 1 6 1 1 3 1006 2456 68 37 96.812614 they5 1 6 1 1 4 1089 2464 68 29 96.626549 may5 1 6 1 1 5 1174 2454 115 39 96.645729 specify5 1 6 1 1 6 1304 2464 16 19 96.848923 a5 1 6 1 1 7 1336 2454 162 29 96.563614 maximum5 1 6 1 1 8 1513 2463 32 19 96.417244 or5 1 6 1 1 9 1559 2453 155 29 96.519951 estimated5 1 6 1 1 10 1728 2452 133 38 96.818039 quantity5 1 6 1 1 11 1877 2452 57 28 96.778900 ands 1 6 1 1 12 1949 2461 68 28 96.984642 may4 1 6 1 2 0 682 2499 1336 43 -1 5 1 6 1 2 1 682 2505 116 30 96.443634 contains 1 6 1 2 2 811 2505 120 28 96.362671 volumes 1 6 1 2 3 943 2503 142 39 96.967560 purchases 1 6 1 2 4 1099 2503 172 33 96.952568 incentives,5 1 6 1 2 5 1284 2503 56 29 96.950638 Sees 1 6 1 2 6 1352 2506 68 25 96.997414 notes 1 6 1 2 7 1434 2502 37 29 96.105576 845 1 6 1 2 8 1484 2502 114 37 96.105576 supra).5 1 6 1 2 9 1623 2501 113 38 96.259964 Buyers5 1 6 1 2 10 1749 2500 143 38 96.909233 typically5 1 6 1 2 11 1905 2499 113 38 96.949539 predict4 1 6 1 3 0 681 2548 1337 41 -1 5 1 6 1 3 1 681 2554 75 29 96.121788 theirs 1 6 1 3 2 771 2554 92 28 96.393570 needs5 1 6 1 3 3 878 2553 46 29 96.865814 for5 1 6 1 3 4 938 2553 48 28 96.726547 thes 1 6 1 3 5 1002 2552 157 37 96.062363 following5 1 6 1 3 6 1174 2551 102 29 96.657166 months 1 6 1 3 7 1291 2551 57 29 96.847382 ands 1 6 1 3 8 1363 2551 68 28 96.971657 then5 1 6 1 3 9 1447 2551 84 37 96.778114 places 1 6 1 3 10 1546 2550 73 29 97.010689 theirs 1 6 1 3 11 1633 2550 100 28 96.716629 orders5 1 6 1 3 12 1749 2558 38 20 96.941261 on5 1 6 1 3 13 1804 2557 35 21 96.977287 an5 1 6 1 3 14 1855 2548 163 29 96.573677 as-needed4 1 6 1 4 0 681 2596 1335 42 -1 5 1 6 1 4 1 681 2602 90 29 96.707115 basis.5 1 6 1 4 2 802 2601 155 29 96.859329 Contracts5 1 6 1 4 3 973 2600 116 38 96.938393 usually5 1 6 1 4 4 1106 2599 115 38 96.420685 specify5 1 6 1 4 5 1237 2608 16 20 96.616096 a5 1 6 1 4 6 1268 2599 80 38 96.616096 prices 1 6 1 4 7 1363 2599 91 28 96.746071 based5 1 6 1 4 8 1470 2607 38 19 96.916061 on5 1 6 1 4 9 1523 2598 48 28 96.916061 thes 1 6 1 4 10 1587 2597 164 38 96.621712 prevailing5 1 6 1 4 11 1768 2596 127 30 92.498314 market price,"

require suppliers to give 30-days' notice of price increases, and give buyers price protection clauses, such as most-favored nation clauses and meeting-competition clauses. See I.D.F, 655-69; Goodrich, 110 FTC at 325; JX1-4, PX61 at 103592 & 595, PX93 & PX94.

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 127] 1010 Opinion the record in this case supports a similar conclusion for each of the three relevant markets. I.D.F. 643-51 (portion Jn Camera). The ready availability of price information in the industry, I.D.F. 652-59, stable technology, I.D.F. 660-75 (portion In Camera), and the declining rate of growth, I.D.F. 676-88 (portion Jn Camera), also are likely to facilitate collusion. Producers of PVC actively monitor the prices of other producers in each of the relevant product markets. See, é.g., JX1(IV), PX32. Customers are a major source of pricing information, and one of the responsibilities of sales representatives is to obtain from customers pricing and other information about other PVC producers. I.D.F. 689-93 (portion Jn Camera); See, e.g., RX217Z36-38 (Occidental memo, Latest5 1 3 2 10 5 1475 1266 103 45 95.987778 Inputs 1 3 2 10 6 1617 1277 46 25 95.948280 on5 1 3 2 10 7 1703 1267 162 46 95.948280 Industry4 1 3 2 11 0 529 1321 1334 50 -1 5 1 3 2 11 1 529 1321 189 45 93.105797 pricing); JX1-4, PX7B at 900132. The meetings 1 3 2 11 8 1610 1325 253 46 95.934837 competition clauses in PVC sales contracts ensures 1 3 2 12 7 1360 1382 72 35 96.532463 that5 1 3 2 12 8 1454 1383 93 35 96.634361 PVC5 1 3 2 12 9 1572 1383 122 36 96.621407 sellers5 1 3 2 12 10 1719 1383 146 46 96.621407 quickly4 1 3 2 13 0 529 1435 1331 51 -1 5 1 3 2 13 1 529 1437 163 35 96.709114 discover5 1 3 2 13 2 703 1437 96 46 96.775505 prices 1 3 2 13 3 812 1438 229 36 96.415695 concessions5 1 3 2 13 4 1056 1439 136 35 96.707336 offered5 1 3 2 13 5 1206 1440 46 45 97.021095 by5 1 3 2 13 6 1267 1440 201 46 93.305466 competing5 1 3 2 13 7 1481 1435 175 41 0.000000 firms.!’* Goodrich, 110 FTC at 325. This information enables PVC producers to identify the prices offered by other suppliers and to identify the suppliers that are not supporting announced price increases. E.g., RX218Z98; RX218Z168 ("maintain market pricing to avoid spiral down"); RX218Z60; RX218Z206-207.""”

The trade press and industry consultants are additional sources of price information, both for current and forecast prices. PVC producers routinely announce price increases in advance of their effective dates, allowing other producers an opportunity to respond. E.g., CX161B; CX168; CX9A-B; CX8; JX1(IV), PX45 ("published industry consensus" on price increase); RX209A; RX310D; na “Meeting competition clauses" permit buyers to cancel purchases if they get a lower price from another supplier but require buyers to give contract suppliers the opportunity to meet the lower price. See Goodrich, 110 FTC at 325. 1S The administrative law judge found that certain evidence “strongly suggests” that post-acquisition increases in the price of PVC “are in large part a result of the acquisition." I.D.F. 759. Occidental disputes this finding. R.R.B. at 18-26. The finding is not necessary to our conclusion that the acquisition violated Section 7 of the Clayton Act, and we do not reach the question. Opinion 115 F.T.C.

RX311A-B.''® These mechanisms allow producers to communicate effectively without explicit collusion. PVC producers also can use these channels to communicate other important information about plant expansions or closings,'’’ export activities'® and other plans with respect to PVC supply. E.g., CX161A (inventory); I.D.F. 689-709 (portion In Camera). This ready availability of competitive information contributes to the stability and predictability of the market.

PVC producers take care that their pricing activity is not perceived by their competitors as aggressive or disruptive, to5 1 3 2 2 10 1903 1162 109 35 96.704018 avoid4 1 3 2 3 0 676 1220 1334 48 -1 5 1 3 2 3 1 676 1221 226 47 96.252022 competitive5 1 3 2 3 2 915 1220 154 37 96.798744 reactions 1 3 2 3 3 1083 1221 68 36 96.832832 ands 1 3 2 3 4 1164 1221 212 45 96.756104 subsequent5 1 3 2 3 5 1388 1220 133 36 96.806923 markets 1 3 2 3 6 1533 1220 159 46 88.077171 impact. CX12A; CX56;

CX57. This is evidenced by their willingness to meet but not undercut the pricing of other producers. I.D.F. 711-14 (portion Jn Camera). Similarly, recent capacity expansions have been announced to maintain market position, not to upset the competitive apple cart. See RX1L Jn Camera; note 117 supra. All these characteristics of the market evidence conditions conducive to collusion. M6 wat press time, Formosa Plastics and Occidental Chemical had issued 3 cent/lb increases for their PVC dispersion resins, effective Jan. 1 [1988]. Goodyear Chemical announced it would raise dispersion-resin prices by 4 cents/Ib this month. Other suppliers say they had already raised their prices and that announcements from Formosa and Occidental merely brought their prices in line with the rest.... [S]ources at Occidental say the company plans to remove all spot discounts from gfeneral]-p[urpose] homopolymer and pipe suspension resins this month. Occidental sources say this move will result in a nominal 2 cent/Ib increase. Sources at major suppliers indicate that 2-3 cents/lb across-the-board hikes are likely this month or Feb. 1." RX311A-B.

My See, e.g., RX222A (list of announced and contemplated expansions); RX312J (Modern Plastics, Jan. 1988, at 76: Formosa5 1 8 1 1 9 1570 2290 123 30 96.321274 Plastics5 1 8 1 1 10 1707 2290 89 38 96.597794 Corp.5 1 8 1 1 11 1811 2289 84 38 96.498665 plans5 1 8 1 1 12 1909 2295 31 23 96.996284 to5 1 8 1 1 13 1954 2289 56 29 96.473618 add4 1 8 1 2 0 676 2337 1335 42 -1 5 1 8 1 2 1 676 2343 59 29 96.637177 6005 1 8 1 2 2 749 2342 117 29 96.621819 millions 1 8 1 2 3 879 2342 38 29 87.223061 lb.5 1 8 1 2 4 932 2347 30 24 96.186783 to5 1 8 1 2 5 975 2341 36 30 95.828957 its5 1 8 1 2 6 1024 2346 114 24 95.828957 reactors 1 8 1 2 7 1150 2340 144 39 93.091309 capacity.5 1 8 1 2 8 1320 2340 140 29 92.782272 Shintech5 1 8 1 2 9 1474 2348 67 29 96.895096 says5 1 8 1 2 10 1556 2339 20 29 96.012527 it5 1 8 1 2 11 1589 2339 60 29 94.547928 will5 1 8 1 2 12 1663 2338 76 30 96.969055 raises 1 8 1 2 13 1753 2338 36 30 96.705643 its5 1 8 1 2 14 1803 2338 82 30 96.157005 stakes 1 8 1 2 15 1898 2338 39 37 96.755714 by5 1 8 1 2 16 1951 2337 60 30 96.114807 5004 1 8 1 3 0 676 2386 1333 38 -1 5 1 8 1 3 1 676 2391 115 29 93.264702 millions 1 8 1 3 2 805 2391 50 33 84.480972 lb.;5 1 8 1 3 3 871 2391 57 28 96.346985 ands 1 8 1 3 4 942 2389 175 30 96.346985 Occidental5 1 8 1 3 5 1132 2389 51 29 96.437927 has5 1 8 1 3 6 1198 2388 174 30 96.659233 announced5 1 8 1 3 7 1387 2397 16 19 96.724335 a5 1 8 1 3 8 1416 2388 59 29 96.406097 2005 1 8 1 3 9 1489 2393 29 23 96.406097 to5 1 8 1 3 10 1531 2387 61 29 96.972374 4005 1 8 1 3 11 1606 2387 115 29 93.242531 millions 1 8 1 3 12 1735 2387 95 37 91.706215 Ib./yr.5 1 8 1 3 13 1845 2386 164 38 95.895119 expansion4 1 8 1 4 0 675 2434 1335 44 -1 5 1 8 1 4 1 675 2439 158 39 80.248810 project.); RX222B (Formosa said, We5 1 8 1 4 6 1328 2437 75 38 96.574722 hopes 1 8 1 4 7 1416 2445 44 20 96.995506 we5 1 8 1 4 8 1472 2445 46 20 96.980431 ares 1 8 1 4 9 1530 2436 89 37 96.661316 doing5 1 8 1 4 10 1631 2435 55 29 97.016029 this5 1 8 1 4 11 1700 2434 183 39 95.776642 [expansion]5 1 8 1 4 12 1898 2434 28 30 95.776642 in5 1 8 1 4 13 1939 2434 71 30 96.834854 such4 1 8 1 5 0 676 2482 1335 43 -1 5 1 8 1 5 1 676 2497 15 21 95.380180 a5 1 8 1 5 2 703 2497 65 28 95.380180 ways 1 8 1 5 3 782 2497 31 20 96.927750 as5 1 8 1 5 4 826 2493 50 23 91.303215 not5 1 8 1 5 5 888 2493 29 23 91.303215 to5 1 8 1 5 6 931 2487 49 29 96.943680 stir5 1 8 1 5 7 991 2487 48 28 96.803139 thes 1 8 1 5 8 1051 2486 196 38 93.283325 marketplace5 1 8 1 5 9 1261 2485 88 38 88.990295 up.); RX236A (announcing expansion, Vista said, “We're tailoring our PVC resin expansion program to match anticipated growth so that Vista will maintain its current 10% share of the overall PVC market."); RXIL Jn Camera (Occidental review of announced expansions: Thea 1 8 1 9 0 676 2677 1335 42 -1 5 1 8 1 9 1 676 2692 66 19 96.509377 sums 1 8 1 9 2 757 2682 35 29 95.851234 of5 1 8 1 9 3 804 2683 83 27 96.998817 these5 1 8 1 9 4 901 2680 180 39 91.767410 expansions5 1 8 1 9 5 1098 2704 5 6 89.686676 .5 1 8 1 9 6 1120 2704 5 5 89.686676 .5 1 8 1 9 7 1143 2704 5 4 91.392311 .5 1 8 1 9 8 1164 2680 61 28 96.954689 will5 1 8 1 9 9 1240 2680 104 28 96.871582 enables 1 8 1 9 10 1359 2679 131 37 96.959618 industry5 1 8 1 9 11 1505 2678 135 38 96.560555 capacity5 1 8 1 9 12 1655 2683 29 24 96.378448 to5 1 8 1 9 13 1699 2678 76 37 96.312637 keeps 1 8 1 9 14 1789 2686 73 29 96.725197 pace5 1 8 1 9 15 1878 2677 70 28 96.393112 with5 1 8 1 9 16 1963 2677 48 28 96.699097 thea 1 8 1 10 0 676 2727 886 41 -1 5 1 8 1 10 1 676 2731 126 29 93.297501 demands 1 8 1 10 2 817 2730 164 38 42.986187 growth.); CX166; CX214E; CX29H; CX9B.

8 C¢x163B; CX165A; CX165B.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1273 1010 Statement V. CONCLUSION We affirm the decision of the administrative law judge that the acquisition by Occidental of the PVC business of Tenneco is likely substantially to lessen competition in the markets for mass and suspension PVC homopolymer, copolymer, and dispersion PVC in the United States. Divestiture of the acquired assets is the appropriate remedy for a violation of Section 7 of the Clayton Act. United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 331 (1961); See also Ford Motor Co. v. United States, 405 U.S. 562, 573 (1972). Divestiture of Tenneco's Pasadena plant is appropriate to remedy the violation in the mass and suspension homopolymer market, and divestiture of Tenneco's Burlington plant is appropriate to remedy the violation in the copolymer and dispersion markets.''’ The attached order is intended to remedy the anticompetitive effects of the acquisition by requiring Occidental to divest the Pasadena, Texas, and Burlington, New Jersey, PVC plants that it acquired from Tenneco.

STATEMENT OF COMMISSIONER DEBORAH K. OWEN CONCURRING IN PART AND DISSENTING IN PART I agree with the majority in this matter that the acquisition by Occidental Petroleum Corporation ("Occidental"), of the polyvinyl chloride ("PVC") business of Tenneco, Inc. ("Tenneco") may substantially lessen competition in the manufacture and sale of suspension PVC copolymer and dispersion PVC in the United States, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. Ialso concur in the decision of the majority to order the divestiture of the former Tenneco plant in Burlington, New Jersey, to remedy the violations in these markets.

19 Counsel for Occidental maintained in FTC v. Occidental Petroleum Corp., Civ. No. 86-0900 (D.D.C. 1986), in defending against the imposition of a preliminary injunction, that any5 1 8 1 3 5 1072 2732 101 33 96.982407 aspects 1 8 1 3 6 1189 2726 35 29 96.985107 of5 1 8 1 3 7 1237 2726 57 29 96.867157 this5 1 8 1 3 8 1311 2725 177 39 96.875549 acquisitions 1 8 1 3 9 1507 2725 46 36 92.135254 [of5 1 8 1 3 10 1566 2724 152 35 92.135254 Tenneco]5 1 8 1 3 11 1737 2733 54 20 97.010307 cans 1 8 1 3 12 1808 2724 36 28 96.911774 be4 1 8 1 4 0 508 2774 718 36 -1 5 1 8 1 4 1 508 2778 135 28 95.979118 divested5 1 8 1 4 2 656 2777 124 29 96.965607 without5 1 8 1 4 3 792 2776 140 29 85.059021 trouble. JX1(II), Tr. 973.

Statement 115 F.T.C.

I respectfully dissent, however, with respect to the majority's finding of a similar violation in the market of mass and suspension PVC homopolymer in the United States, and consequently, with respect to their decision to order divestiture of the former Tenneco plant in Pasadena, Texas. I adopt the reasoning of the majority, except to the extent that it may be inconsistent with the analysis herein.

I. INTRODUCTION Section 7 of the Clayton Act, prohibits acquisitions’ where the effect in5 1 5 1 2 3 928 1286 67 35 96.168327 any5 1 5 1 2 4 1009 1276 70 35 96.168327 lines 1 5 1 2 5 1092 1277 41 35 96.962807 of5 1 5 1 2 6 1142 1288 200 26 96.491570 commerce5 1 5 1 2 7 1355 1289 39 25 96.901932 or5 1 5 1 2 8 1406 1279 35 35 96.901932 in5 1 5 1 2 9 1455 1290 67 36 96.444664 any5 1 5 1 2 10 1537 1281 141 45 96.444664 activity5 1 5 1 2 11 1692 1282 169 46 96.307777 affecting5 1 5 1 2 12 1874 1294 201 26 96.413109 commerce4 1 5 1 3 0 739 1334 1335 50 -1 5 1 5 1 3 1 739 1362 5 6 34.924461 .5 1 5 1 3 2 787 1362 6 6 34.924461 ..5 1 5 1 3 3 809 1344 83 35 96.831902 may5 1 5 1 3 4 907 1334 44 35 97.003716 be5 1 5 1 3 5 967 1334 244 48 96.926414 substantially5 1 5 1 3 6 1226 1343 36 28 96.531143 to5 1 5 1 3 7 1277 1337 117 35 96.161140 lessens 1 5 1 3 8 1408 1339 244 45 96.161140 competition,5 1 5 1 3 9 1669 1351 40 24 96.818863 or5 1 5 1 3 10 1723 1347 35 29 96.957298 to5 1 5 1 3 11 1774 1342 82 34 96.113129 tends 1 5 1 3 12 1872 1348 35 29 96.983322 to5 1 5 1 3 13 1923 1349 117 28 96.888313 creates 1 5 1 3 14 2056 1354 18 24 96.888313 a4 1 5 1 4 0 736 1392 1335 51 -1 5 1 5 1 4 1 736 1392 227 45 92.560837 monopoly. 15 U.S.C. 18. Such activity may also violate Section 5 of the FTC Act, if it constitutes an unfair5 1 5 1 5 10 1570 1457 144 34 95.976807 methods 1 5 1 5 11 1741 1457 42 35 96.487022 of5 1 5 1 5 12 1805 1458 266 45 83.949844 competition. 15 U.S.C. 45. The unifying5 1 5 1 6 6 1376 1513 136 35 96.224380 theme of merger analysis is that mergers5 1 5 1 7 2 925 1568 128 36 96.793945 should5 1 5 1 7 3 1068 1575 60 29 97.000641 not5 1 5 1 7 4 1141 1569 45 36 96.826546 be5 1 5 1 7 5 1199 1570 186 45 96.865944 permitted5 1 5 1 7 6 1399 1577 35 29 96.972542 to5 1 5 1 7 7 1449 1578 114 29 96.132721 creates 1 5 1 7 8 1578 1584 39 24 96.087791 or5 1 5 1 7 9 1630 1573 158 36 95.363602 enhances 1 5 1 7 10 1802 1575 134 35 96.949242 markets 1 5 1 7 11 1949 1586 123 35 96.793152 power4 1 5 1 8 0 733 1626 1336 50 -1 5 1 5 1 8 1 733 1636 40 25 96.043655 or5 1 5 1 8 2 789 1632 36 29 96.043655 to5 1 5 1 8 3 842 1626 173 36 96.325348 facilitates 1 5 1 8 4 1031 1627 44 35 96.325348 its5 1 5 1 8 5 1093 1628 190 36 82.257202 exercise. U.S. Department of Justice & Federal Trade Commission Horizontal Merger Guidelines ("Merger Guidelines"), Section 0.1, reprinted in 4 Trade Reg. Rep. (CCH) J 13,104.? Market power is thes 1 5 1 11 6 1363 1804 122 45 96.229256 ability5 1 5 1 11 7 1502 1805 192 46 96.958237 profitably5 1 5 1 11 8 1711 1812 36 29 96.901985 to5 1 5 1 11 9 1764 1807 170 35 96.839996 maintains 1 5 1 11 10 1951 1804 116 54 96.973610 prices4 1 5 1 12 0 731 1858 1337 50 -1 5 1 5 1 12 1 731 1858 117 35 96.969269 above5 1 5 1 12 2 864 1859 232 44 96.119370 competitive5 1 5 1 12 3 1112 1860 113 34 96.638458 levels5 1 5 1 12 4 1241 1860 57 35 96.638458 for5 1 5 1 12 5 1312 1872 19 24 96.799545 a5 1 5 1 12 6 1348 1861 206 45 96.492119 significant5 1 5 1 12 7 1569 1863 124 45 96.934227 periods 1 5 1 12 8 1709 1863 42 35 96.967651 of5 1 5 1 12 9 1763 1864 116 40 93.022018 time, /d., or to lessens 1 5 1 13 2 883 1917 232 46 95.512787 competitions 1 5 1 13 3 1130 1928 47 25 96.597496 on5 1 5 1 13 4 1192 1918 219 36 96.519241 dimensions5 1 5 1 13 5 1426 1920 100 35 96.537140 others 1 5 1 13 6 1540 1920 80 36 96.783989 than5 1 5 1 13 7 1636 1921 107 46 96.690948 price,5 1 5 1 13 8 1761 1923 86 34 96.973587 such5 1 5 1 13 9 1864 1933 37 24 96.965576 as5 1 5 1 13 10 1917 1924 152 45 96.990303 product4 1 5 1 14 0 730 1974 1333 49 -1 5 1 5 1 14 1 730 1974 147 46 95.899155 quality,5 1 5 1 14 2 894 1974 149 43 96.881905 service,5 1 5 1 14 3 1060 1986 40 25 96.881905 or5 1 5 1 14 4 1114 1975 240 37 92.363258 innovation. Jd. at n.6; See also Owens-Illinois, Inc., Dkt. No. 9212 (Feb. 26, 1992), slip op. at 4-5 (quoting 1984 U.S. Department of Justice Merger Guidelines). Evaluating whether a merger may result in market power necessitates determining, first, the relevant product and geographic market, the level of concentration in that market, and the change in concentration from the merger. However, that is only the starting point. Given that market structure, the Commission must determine ' The terms acquisitions and mergers are used interchangeably in this opinion to refer to any transaction subject to Section 7 of the Clayton Act. > The Merger Guidelines updates 1 9 1 1 6 1383 2666 47 29 96.773880 thes 1 9 1 1 7 1443 2667 120 38 96.638794 Mergers 1 9 1 1 8 1575 2668 175 30 96.898209 Guidelines5 1 9 1 1 9 1764 2668 99 30 93.445480 issued5 1 9 1 1 10 1876 2669 39 38 96.972786 by5 1 9 1 1 11 1928 2670 48 28 96.808556 thes 1 9 1 1 12 1990 2670 69 29 92.744682 U.S.4 1 9 1 2 0 724 2713 1336 38 -1 5 1 9 1 2 1 724 2713 193 38 96.525269 Departments 1 9 1 2 2 933 2713 35 30 96.135384 of5 1 9 1 2 3 980 2714 110 29 96.978592 Justice5 1 9 1 2 4 1107 2715 28 28 96.650917 in5 1 9 1 2 5 1156 2715 75 29 96.650917 19845 1 9 1 2 6 1248 2716 56 28 95.945702 ands 1 9 1 2 7 1321 2716 47 29 96.875160 thes 1 9 1 2 8 1384 2716 162 30 96.750427 Statements 1 9 1 2 9 1561 2717 35 29 95.494507 of5 1 9 1 2 10 1608 2718 120 29 96.317871 Federal5 1 9 1 2 11 1744 2719 94 28 96.453827 Trades 1 9 1 2 12 1855 2719 205 30 96.387131 Commission4 1 9 1 3 0 724 2761 1335 43 -1 5 1 9 1 3 1 724 2761 189 39 96.182014 Concerning5 1 9 1 3 2 928 2763 174 29 96.182014 Horizontal5 1 9 1 3 3 1117 2764 135 38 96.236565 Mergers5 1 9 1 3 4 1267 2764 101 30 96.236565 issued5 1 9 1 3 5 1382 2765 29 29 96.519714 in5 1 9 1 3 6 1432 2765 100 30 70.591591 1982. Merger Guidelines, Section 0.

n.4.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1275 1010 Statement also: (1) whether potential anticompetitive effects are demonstrable; (2) whether entry into the. market would be timely, likely and sufficient to counteract the potential for anticompetitive effects; (3) whether there are any efficiency gains specific to the merger, and if so, their magnitude; and (4) whether, absent the merger, one of the firms will fail and exit from the market. See generally Merger Guidelines, Section 0.1 and passim; Owens-Illinois, passim. Applying these principles, I reach a different conclusion from the majority in one market. While I agree that the manufacture and sale of mass and suspension PVC homopolymer is a relevant market, I believe that the level of concentration in that market, and the increase in concentration due to the merger, may be less than the majority calculates. In my view, the acquisition increases concentration to just above the threshold that potentially raises competitive concerns,’ and is, thus, truly a marginal case based on market structure alone. I therefore agree with the majority that additional analysis beyond market concentration is necessary to determine actual competitive effects.

When I analyze the potential competitive effects of this merger, I find, on balance, that anticompetitive effects are unlikely in the mass and suspension PVC homopolymer market; therefore, an examination of entry, efficiencies, or business failure is unnecessary. I conclude that the acquisition does not violate Section 7 of the Clayton Act or Section 5 of the FTC Act in the mass and suspension PVC homopolymer market.

I. SETTING THE FRAMEWORK FOR THE ANALYSIS A. The Relevant Market Relevant markets are markets in which the parties to the merger compete, or which in some way may be affected by the merger at Merger Guidelines, Section 1.51(b). The Guidelines presume that the merger is likely to create or enhance market power or facilitate its exercise only when the post-merger Herfindahl-Hirschmann Index ("HHI") exceeds 1800, and the increase in the HHI due to the merger exceeds 100. /d., Section 1.51(c). This case is not close to those levels.

Statement 115 F.T.C.

issue, the area of effective5 1 3 1 1 6 1283 653 264 45 79.642906 competition. United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 593 (1957); Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962). Relevant markets must be economically meaningful. An economically meaningful market is one in which market power may be exercised, i.e., any5 1 3 1 5 12 1872 890 177 46 95.828377 grouping4 1 3 1 6 0 712 944 1336 50 -1 5 1 3 1 6 1 712 944 43 36 96.892715 of5 1 3 1 6 2 767 945 93 35 96.884773 sales5 1 3 1 6 3 877 945 124 35 96.884773 whose5 1 3 1 6 4 1017 945 135 42 96.793732 sellers,5 1 3 1 6 5 1169 945 31 35 96.993858 if5 1 3 1 6 6 1212 945 137 36 96.927887 unified5 1 3 1 6 7 1365 946 46 45 96.589432 by5 1 3 1 6 8 1427 957 20 24 96.586922 a5 1 3 1 6 9 1462 947 241 45 96.586922 hypothetical5 1 3 1 6 10 1719 948 107 34 96.498764 cartel5 1 3 1 6 11 1843 959 40 23 96.498764 or5 1 3 1 6 12 1898 959 150 35 96.897163 merger,4 1 3 1 7 0 712 1003 1334 48 -1 5 1 3 1 7 1 712 1003 109 35 96.515266 could5 1 3 1 7 2 853 1003 93 35 95.926270 raises 1 3 1 7 3 978 1003 116 46 95.370819 prices5 1 3 1 7 4 1129 1004 244 46 96.465302 significantly5 1 3 1 7 5 1407 1004 115 36 96.827911 above5 1 3 1 7 6 1555 1005 58 35 96.336609 thes 1 3 1 7 7 1646 1006 232 45 96.537933 competitive5 1 3 1 7 8 1912 1007 134 35 0.000000 level. Owens-Illinois, slip op. at 4 (quoting H.J., Inc. v. International Telephone & Telegraph Corp., 867 F.2d 1531, 1537 (8th Cir. 1989)). The willingness and ability of customers to switch to other products determines whether sellers could significantly raise prices, and ultimately defines the extent of the market. Jd. at 5. The extent to which customers will switch products, and thus the extent of the product market, may be defined “either in terms of the ‘crosselasticity of demand' or the ‘reasonable interchangeability of use’ between the product in question and potential substitutes." Olin Corporation, Dkt. No. 9196 (June 13, 1990), slip op. at 5 (quoting Grand Union Co., 102 FTC 812, 1041-42 (1983)), aff'd, No. 90- 70452 (9th Cir. Feb. 26, 1993).

Based on these criteria, I agree with the majority that one relevant market in which to analyze this acquisition is the production and sales of mass and suspension PVC homopolymer in the United States. B. Market Concentration A5 1 5 1 1 2 853 2111 139 35 95.996971 mergers 1 5 1 1 3 1009 2100 30 36 96.417137 is5 1 5 1 1 4 1057 2100 161 46 96.624641 unlikely5 1 5 1 1 5 1237 2107 35 29 96.893356 to5 1 5 1 1 6 1290 2107 115 29 96.630440 creates 1 5 1 1 7 1423 2111 40 25 96.630440 or5 1 5 1 1 8 1479 2101 159 35 96.204201 enhances 1 5 1 1 9 1656 2101 135 36 96.562813 markets 1 5 1 1 10 1808 2112 124 35 96.562813 powers 1 5 1 1 11 1948 2112 40 25 96.293648 or5 1 5 1 1 12 2005 2108 36 29 96.293648 to4 1 5 1 2 0 706 2159 1335 46 -1 5 1 5 1 2 1 706 2160 172 35 97.010559 facilitates 1 5 1 2 2 895 2160 44 34 96.810616 its5 1 5 1 2 3 957 2159 160 35 96.662437 exercises 1 5 1 2 4 1134 2159 121 35 96.905823 unless5 1 5 1 2 5 1273 2159 25 35 96.488358 it5 1 5 1 2 6 1316 2159 242 46 96.642334 significantly5 1 5 1 2 7 1576 2159 178 36 96.590546 increases5 1 5 1 2 8 1772 2160 269 35 96.554329 concentration4 1 5 1 3 0 706 2217 1335 46 -1 5 1 5 1 3 1 706 2218 67 36 96.327774 ands 1 5 1 3 2 785 2218 125 35 96.749092 results5 1 5 1 3 3 924 2217 35 36 96.204689 in5 1 5 1 3 4 973 2229 20 24 96.185089 a5 1 5 1 3 5 1006 2218 245 35 96.185089 concentrated5 1 5 1 3 6 1264 2218 141 35 90.954559 market.5 1 5 1 3 7 1423 2247 5 6 68.053238 .5 1 5 1 3 8 1446 2247 5 6 68.053238 .5 1 5 1 3 9 1469 2218 25 35 86.744850 . Merger Guidelines, Section 1.0. To determine the level of concentration, it is necessary to identify the participants in that market and the extent of their involvement. Participants include all firms that are now producing or selling in the relevant market. Merger Guidelines, Section 1.31. In addition, if suppliers5 1 5 1 8 5 1229 2515 61 29 96.913544 not5 1 5 1 8 6 1311 2509 178 46 96.402290 presently5 1 5 1 8 7 1510 2509 198 46 96.314865 producing5 1 5 1 8 8 1730 2510 59 35 96.645851 thes 1 5 1 8 9 1810 2509 151 46 96.575577 products 1 5 1 8 10 1983 2521 57 24 96.903419 area 1 5 1 9 0 705 2567 1337 47 -1 5 1 5 1 9 1 705 2569 110 45 96.969452 likely5 1 5 1 9 2 833 2575 36 28 96.997658 to5 1 5 1 9 3 887 2568 150 35 96.615540 redirect5 1 5 1 9 4 1055 2567 154 47 96.574432 existing5 1 5 1 9 5 1228 2567 166 36 86.086624 facilities5 1 5 1 9 6 1415 2597 5 5 64.050659 .5 1 5 1 9 7 1443 2597 5 5 64.050659 .5 1 5 1 9 8 1475 2597 1 5 83.883148 .5 1 5 1 9 9 1495 2574 35 28 96.840485 to5 1 5 1 9 10 1549 2568 128 46 96.483238 supply5 1 5 1 9 11 1696 2568 57 35 96.732140 thes 1 5 1 9 12 1771 2568 160 46 96.438995 product,5 1 5 1 9 13 1951 2567 91 36 96.979996 their4 1 5 1 10 0 706 2626 1334 47 -1 5 1 5 1 10 1 706 2628 174 35 96.234528 short-runs 1 5 1 10 2 895 2633 122 40 96.808144 output5 1 5 1 10 3 1031 2638 81 34 96.402039 may5 1 5 1 10 4 1126 2633 144 39 96.170540 prevents 1 5 1 10 5 1283 2626 94 46 96.589355 prices 1 5 1 10 6 1391 2626 92 36 96.773209 from5 1 5 1 10 7 1496 2626 138 46 61.148033 rising. Owens-Illinois, slip op. at 5. To the extent that suppliers would, within one year, redirect existing facilities in the event of a small but significant, nontransitory price increase, and without the expenditure of significant sunk costs, OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1277 1010 Statement such suppliers should be included in the market. Merger Guidelines, Section 1.32.

Using the now familiar Herfindahl-Hirschmann Index to measure concentration, the majority calculates a post-merger HHI of 1278, based on 1985 actual production, and 1305, based on operating capacity, with an increase due to the merger of 156 and 158, respectively. Slip op. at 27. Included in these calculations are suspension PVC copolymer plants that could instead produce suspension PVC homopolymer. The majority observes that such switching is unlikely and, therefore, including these plants in the market is unnecessary. Slip op. at 7-8. This suggests that the HHI understates concentration in the mass and suspension PVC homopolymer market.

I disagree and believe the HHI calculations overstate the level of concentration. First, I find it necessary, and not an act of discretion, to include producers of suspension PVC copolymer in the relevant market. There has been switching of capacity, in fact, at the existing premerger price levels, between copolymer and homopolymer production. See, e.g., slip op. at 12 n.32. Second, I believe that existing imports of mass and suspension PVC homopolymer should be included in the market and in the calculation of the HHI.* * As the majority notes, slip op. at 27 n.61, in B.F. Goodrich, the Commission likewise did not include imports of mass and suspension PVC in the relevant market, See 110 FTC at 307- 309, Tables J and IJ, having determined that imports did not significantly constrain domestic pricing discretion. Jd. at 301. While that conclusion may be sufficient to limit the geographic market to the United States, I do not believe that it is appropriate to ignore the imports that are currently entering the country when calculating market shares and concentration. The Merger Guidelines support including imports in the market share calculations by including as participants in the market all firms that currently produce or sell in the relevant market. Section 1.31. The Merger Guidelines then calculate a market share for all participants based5 1 5 2 4 9 1327 2426 39 20 96.345467 on5 1 5 2 4 10 1381 2418 48 28 96.345467 thes 1 5 2 4 11 1444 2418 69 29 96.704132 totals 1 5 2 4 12 1530 2418 77 30 96.417412 sales5 1 5 2 4 13 1621 2427 34 21 96.417412 or5 1 5 2 4 14 1668 2419 135 38 96.850235 capacity4 1 5 2 5 0 468 2464 1336 37 -1 5 1 5 2 5 1 468 2464 148 36 96.661911 currently5 1 5 2 5 2 634 2464 127 27 96.368813 devoted5 1 5 2 5 3 778 2469 30 22 96.368813 to5 1 5 2 5 4 824 2464 48 28 96.300308 thes 1 5 2 5 5 889 2464 130 28 96.603973 relevant5 1 5 2 5 6 1035 2465 169 28 73.211746 market...5 1 5 2 5 7 1224 2466 21 28 73.211746 . Section 1.41. In this case, that should include current import sales.

The Merger Guidelines approach is consistent with the Commission's treatment of import sales in Owens-Illinois, which included import sales in the calculation of market share even though the geographic market was limited to the continental United States. See Owens-Illinois, slip op. at 26-27 (adopting the Initial Decision which (at 45) shows import sales included in the calculation of market concentration).

Statement 115 F.T.C.

Including the sales of imported mass and suspension PVC, the post-acquisition HHI is between 1164 and 1187, with an increase of over 140. Slip op. at 27 n.61. Finally, in a result in which I concur, the majority orders the divestiture of the former Tenneco plant in Burlington, New Jersey. Although its share of the mass and suspension PVC homopolymer market is relatively small, the divestiture of this plant will further lower the post-merger HHIs.° These three adjustments -- greater emphasis on suspension PVC copolymer, inclusion of imports, and exclusion of the Burlington plant -- lower the HHI appreciably. Nevertheless, even after these adjustments, the post-acquisition HHI still exceeds 1100 and the increase exceeds 100, thus necessitating a review of the potential competitive effects of the merger.

II]. THE STANDARDS FOR DETERMINING THE LIKELY COMPETITIVE EFFECT A. The Significance of Market Concentration Measuring market concentration is the first step in identifying the effects of an acquisition on the relevant market. See, e.g., United States v. Philadelphia National Bank, 374 U.S. 321 (1963). Asa general principle, '[a]s5 1 6 1 4 4 1153 1890 6 6 53.094406 .5 1 6 1 4 5 1179 1889 5 6 53.094406 .5 1 6 1 4 6 1210 1890 1 6 89.153061 .5 1 6 1 4 7 1226 1860 158 47 96.185677 industry5 1 6 1 4 8 1400 1863 267 36 96.994743 concentrations 1 6 1 4 9 1682 1863 179 36 91.867439 increases5 1 6 1 4 10 1879 1894 5 6 58.526886 .5 1 6 1 4 11 1904 1893 6 6 58.526886 .5 1 6 1 4 12 1929 1894 5 6 89.335724 .5 1 6 1 4 13 1952 1866 58 34 97.000694 the2 1 7 0 0 0 671 1965 596 14 -1 3 1 7 1 0 0 671 1965 596 14 -1 4 1 7 1 1 0 671 1965 596 14 -1 5 1 7 1 1 1 671 1965 596 14 95.000000 2 1 8 0 0 0 746 2010 1263 57 -1 3 1 8 1 0 0 746 2010 1263 57 -1 4 1 8 1 1 0 746 2010 1263 57 -1 5 1 8 1 1 1 746 2010 12 21 67.385567 >5 1 8 1 1 2 802 2023 141 30 67.677261 [believes 1 8 1 1 3 957 2023 21 30 96.974213 it5 1 8 1 1 4 991 2024 194 38 96.273209 appropriate,5 1 8 1 1 5 1200 2025 56 29 96.831978 ands 1 8 1 1 6 1270 2026 162 30 96.918724 consistent5 1 8 1 1 7 1446 2026 69 30 96.936478 with5 1 8 1 1 8 1528 2028 205 29 96.730766 Commissions 1 8 1 1 9 1747 2028 137 39 96.308357 practice,5 1 8 1 1 10 1900 2034 30 24 97.011230 to5 1 8 1 1 11 1943 2030 66 29 96.993454 take2 1 9 0 0 0 665 2073 1343 754 -1 3 1 9 1 0 0 669 2073 1338 184 -1 4 1 9 1 1 0 671 2073 1335 43 -1 5 1 9 1 1 1 671 2073 47 28 97.015427 thes 1 9 1 1 2 730 2073 171 38 96.935287 Burlington5 1 9 1 1 3 913 2073 166 30 96.354935 divestitures 1 9 1 1 4 1091 2074 60 30 96.959053 into5 1 9 1 1 5 1162 2081 123 23 96.979645 accounts 1 9 1 1 6 1296 2076 29 28 96.979645 in5 1 9 1 1 7 1336 2076 146 38 96.728844 assessing5 1 9 1 1 8 1494 2077 47 29 96.883568 thes 1 9 1 1 9 1552 2077 160 30 96.338768 remainder5 1 9 1 1 10 1723 2079 35 28 96.979103 of5 1 9 1 1 11 1765 2079 47 28 97.011414 thes 1 9 1 1 12 1825 2079 181 37 96.468407 acquisition.4 1 9 1 2 0 670 2120 1337 44 -1 5 1 9 1 2 1 670 2120 56 29 96.851593 For5 1 9 1 2 2 738 2120 140 34 96.851593 instance,5 1 9 1 2 3 891 2121 47 29 96.522141 thes 1 9 1 2 4 951 2121 203 31 96.732239 Commissions 1 9 1 2 5 1166 2123 144 38 96.732239 regularly5 1 9 1 2 6 1322 2123 150 30 96.961609 considers5 1 9 1 2 7 1485 2124 47 30 96.860847 thes 1 9 1 2 8 1545 2124 108 40 96.605392 impacts 1 9 1 2 9 1665 2125 35 30 96.972389 of5 1 9 1 2 10 1708 2126 100 38 96.669678 partial5 1 9 1 2 11 1822 2126 185 30 96.669678 divestitures4 1 9 1 3 0 671 2169 1336 42 -1 5 1 9 1 3 1 671 2169 29 29 96.450989 in5 1 9 1 3 2 720 2169 192 38 96.535400 considering5 1 9 1 3 3 931 2169 132 31 96.350212 whether5 1 9 1 3 4 1080 2171 150 37 96.657097 proposed5 1 9 1 3 5 1250 2172 180 30 96.381943 settlements5 1 9 1 3 6 1450 2172 35 30 96.778542 of5 1 9 1 3 7 1501 2182 115 29 96.778542 mergers 1 9 1 3 8 1633 2182 85 21 96.656548 cases5 1 9 1 3 9 1738 2183 48 21 96.185165 ares 1 9 1 3 10 1805 2175 154 29 96.770584 sufficient5 1 9 1 3 11 1978 2181 29 24 96.806152 to4 1 9 1 4 0 669 2217 677 40 -1 5 1 9 1 4 1 669 2221 113 33 96.779732 protects 1 9 1 4 2 796 2217 47 28 96.807365 thes 1 9 1 4 3 855 2217 101 38 96.685127 public5 1 9 1 4 4 971 2218 118 30 96.685127 interests 1 9 1 4 5 1102 2218 28 30 95.870064 in5 1 9 1 4 6 1144 2219 202 38 95.870064 competition.3 1 9 2 0 0 665 2265 1343 562 -1 4 1 9 2 1 0 743 2265 1263 43 -1 5 1 9 2 1 1 743 2266 39 28 96.341583 At5 1 9 2 1 2 799 2265 48 30 96.621437 thes 1 9 2 1 3 862 2265 61 30 96.521248 oral5 1 9 2 1 4 939 2271 162 33 96.724342 argument,5 1 9 2 1 5 1117 2266 175 31 96.537178 Occidental5 1 9 2 1 6 1309 2268 90 37 96.995972 urged5 1 9 2 1 7 1414 2268 57 30 96.644287 this5 1 9 2 1 8 1486 2270 157 37 96.943420 approach,5 1 9 2 1 9 1660 2270 122 38 96.997360 arguing5 1 9 2 1 10 1797 2271 60 29 96.921227 that5 1 9 2 1 11 1873 2271 70 29 96.840889 with5 1 9 2 1 12 1959 2272 47 29 96.840889 thea 1 9 2 2 0 669 2313 1337 41 -1 5 1 9 2 2 1 669 2313 121 29 96.557129 ordered5 1 9 2 2 2 803 2313 170 30 96.559258 divestitures 1 9 2 2 3 985 2314 36 29 96.902924 of5 1 9 2 2 4 1030 2314 46 30 96.646309 thes 1 9 2 2 5 1089 2314 75 30 96.948837 News 1 9 2 2 6 1175 2315 101 38 96.831573 Jersey5 1 9 2 2 7 1288 2316 88 38 96.864265 plant,5 1 9 2 2 8 1390 2316 47 29 96.864265 thes 1 9 2 2 9 1450 2318 174 29 96.774696 transactions 1 9 2 2 10 1638 2318 104 29 96.845230 should5 1 9 2 2 11 1755 2319 36 28 96.845230 be5 1 9 2 2 12 1804 2319 108 29 96.462120 treated5 1 9 2 2 13 1925 2328 31 20 96.876282 as5 1 9 2 2 14 1970 2328 36 21 96.629738 an4 1 9 2 3 0 669 2361 1335 43 -1 5 1 9 2 3 1 669 2361 178 39 96.722885 acquisitions 1 9 2 3 2 865 2363 96 38 96.697998 solely5 1 9 2 3 3 977 2362 36 30 96.810898 of5 1 9 2 3 4 1026 2363 47 29 96.701782 thes 1 9 2 3 5 1090 2363 160 35 96.658997 Pasadena,5 1 9 2 3 6 1267 2364 95 30 96.843803 Texas5 1 9 2 3 7 1379 2365 88 38 93.861481 plant.5 1 9 2 3 8 1499 2366 80 33 96.939400 This,5 1 9 2 3 9 1596 2367 160 37 96.383659 according5 1 9 2 3 10 1772 2372 30 24 96.259453 to5 1 9 2 3 11 1819 2367 185 34 96.658272 Occidental,4 1 9 2 4 0 668 2409 1336 43 -1 5 1 9 2 4 1 668 2409 99 30 96.650948 would5 1 9 2 4 2 778 2411 88 29 96.360596 results 1 9 2 4 3 877 2410 29 30 95.633247 in5 1 9 2 4 4 919 2419 15 21 95.633247 a5 1 9 2 4 5 946 2411 253 38 96.566200 post-acquisitions 1 9 2 4 6 1212 2412 69 30 96.162537 HHI5 1 9 2 4 7 1293 2412 35 30 95.906898 of5 1 9 2 4 8 1340 2413 82 33 95.906898 1218,5 1 9 2 4 9 1436 2413 68 30 96.879929 with5 1 9 2 4 10 1516 2422 16 21 96.879929 a5 1 9 2 4 11 1543 2414 112 38 96.888405 changes 1 9 2 4 12 1668 2415 27 29 96.706146 in5 1 9 2 4 13 1708 2415 46 29 96.706146 thes 1 9 2 4 14 1766 2415 70 30 96.891747 HHI5 1 9 2 4 15 1848 2416 56 29 96.909431 dues 1 9 2 4 16 1918 2421 28 25 96.809746 to5 1 9 2 4 17 1958 2417 46 29 96.809746 thea 1 9 2 5 0 668 2458 1340 43 -1 5 1 9 2 5 1 668 2467 115 29 96.788177 mergers 1 9 2 5 2 796 2458 36 30 96.405510 of5 1 9 2 5 3 846 2458 65 35 96.298820 105,5 1 9 2 5 4 925 2460 92 28 96.587837 based5 1 9 2 5 5 1030 2469 39 20 96.635048 on5 1 9 2 5 6 1083 2460 138 37 96.870247 practical5 1 9 2 5 7 1236 2461 175 38 96.751312 productions 1 9 2 5 8 1424 2462 145 38 96.108704 capacity;5 1 9 2 5 9 1584 2472 16 20 96.743340 a5 1 9 2 5 10 1613 2464 261 37 96.574989 post-acquisitions 1 9 2 5 11 1889 2464 69 30 94.437187 HHI5 1 9 2 5 12 1972 2464 36 30 96.173729 of4 1 9 2 6 0 671 2506 1333 45 -1 5 1 9 2 6 1 671 2506 87 34 96.598785 1267,5 1 9 2 6 2 776 2506 71 30 97.007935 with5 1 9 2 6 3 865 2516 16 20 96.976799 a5 1 9 2 6 4 898 2507 114 38 96.767067 changes 1 9 2 6 5 1030 2507 30 30 96.994415 in5 1 9 2 6 6 1078 2508 47 29 96.693588 thes 1 9 2 6 7 1143 2509 71 29 96.719772 HHI5 1 9 2 6 8 1231 2509 57 30 96.497528 dues 1 9 2 6 9 1306 2514 29 25 96.680527 to5 1 9 2 6 10 1352 2510 48 29 96.536354 thes 1 9 2 6 11 1418 2519 114 29 96.681732 mergers 1 9 2 6 12 1549 2511 35 29 96.681732 of5 1 9 2 6 13 1602 2511 64 34 96.502571 121,5 1 9 2 6 14 1685 2512 90 29 96.984619 based5 1 9 2 6 15 1793 2521 39 21 96.700798 on5 1 9 2 6 16 1850 2512 154 39 96.425323 operating4 1 9 2 7 0 667 2555 1336 44 -1 5 1 9 2 7 1 667 2555 148 38 92.648247 capacity;5 1 9 2 7 2 835 2557 55 28 96.854866 ands 1 9 2 7 3 909 2565 16 20 96.915421 a5 1 9 2 7 4 941 2557 262 38 96.957054 post-acquisitions 1 9 2 7 5 1220 2557 71 30 96.567604 HHI5 1 9 2 7 6 1309 2558 34 29 96.680130 of5 1 9 2 7 7 1362 2559 85 33 96.680130 1138,5 1 9 2 7 8 1465 2560 91 29 96.703354 based5 1 9 2 7 9 1573 2569 39 20 96.703354 on5 1 9 2 7 10 1630 2561 94 29 96.716492 actual5 1 9 2 7 11 1743 2561 176 37 96.518364 productions 1 9 2 7 12 1937 2561 66 38 96.166275 plus4 1 9 2 8 0 667 2603 1336 41 -1 5 1 9 2 8 1 667 2603 128 38 96.759842 imports.5 1 9 2 8 2 817 2604 164 38 96.763199 Transcripts 1 9 2 8 3 992 2605 34 29 97.013077 of5 1 9 2 8 4 1035 2605 68 30 96.718475 Oral5 1 9 2 8 5 1115 2606 161 38 96.033264 Arguments 1 9 2 8 6 1288 2606 115 35 96.033264 (March5 1 9 2 8 7 1415 2607 47 34 96.668457 29,5 1 9 2 8 8 1478 2607 87 36 95.982216 1990)5 1 9 2 8 9 1577 2613 27 25 96.346619 at5 1 9 2 8 10 1615 2608 99 30 96.346619 72-73.5 1 9 2 8 11 1738 2608 22 30 68.572289 It5 1 9 2 8 12 1771 2609 24 29 68.572289 is5 1 9 2 8 13 1807 2609 118 29 96.435844 unclear5 1 9 2 8 14 1936 2610 67 28 96.435844 how4 1 9 2 9 0 667 2652 1336 44 -1 5 1 9 2 9 1 667 2652 175 30 93.343307 Occidental5 1 9 2 9 2 862 2653 115 29 96.632454 arrived5 1 9 2 9 3 994 2659 28 24 96.608574 at5 1 9 2 9 4 1039 2653 82 30 96.666786 these5 1 9 2 9 5 1139 2655 148 34 96.235687 numbers,5 1 9 2 9 6 1306 2655 56 29 96.349411 ands 1 9 2 9 7 1380 2656 11 28 95.898277 I5 1 9 2 9 8 1408 2656 76 29 95.898277 have5 1 9 2 9 9 1501 2656 75 30 95.901268 been5 1 9 2 9 10 1594 2657 107 29 96.139381 unable5 1 9 2 9 11 1718 2663 30 23 96.704826 to5 1 9 2 9 12 1765 2658 141 38 96.185051 replicate5 1 9 2 9 13 1924 2659 79 29 96.400269 them4 1 9 2 10 0 665 2701 1336 42 -1 5 1 9 2 10 1 665 2701 191 37 95.111626 completely.5 1 9 2 10 2 882 2701 133 30 96.747543 Without5 1 9 2 10 3 1028 2701 141 39 96.575325 knowing5 1 9 2 10 4 1183 2703 48 28 96.974571 thes 1 9 2 10 5 1245 2702 122 38 96.453598 identity5 1 9 2 10 6 1381 2704 34 29 96.999481 of5 1 9 2 10 7 1426 2704 47 29 96.620354 thes 1 9 2 10 8 1486 2704 159 39 96.159492 purchasers 1 9 2 10 9 1657 2704 34 30 96.988640 of5 1 9 2 10 10 1702 2706 48 28 96.947006 thes 1 9 2 10 11 1763 2705 135 30 96.947006 divested5 1 9 2 10 12 1912 2707 89 36 96.976387 plant,4 1 9 2 11 0 665 2749 1338 39 -1 5 1 9 2 11 1 665 2749 47 29 96.991295 thes 1 9 2 11 2 724 2749 141 38 96.524506 resulting5 1 9 2 11 3 876 2749 70 30 95.392792 HHI5 1 9 2 11 4 957 2756 107 23 95.392792 cannot5 1 9 2 11 5 1074 2751 37 28 96.988556 be5 1 9 2 11 6 1121 2751 145 37 96.632828 precisely5 1 9 2 11 7 1278 2752 171 33 96.184639 calculated;5 1 9 2 11 8 1462 2752 146 33 95.908020 however,5 1 9 2 11 9 1621 2754 20 28 95.908020 it5 1 9 2 11 10 1652 2753 24 29 96.851730 is5 1 9 2 11 11 1688 2754 78 28 96.851540 clears 1 9 2 11 12 1776 2754 59 29 96.951042 that5 1 9 2 11 13 1847 2754 20 29 96.616318 it5 1 9 2 11 14 1879 2754 60 29 94.484848 will5 1 9 2 11 15 1951 2754 52 30 95.891144 fall4 1 9 2 12 0 666 2797 173 30 -1 5 1 9 2 12 1 666 2797 173 30 96.796928 somewhat. OCCIDENTAL PETROLEUM CORPORATION, ETAL. —_ 1279 1010 Statement likelihood of anticompetitive effects from an acquisition consequently increases as well... .". Owens-Illinois, slip op. at 27 (quoting B.F. Goodrich, 110 FTC at 303); See also Merger Guidelines, Section 1.51 ("Market concentration is a useful indicator of the likely potential competitive effect of a merger."). Increases in concentration magnify the likelihood of collusive behavior since [t]he4 1 3 1 7 0 514 985 1337 53 -1 5 1 3 1 7 1 514 992 112 36 96.952377 fewer5 1 3 1 7 2 637 992 59 35 97.014915 thes 1 3 1 7 3 709 991 229 47 96.324776 competitors5 1 3 1 7 4 952 990 36 36 96.831802 in5 1 3 1 7 5 1003 1000 19 26 96.865013 a5 1 3 1 7 6 1034 989 145 41 95.867973 market,5 1 3 1 7 7 1193 989 59 35 96.261230 thes 1 3 1 7 8 1265 988 113 36 96.955444 easier5 1 3 1 7 9 1390 987 26 36 96.949219 it5 1 3 1 7 10 1428 987 169 36 96.922165 becomes5 1 3 1 7 11 1612 986 56 36 96.922165 for5 1 3 1 7 12 1680 986 58 35 96.809570 thes 1 3 1 7 13 1752 985 99 35 96.772964 firms4 1 3 1 8 0 515 1044 1336 51 -1 5 1 3 1 8 1 515 1057 36 29 96.116982 to5 1 3 1 8 2 569 1050 210 36 96.677071 coordinates 1 3 1 8 3 796 1049 98 46 96.677071 prices 1 3 1 8 4 913 1048 67 36 96.859421 ands 1 3 1 8 5 999 1053 124 40 95.866821 output5 1 3 1 8 6 1141 1046 212 36 86.668648 decisions. Olin slip op. at 21; See also Merger Guidelines, Section 2.0. However, while market concentration is a screen that helps identify mergers that may reduce competition, it is not always a precision tool. The Merger Guidelines divide markets into three categories according to concentration. Markets with a post-merger HHI under 1000 are unconcentrated; markets with a post-merger HHI between 1000 and 1800 are moderately concentrated; and markets with a post-merger HHI over 1800 are highly concentrated. Merger Guidelines, Section 1.51. In this case, as in B.F. Goodrich, 110 FTC at 310, the mass and suspension PVC homopolymer market, is moderately concentrated, as the majority notes. Slip op. at 27. Within each category, the Guidelines also look to the amount of increase resulting from the acquisition. In a moderately concentrated market, an increase of less than 100 in the HHI is “unlikely to have adverse competitive consequences." Merger Guidelines, Section 1.51(b). An increase of more than 100, however, potentially5 1 3 3 5 10 1711 1974 139 43 89.969742 raise[s]4 1 3 3 6 0 516 2034 1336 50 -1 5 1 3 3 6 1 516 2038 205 46 96.916977 significant5 1 3 3 6 2 735 2037 230 46 96.442497 competitive5 1 3 3 6 3 981 2037 191 35 85.117950 concerns”5 1 3 3 6 4 1189 2036 204 45 96.513847 depending5 1 3 3 6 5 1408 2046 46 24 96.893166 on5 1 3 3 6 6 1470 2035 83 34 96.984558 how5 1 3 3 6 7 1569 2034 110 46 95.708542 likely5 1 3 3 6 8 1694 2034 26 34 96.932297 it5 1 3 3 6 9 1734 2034 30 34 96.655266 is5 1 3 3 6 10 1780 2034 72 34 96.301384 that4 1 3 3 7 0 515 2091 1337 55 -1 5 1 3 3 7 1 515 2097 99 36 96.441025 there5 1 3 3 7 2 646 2096 74 36 96.441025 will5 1 3 3 7 3 754 2096 44 35 96.479912 be5 1 3 3 7 4 831 2106 20 25 95.289330 a5 1 3 3 7 5 883 2095 182 51 96.516655 lessening5 1 3 3 7 6 1098 2094 42 36 96.634293 of5 1 3 3 7 7 1168 2093 235 47 96.669327 competitions 1 3 3 7 8 1435 2093 151 45 96.486282 through5 1 3 3 7 9 1619 2091 233 37 96.754486 coordinated4 1 3 3 8 0 516 2151 1335 46 -1 5 1 3 3 8 1 516 2155 210 36 96.673279 interactions 1 3 3 8 2 760 2166 39 25 96.895035 or5 1 3 3 8 3 830 2154 185 37 96.595718 unilateral5 1 3 3 8 4 1049 2153 140 41 96.657852 effects,5 1 3 3 8 5 1224 2153 68 35 96.373444 ands 1 3 3 8 6 1324 2152 132 36 96.680351 factors5 1 3 3 8 7 1489 2151 150 46 96.652901 relating5 1 3 3 8 8 1672 2157 36 29 96.454742 to5 1 3 3 8 9 1741 2157 110 39 96.454742 entry,4 1 3 3 9 0 516 2209 1337 46 -1 5 1 3 3 9 1 516 2214 238 41 96.406464 efficiencies,5 1 3 3 9 2 778 2213 67 36 96.406464 ands 1 3 3 9 3 866 2212 165 36 96.709778 business5 1 3 3 9 4 1054 2211 137 36 96.281433 failure.5 1 3 3 9 5 1213 2211 48 35 77.698372 Jd.5 1 3 3 9 6 1306 2211 37 35 96.683586 In5 1 3 3 9 7 1366 2210 67 35 96.739426 this5 1 3 3 9 8 1455 2220 94 30 95.884361 case,5 1 3 3 9 9 1572 2209 97 36 95.884361 there5 1 3 3 9 10 1690 2220 94 24 96.452148 were5 1 3 3 9 11 1806 2218 47 25 96.632698 no4 1 3 3 10 0 517 2266 1335 51 -1 5 1 3 3 10 1 517 2272 209 45 96.528275 allegations5 1 3 3 10 2 742 2271 41 36 97.016991 of5 1 3 3 10 3 794 2271 182 35 96.261719 unilateral5 1 3 3 10 4 991 2269 303 46 96.261719 anticompetitive5 1 3 3 10 5 1307 2269 127 35 96.192596 effects5 1 3 3 10 6 1448 2268 93 35 96.192596 from5 1 3 3 10 7 1555 2268 58 34 96.062309 thes 1 3 3 10 8 1628 2266 224 46 96.931976 acquisition,4 1 3 3 11 0 516 2324 1337 48 -1 5 1 3 3 11 1 516 2330 179 35 96.266068 therefore5 1 3 3 11 2 721 2340 65 25 96.784653 ours 1 3 3 11 3 812 2329 104 35 96.293564 focus5 1 3 3 11 4 944 2328 30 36 96.932358 is5 1 3 3 11 5 1003 2339 45 24 95.855820 on5 1 3 3 11 6 1075 2328 160 34 96.616112 whether5 1 3 3 11 7 1259 2327 60 35 96.158318 thes 1 3 3 11 8 1346 2325 213 47 96.744118 acquisitions 1 3 3 11 9 1588 2325 179 34 96.196022 increases5 1 3 3 11 10 1796 2324 57 35 96.737877 thea 1 3 3 12 0 517 2382 1336 46 -1 5 1 3 3 12 1 517 2388 200 37 96.137184 likelihood5 1 3 3 12 2 751 2388 42 35 96.619186 of5 1 3 3 12 3 824 2387 231 36 96.212471 coordinated5 1 3 3 12 4 1091 2385 136 37 96.830711 actions5 1 3 3 12 5 1263 2396 40 25 96.264061 or5 1 3 3 12 6 1336 2384 176 36 95.107925 collusive5 1 3 3 12 7 1547 2382 306 46 96.759262 anticompetitive4 1 3 3 13 0 517 2447 182 36 -1 5 1 3 3 13 1 517 2447 182 36 96.643204 behavior.3 1 3 4 0 0 517 2499 1339 341 -1 4 1 3 4 1 0 591 2499 1262 51 -1 5 1 3 4 1 1 591 2506 75 34 93.250549 Thes 1 3 4 1 2 679 2505 206 45 92.312790 bright-lines 1 3 4 1 3 899 2503 155 36 96.408646 divisions 1 3 4 1 4 1067 2503 161 35 93.295097 between5 1 3 4 1 5 1243 2500 296 36 90.498276 unconcentrated5 1 3 4 1 6 1553 2500 69 34 96.775383 ands 1 3 4 1 7 1636 2499 217 44 96.566963 moderately4 1 3 4 2 0 517 2557 1339 46 -1 5 1 3 4 2 1 517 2563 253 36 96.439789 concentrated5 1 3 4 2 2 807 2562 153 35 95.977928 markets5 1 3 4 2 3 997 2561 29 35 95.977928 is5 1 3 4 2 4 1064 2560 198 36 96.646072 somewhat5 1 3 4 2 5 1297 2559 159 44 94.503464 illusory.5 1 3 4 2 6 1527 2559 52 34 96.020706 As5 1 3 4 2 7 1616 2557 58 35 96.880135 thes 1 3 4 2 8 1710 2557 146 44 96.890221 Merger4 1 3 4 3 0 517 2614 1336 51 -1 5 1 3 4 3 1 517 2622 208 36 96.632812 Guidelines5 1 3 4 3 2 739 2621 159 40 93.258263 observe,5 1 3 4 3 3 915 2620 216 45 86.620575 {a]lthough the resulting regions provide a useful framework for merger analysis, the numerical divisions suggest greater precision than is possible with the available economic tools and information." Merger Guidelines, Section 1.5. The imprecision OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1279 1010 Statement likelihood of anticompetitive effects from an acquisition consequently increases as well... ." Owens-Illinois, slip op. at 27 (quoting B.F. Goodrich, 110 FTC at 303); See also Merger Guidelines, Section 1.51 ("Market concentration is a useful indicator of the likely potential competitive effect of a merger."). Increases in concentration magnify the likelihood of collusive behavior since [t]he4 1 3 1 7 0 514 982 1336 53 -1 5 1 3 1 7 1 514 990 111 36 96.917641 fewer5 1 3 1 7 2 637 989 59 36 97.012291 thes 1 3 1 7 3 709 988 229 47 96.959991 competitors5 1 3 1 7 4 952 987 35 36 96.223625 in5 1 3 1 7 5 1002 998 19 25 96.223625 a5 1 3 1 7 6 1034 986 144 42 96.531487 market,5 1 3 1 7 7 1192 986 58 35 96.666656 thes 1 3 1 7 8 1264 985 113 36 96.885155 easier5 1 3 1 7 9 1389 984 26 36 96.913338 it5 1 3 1 7 10 1427 985 169 35 96.259583 becomes5 1 3 1 7 11 1610 983 57 36 96.831314 for5 1 3 1 7 12 1678 983 59 35 97.009377 thes 1 3 1 7 13 1750 982 100 35 97.008957 firms4 1 3 1 8 0 515 1040 1335 52 -1 5 1 3 1 8 1 515 1055 36 28 96.216431 to5 1 3 1 8 2 569 1047 210 36 96.887108 coordinates 1 3 1 8 3 796 1046 97 46 96.463921 prices 1 3 1 8 4 912 1046 68 35 96.976372 ands 1 3 1 8 5 998 1050 124 41 96.748398 output5 1 3 1 8 6 1139 1043 213 37 87.116745 decisions. Olin slip op. at 21; See also Merger Guidelines, Section 2.0. However, while market concentration is a screen that helps identify mergers that may reduce competition, it is not always a precision tool. The Merger Guidelines divide markets into three categories according to concentration. Markets with a post-merger HHI under 1000 are unconcentrated; markets with a post-merger HHI between 1000 and 1800 are moderately concentrated; and markets with a post-merger HHI over 1800 are highly concentrated. Merger Guidelines, Section 1.51. In this case, as in B.F. Goodrich, 110 FTC at 310, the mass and suspension PVC homopolymer market, is moderately concentrated, as the majority notes. Slip op. at 27. Within each category, the Guidelines also look to the amount of increase resulting from the acquisition. In a moderately concentrated market, an increase of less than 100 in the HHI is “unlikely to have adverse competitive consequences." Merger Guidelines, Section 1.51(b). An increase of more than 100, however, potentially5 1 3 3 5 10 1711 1971 137 43 89.723831 raise[s]4 1 3 3 6 0 516 2031 1335 51 -1 5 1 3 3 6 1 516 2035 205 47 96.908859 significant5 1 3 3 6 2 734 2034 231 46 96.310814 competitive5 1 3 3 6 3 980 2034 191 35 78.577766 concerns”5 1 3 3 6 4 1189 2033 203 45 96.217491 depending5 1 3 3 6 5 1408 2043 46 24 96.993195 on5 1 3 3 6 6 1469 2033 83 34 95.020981 how5 1 3 3 6 7 1568 2031 110 46 95.020981 likely5 1 3 3 6 8 1693 2031 25 34 96.858353 it5 1 3 3 6 9 1733 2031 30 34 96.111519 is5 1 3 3 6 10 1780 2031 71 34 97.011192 that4 1 3 3 7 0 515 2088 1336 55 -1 5 1 3 3 7 1 515 2095 99 35 96.032249 there5 1 3 3 7 2 646 2094 74 35 96.882759 will5 1 3 3 7 3 753 2093 44 36 96.229584 be5 1 3 3 7 4 831 2103 19 26 95.747932 a5 1 3 3 7 5 883 2092 181 51 95.747932 lessening5 1 3 3 7 6 1097 2091 42 36 96.964134 of5 1 3 3 7 7 1168 2090 234 47 96.570847 competitions 1 3 3 7 8 1434 2090 152 45 96.670410 through5 1 3 3 7 9 1618 2088 233 37 96.641953 coordinated4 1 3 3 8 0 516 2148 1334 46 -1 5 1 3 3 8 1 516 2152 209 37 96.450836 interactions 1 3 3 8 2 759 2163 39 25 96.957832 or5 1 3 3 8 3 830 2151 184 37 96.111160 unilateral5 1 3 3 8 4 1048 2150 140 41 96.595245 effects,5 1 3 3 8 5 1222 2150 69 35 96.259659 ands 1 3 3 8 6 1323 2149 132 36 96.419960 factors5 1 3 3 8 7 1487 2148 150 46 96.604301 relating5 1 3 3 8 8 1670 2154 37 29 96.132057 to5 1 3 3 8 9 1740 2153 110 39 96.132057 entry,4 1 3 3 9 0 516 2206 1335 46 -1 5 1 3 3 9 1 516 2211 238 41 95.757912 efficiencies,5 1 3 3 9 2 777 2210 68 36 96.151176 ands 1 3 3 9 3 866 2210 165 35 96.252174 business5 1 3 3 9 4 1053 2208 137 37 96.188026 failure.5 1 3 3 9 5 1212 2208 48 35 39.974171 Jd.5 1 3 3 9 6 1305 2209 38 34 95.785210 In5 1 3 3 9 7 1365 2207 67 35 96.299576 this5 1 3 3 9 8 1454 2217 94 31 96.947845 case,5 1 3 3 9 9 1571 2206 97 36 96.545265 there5 1 3 3 9 10 1689 2217 95 24 96.238647 were5 1 3 3 9 11 1805 2215 46 25 96.238647 no4 1 3 3 10 0 517 2263 1334 52 -1 5 1 3 3 10 1 517 2270 208 45 96.530128 allegations5 1 3 3 10 2 741 2269 42 36 96.375801 of5 1 3 3 10 3 793 2268 182 36 96.375801 unilateral5 1 3 3 10 4 991 2266 301 46 96.820107 anticompetitive5 1 3 3 10 5 1306 2266 127 36 95.726624 effects5 1 3 3 10 6 1447 2265 94 35 95.726624 from5 1 3 3 10 7 1555 2265 58 34 96.426918 thes 1 3 3 10 8 1627 2263 224 46 96.037460 acquisition,4 1 3 3 11 0 516 2321 1336 48 -1 5 1 3 3 11 1 516 2327 178 36 96.374039 therefore5 1 3 3 11 2 721 2338 64 24 96.013298 ours 1 3 3 11 3 811 2326 105 36 96.173378 focus5 1 3 3 11 4 943 2326 30 35 96.361992 is5 1 3 3 11 5 1002 2336 46 25 96.319962 on5 1 3 3 11 6 1075 2325 158 34 96.319962 whether5 1 3 3 11 7 1258 2324 60 35 96.545837 thes 1 3 3 11 8 1345 2322 214 47 96.547234 acquisitions 1 3 3 11 9 1587 2322 179 34 95.310890 increases5 1 3 3 11 10 1795 2321 57 35 95.310890 thea 1 3 3 12 0 517 2379 1336 46 -1 5 1 3 3 12 1 517 2385 199 37 95.949539 likelihood5 1 3 3 12 2 751 2385 41 35 95.949539 of5 1 3 3 12 3 823 2384 232 36 96.286018 coordinated5 1 3 3 12 4 1090 2383 136 36 96.615234 actions5 1 3 3 12 5 1262 2393 39 25 96.615234 or5 1 3 3 12 6 1335 2381 176 36 96.282738 collusive5 1 3 3 12 7 1546 2379 307 46 96.388184 anticompetitive4 1 3 3 13 0 517 2444 181 36 -1 5 1 3 3 13 1 517 2444 181 36 96.713814 behavior.3 1 3 4 0 0 517 2495 1337 343 -1 4 1 3 4 1 0 591 2495 1262 52 -1 5 1 3 4 1 1 591 2503 75 34 93.288887 Thes 1 3 4 1 2 679 2502 205 45 93.040878 bright-lines 1 3 4 1 3 898 2500 155 36 96.886948 divisions 1 3 4 1 4 1066 2500 161 35 93.287621 between5 1 3 4 1 5 1241 2497 297 36 92.654716 unconcentrated5 1 3 4 1 6 1553 2497 67 35 96.921303 ands 1 3 4 1 7 1635 2495 218 45 96.339737 moderately4 1 3 4 2 0 517 2554 1337 47 -1 5 1 3 4 2 1 517 2560 253 36 93.167015 concentrated5 1 3 4 2 2 807 2559 152 35 94.011108 markets5 1 3 4 2 3 997 2558 29 35 96.623772 is5 1 3 4 2 4 1063 2557 198 36 95.468521 somewhat5 1 3 4 2 5 1296 2557 159 44 95.225433 illusory.5 1 3 4 2 6 1526 2556 53 34 96.698921 As5 1 3 4 2 7 1615 2554 58 35 96.523758 thes 1 3 4 2 8 1709 2554 145 44 96.914589 Merger4 1 3 4 3 0 518 2611 1335 51 -1 5 1 3 4 3 1 518 2619 207 36 96.499451 Guidelines5 1 3 4 3 2 738 2619 160 39 93.121078 observe,5 1 3 4 3 3 914 2617 216 45 26.007858 [a]lthough the resulting regions provide a useful framework for merger analysis, the numerical divisions suggest greater precision than is possible with the available economic tools and information.” Merger Guidelines, Section 1.5. The imprecision Statement 115 F.T.C.

of the numbers is further complicated where they fall just5 1 3 1 1 11 1830 643 114 36 95.600739 above5 1 3 1 1 12 1958 646 68 34 96.961029 anda 1 3 1 2 0 683 689 1341 63 -1 5 1 3 1 2 1 683 689 75 45 92.829964 just5 1 3 1 2 2 780 690 119 35 96.940407 below5 1 3 1 2 3 922 702 20 24 96.642525 a5 1 3 1 2 4 964 692 213 36 79.638100 threshold. In that event, other things being equal, comparable5 1 3 1 3 2 969 751 232 46 96.592621 competitive5 1 3 1 3 3 1231 752 134 37 96.769012 issues are presented. Jd. Had the concentration level in this case fallen below the threshold dividing unconcentrated and moderately concentrated markets, it is unlikely that the acquisition would have had an adverse competitive effect. In such a case, there ordinarily would be no further investigation after the concentration level was determined. Jd. at Section 1.51(a). The acquisition in this case left the market concentration just above the threshold separating unconcentrated and moderately concentrated markets, with an increase in the HHI just exceeding 100. Such a concentration level does not permit us to dismiss the acquisition as competitively insignificant without further analysis, but at the same time, the marginal level of concentration tells us relatively little about the likely competitive effect of a merger. The concentration as I have calculated it here is comparable, although not identical, to the market at the time of B.F. Goodrich. Then, the mass and suspension PVC homopolymer market after the acquisition was moderately concentrated, but5 1 3 1 19 3 1054 1689 84 44 96.754608 only5 1 3 1 19 4 1155 1689 47 45 96.293938 by5 1 3 1 19 5 1219 1689 58 34 93.293152 thes 1 3 1 19 6 1292 1689 116 36 93.189072 barest5 1 3 1 19 7 1424 1691 43 34 96.585266 of5 1 3 1 19 8 1479 1692 188 44 94.015213 margins. 110 FTC at 310. The increase in the HHI was over 100 (110-113), barely4 1 3 1 21 0 673 1802 1337 46 -1 5 1 3 1 21 1 673 1802 251 46 81.770187 exceed[ing] the Guidelines' threshold. The Commission held that such concentration created only5 1 3 1 22 5 1324 1874 20 25 97.009140 a5 1 3 1 22 6 1357 1864 101 35 97.008911 weak5 1 3 1 22 7 1471 1866 242 45 96.265709 presumptions 1 3 1 22 8 1728 1867 42 35 96.906021 of5 1 3 1 22 9 1780 1868 229 45 96.571327 competitive4 1 3 1 23 0 672 1914 1232 55 -1 5 1 3 1 23 1 672 1918 147 46 93.309013 injury. Id. at 310-11.° I would apply the same standard here. © The Commission in B.F. Goodrich noted the 1984 Justice Department Guidelines in its discussion of market concentration. 110 FTC at 310-11. In 1984, the Department was likely5 1 5 1 3 5 1123 2422 30 24 96.632164 to5 1 5 1 3 6 1165 2416 153 39 96.632164 challenges 1 5 1 3 7 1330 2427 127 29 96.871101 mergers5 1 5 1 3 8 1471 2418 28 30 96.952003 in5 1 5 1 3 9 1514 2419 60 36 96.360123 [thes 1 5 1 3 10 1587 2420 182 39 96.483032 moderately5 1 5 1 3 11 1782 2422 221 36 96.062248 concentrated]4 1 5 1 4 0 667 2464 1336 43 -1 5 1 5 1 4 1 667 2464 102 36 96.894974 regions 1 5 1 4 2 781 2464 60 29 96.781586 that5 1 5 1 4 3 853 2464 128 38 96.286430 produces 1 5 1 4 4 994 2473 37 21 96.822655 an5 1 5 1 4 5 1043 2464 131 30 96.822655 increases 1 5 1 4 6 1186 2466 29 28 96.998329 in5 1 5 1 4 7 1228 2467 47 28 96.663635 thes 1 5 1 4 8 1288 2467 69 29 96.723160 HHI5 1 5 1 4 9 1369 2467 35 29 96.505058 of5 1 5 1 4 10 1414 2476 80 21 96.930779 more5 1 5 1 4 11 1507 2468 67 29 96.931343 than5 1 5 1 4 12 1592 2468 55 30 96.235764 1005 1 5 1 4 13 1660 2469 114 38 96.736557 points”5 1 5 1 4 14 1788 2470 110 34 96.951340 unless,5 1 5 1 4 15 1912 2470 91 30 96.869858 based4 1 5 1 5 0 667 2512 1336 43 -1 5 1 5 1 5 1 667 2520 39 21 96.869698 on5 1 5 1 5 2 723 2512 49 29 96.596390 thes 1 5 1 5 3 788 2512 114 39 96.566666 totality5 1 5 1 5 4 919 2512 35 30 97.003021 of5 1 5 1 5 5 968 2512 119 35 96.751945 factors,5 1 5 1 5 6 1105 2513 48 30 96.739845 thes 1 5 1 5 7 1168 2514 192 40 96.585724 Departments 1 5 1 5 8 1376 2516 167 29 96.585724 concluded5 1 5 1 5 9 1559 2516 60 29 96.700531 that5 1 5 1 5 10 1635 2517 48 29 96.940269 thes 1 5 1 5 11 1700 2518 177 37 96.316910 acquisitions 1 5 1 5 12 1897 2518 39 30 96.316910 is not likely substantially to lessen competition." 1984 Department of Justice Merger Guidelines ("1984 DOJ Guidelines"), Section 3.11(b), reprinted in 4 Trade Reg. Rep. (CCH) 913,103 at 20,561 (emphasis in original). Under the Merger Guidelines since adopted by the Commission, such a merger potentially5 1 5 1 9 11 1882 2712 118 36 91.471039 raise[s]4 1 5 1 10 0 666 2753 1333 42 -1 5 1 5 1 10 1 666 2753 169 38 96.970016 significant5 1 5 1 10 2 847 2755 189 37 96.259407 competitive5 1 5 1 10 3 1048 2756 158 29 94.125412 concerns depending upon other factors discussed therein. Section 1.51(b).

OCCIDENTAL PETROLEUM CORPORATION, ETAL. 128] 1010 Statement B. Weighing the Significance of Other Factors In order to find a violation, we must determine that the effect of the acquisition may5 1 4 1 2 4 980 796 45 34 96.517502 be5 1 4 1 2 5 1048 796 247 46 96.712845 substantially5 1 4 1 2 6 1318 803 36 29 97.001747 to5 1 4 1 2 7 1376 797 118 36 96.214630 lessens 1 4 1 2 8 1516 798 265 46 75.793770 competition. 15 U.S.C. 18. Where we fear coordinated activity, as opposed to the unilateral exercise of market power, thes 1 4 1 4 7 1327 913 156 35 96.851082 ultimate5 1 4 1 4 8 1495 913 95 35 97.003426 issues 1 4 1 4 9 1603 914 28 35 96.635681 is5 1 4 1 4 10 1645 914 157 36 96.875832 whether5 1 4 1 4 11 1814 915 57 35 96.328651 thea 1 4 1 5 0 534 968 1337 49 -1 5 1 4 1 5 1 534 968 215 46 96.411942 challenged5 1 4 1 5 2 772 968 214 46 96.771790 acquisitions 1 4 1 5 3 1009 969 30 36 96.873398 is5 1 4 1 5 4 1062 969 110 46 96.631836 likely5 1 4 1 5 5 1195 976 36 29 96.933624 to5 1 4 1 5 6 1253 970 171 36 96.527885 facilitates 1 4 1 5 7 1447 971 209 37 54.834259 collusion. Hospital Corp. of America v. FTC, 807 F.2d 1381, 1386 (7th Cir. 1986), cert. denied, 481 U.S. 1038 (1987). While the level of market concentration is the starting point to determine the likelihood of collusion, many other factors also affect the likelihood of collusive behavior. When the concentration only marginally suggests a competitive problem, as in this case, the anticompetitive theory and the supporting facts must be examined with particular care. The Commission has previously examined mergers where the increase in concentration was marginal, although within the moderately concentrated range. In Weyerhaeuser Company, the increase in the HHI was 211 points, resulting in a post-merger HHI of 1166. The Commission observed that an “especially careful review of a number of industry characteristics in addition to concentration" was necessary. 106 FTC 172, 280 (1985). As previously noted, in B.F. Goodrich, the Commission found that concentration levels comparable to those here at5 1 4 2 9 8 1479 1904 57 34 96.979950 thes 1 4 2 9 9 1549 1904 109 35 96.463142 lowers 1 4 2 9 10 1670 1905 68 35 96.910324 ends 1 4 2 9 11 1751 1905 42 35 97.002235 of5 1 4 2 9 12 1802 1906 57 35 96.835800 thea 1 4 2 10 0 525 1956 1333 52 -1 5 1 4 2 10 1 525 1956 225 46 91.252098 ‘moderately5 1 4 2 10 2 766 1958 255 35 42.962093 concentrated’5 1 4 2 10 3 1036 1969 107 34 92.921082 ranges 1 4 2 10 4 1159 1987 6 6 52.503212 .5 1 4 2 10 5 1183 1988 6 5 52.503212 .5 1 4 2 10 6 1211 1988 3 5 84.859436 .5 1 4 2 10 7 1231 1966 116 29 96.921600 creates 1 4 2 10 8 1362 1960 84 45 96.690926 only5 1 4 2 10 9 1462 1971 19 24 96.909065 a5 1 4 2 10 10 1496 1962 102 34 96.775612 weak5 1 4 2 10 11 1612 1962 246 46 96.433563 presumption4 1 4 2 11 0 523 2013 1335 53 -1 5 1 4 2 11 1 523 2013 43 36 97.012657 of5 1 4 2 11 2 579 2014 305 47 96.215042 anticompetitive5 1 4 2 11 3 901 2016 191 36 23.552055 effects...5 1 4 2 11 4 1113 2017 26 35 23.552055 . 110 FTC at 338. Accordingly, the amount of evidence needed to rebut the presumption is not great. See, e.g., United States v. Baker Hughes, Inc., 908 F.2d 981, 991 (D.C. Cir. 1990).’ Thes 1 6 1 1 2 688 2357 67 29 92.799454 B.F.5 1 6 1 1 3 769 2357 153 30 96.853783 Goodrich5 1 6 1 1 4 935 2358 148 39 96.549919 approach5 1 6 1 1 5 1096 2359 139 38 96.920517 requires,5 1 6 1 1 6 1249 2368 31 21 96.850380 as5 1 6 1 1 7 1294 2360 220 30 96.875061 concentrations 1 6 1 1 8 1528 2360 157 35 96.846138 increases,5 1 6 1 1 9 1699 2370 16 21 96.578621 a5 1 6 1 1 10 1728 2367 113 33 96.578621 greater4 1 6 1 2 0 519 2406 1334 42 -1 5 1 6 1 2 1 519 2410 140 33 95.804634 quantum5 1 6 1 2 2 669 2406 56 28 96.870743 ands 1 6 1 2 3 736 2406 109 37 96.971939 quality5 1 6 1 2 4 856 2406 34 29 96.947716 of5 1 6 1 2 5 897 2406 140 30 96.929367 evidences 1 6 1 2 6 1049 2413 28 23 96.847984 to5 1 6 1 2 7 1088 2408 80 29 96.893707 rebuts 1 6 1 2 8 1180 2416 55 30 96.883545 any5 1 6 1 2 9 1246 2409 197 37 96.556053 presumptions 1 6 1 2 10 1454 2409 114 29 96.871948 created5 1 6 1 2 11 1578 2409 38 39 96.872009 by5 1 6 1 2 12 1627 2410 226 34 96.865730 concentration;4 1 6 1 3 0 520 2453 1334 44 -1 5 1 6 1 3 1 520 2453 151 38 96.633209 similarly,5 1 6 1 3 2 685 2454 19 29 94.881088 it5 1 6 1 3 3 717 2454 127 38 94.881088 requires5 1 6 1 3 4 858 2455 57 29 96.601028 less5 1 6 1 3 5 928 2455 142 30 96.610306 evidences 1 6 1 3 6 1083 2461 27 24 96.610306 at5 1 6 1 3 7 1122 2456 92 29 96.744255 lowers 1 6 1 3 8 1225 2456 91 29 96.854385 levels5 1 6 1 3 9 1329 2457 35 29 97.014313 of5 1 6 1 3 10 1372 2458 227 29 96.024200 concentration.5 1 6 1 3 11 1622 2458 71 30 96.199280 This5 1 6 1 3 12 1706 2460 148 37 96.776115 approach4 1 6 1 4 0 520 2501 1333 38 -1 5 1 6 1 4 1 520 2501 107 29 96.747147 should5 1 6 1 4 2 642 2502 37 29 96.820885 be5 1 6 1 4 3 695 2502 217 37 96.872147 distinguished5 1 6 1 4 4 928 2503 76 29 96.342606 from5 1 6 1 4 5 1020 2504 48 28 96.342606 thes 1 6 1 4 6 1084 2504 102 29 96.602875 notions 1 6 1 4 7 1201 2505 70 32 96.908440 that,5 1 6 1 4 8 1287 2513 32 20 96.908440 as5 1 6 1 4 9 1334 2506 48 28 96.496300 thes 1 6 1 4 10 1397 2506 71 28 96.159355 HHI5 1 6 1 4 11 1483 2506 158 33 96.595985 increases,5 1 6 1 4 12 1658 2506 80 30 96.981506 there5 1 6 1 4 13 1754 2507 24 29 96.891403 is5 1 6 1 4 14 1795 2507 58 29 96.860886 less4 1 6 1 5 0 519 2549 1334 40 -1 5 1 6 1 5 1 519 2549 165 29 96.541649 likelihood5 1 6 1 5 2 703 2551 60 28 96.818382 that5 1 6 1 5 3 782 2560 56 28 96.918610 any5 1 6 1 5 4 859 2551 71 29 96.771652 such5 1 6 1 5 5 949 2552 203 37 96.525475 presumptions 1 6 1 5 6 1171 2561 54 20 96.007599 cans 1 6 1 5 7 1244 2553 37 28 96.007599 be5 1 6 1 5 8 1300 2562 168 25 96.566277 overcome,5 1 6 1 5 9 1488 2554 56 29 96.745399 ands 1 6 1 5 10 1563 2554 156 34 96.418053 therefore,5 1 6 1 5 11 1738 2556 61 28 96.418053 that5 1 6 1 5 12 1817 2564 36 20 96.812302 an4 1 6 1 6 0 518 2598 1335 41 -1 5 1 6 1 6 1 518 2598 131 37 96.419167 analysis5 1 6 1 6 2 663 2598 35 28 96.419167 of5 1 6 1 6 3 708 2599 191 36 96.668312 competitive5 1 6 1 6 4 913 2599 106 29 96.833618 effects5 1 6 1 6 5 1033 2599 24 29 96.765373 is5 1 6 1 6 6 1071 2608 208 29 96.367401 unnecessary.5 1 6 1 6 7 1303 2601 62 28 96.749840 Thes 1 6 1 6 8 1378 2601 75 28 96.886536 needs 1 6 1 6 9 1466 2606 30 23 96.195419 to5 1 6 1 6 10 1509 2602 123 37 96.294212 analyzes 1 6 1 6 11 1645 2602 85 29 96.926880 those5 1 6 1 6 12 1743 2602 110 30 96.451477 factors4 1 6 1 7 0 517 2646 1336 41 -1 5 1 6 1 7 1 517 2646 90 29 96.884064 exists5 1 6 1 7 2 619 2646 28 29 96.406052 in5 1 6 1 7 3 658 2647 38 28 95.518555 all5 1 6 1 7 4 707 2655 84 21 96.792725 cases5 1 6 1 7 5 802 2647 94 29 96.792725 above5 1 6 1 7 6 907 2647 48 29 93.294815 thes 1 6 1 7 7 965 2648 246 29 92.262352 unconcentrated5 1 6 1 7 8 1222 2657 96 29 96.818298 range,5 1 6 1 7 9 1330 2649 186 38 96.254494 irrespective5 1 6 1 7 10 1526 2650 35 29 96.468666 of5 1 6 1 7 11 1568 2650 68 29 96.291817 how5 1 6 1 7 12 1647 2651 206 29 96.291817 concentrated4 1 6 1 8 0 517 2694 1335 39 -1 5 1 6 1 8 1 517 2694 48 29 96.468010 thes 1 6 1 8 2 584 2695 113 29 96.347931 markets 1 6 1 8 3 716 2695 33 34 96.652313 is,5 1 6 1 8 4 769 2695 56 30 96.418076 ands 1 6 1 8 5 843 2695 48 30 96.418076 thes 1 6 1 8 6 908 2700 99 25 96.404640 extent5 1 6 1 8 7 1024 2695 34 30 96.570137 of5 1 6 1 8 8 1073 2696 47 29 96.891739 thes 1 6 1 8 9 1138 2696 133 30 96.647842 increases 1 6 1 8 10 1288 2697 29 29 96.647842 in5 1 6 1 8 11 1336 2698 229 30 96.380653 concentration.5 1 6 1 8 12 1598 2698 90 35 96.556137 Thus,5 1 6 1 8 13 1707 2699 48 29 96.160202 thes 1 6 1 8 14 1777 2699 75 30 96.952721 19924 1 6 1 9 0 517 2743 1335 41 -1 5 1 6 1 9 1 517 2743 118 37 96.816620 Mergers 1 6 1 9 2 646 2743 184 34 96.384903 Guidelines,5 1 6 1 9 3 843 2744 78 38 96.444862 quite5 1 6 1 9 4 933 2744 106 38 96.473351 rightly5 1 6 1 9 5 1051 2745 28 28 96.972473 in5 1 6 1 9 6 1092 2754 49 28 96.972473 my5 1 6 1 9 7 1154 2746 85 33 96.774910 view,5 1 6 1 9 8 1252 2755 119 20 96.447906 removes 1 6 1 9 9 1383 2746 47 29 96.610779 thes 1 6 1 9 10 1443 2746 169 38 96.713463 suggestions 1 6 1 9 11 1625 2747 77 29 96.371956 from5 1 6 1 9 12 1714 2748 47 29 96.297188 thes 1 6 1 9 13 1777 2748 75 29 96.861504 19844 1 6 1 10 0 517 2790 1335 43 -1 5 1 6 1 10 1 517 2790 173 31 96.931175 Guidelines5 1 6 1 10 2 703 2792 59 29 96.344727 that5 1 6 1 10 3 774 2791 109 30 97.002800 factors5 1 6 1 10 4 896 2792 123 38 96.921158 relating5 1 6 1 10 5 1033 2797 29 24 97.008133 to5 1 6 1 10 6 1075 2793 48 29 96.883224 thes 1 6 1 10 7 1135 2802 69 20 96.855980 eases 1 6 1 10 8 1217 2794 56 28 96.855980 ands 1 6 1 10 9 1286 2794 194 39 96.993599 profitability5 1 6 1 10 10 1493 2794 35 30 96.885597 of5 1 6 1 10 11 1537 2795 158 34 93.180489 collusion,5 1 6 1 10 12 1711 2796 141 35 60.732029 [w]here Statement 115 F.T.C.

Successful collusion, or coordinated interaction, by competitors entails5 1 3 1 2 2 831 701 167 46 96.848045 reaching5 1 3 1 2 3 1011 709 104 30 96.603958 terms5 1 3 1 2 4 1130 704 41 36 96.884727 of5 1 3 1 2 5 1180 706 243 37 96.505638 coordination5 1 3 1 2 6 1438 709 70 36 96.604111 that5 1 3 1 2 7 1521 720 57 25 96.604111 ares 1 3 1 2 8 1589 712 189 44 96.520889 profitable5 1 3 1 2 9 1791 720 35 29 96.914452 to5 1 3 1 2 10 1841 715 57 35 96.963074 thes 1 3 1 2 11 1912 715 99 37 96.426277 firms4 1 3 1 3 0 673 756 1337 56 -1 5 1 3 1 3 1 673 756 173 38 96.938881 involved5 1 3 1 3 2 865 760 68 34 97.009850 ands 1 3 1 3 3 952 770 43 25 96.077660 an5 1 3 1 3 4 1014 761 124 46 96.077660 ability5 1 3 1 3 5 1156 769 35 29 96.582817 to5 1 3 1 3 6 1210 764 116 36 96.582817 detect5 1 3 1 3 7 1344 767 69 34 96.971649 ands 1 3 1 3 8 1430 768 129 44 96.644012 punish5 1 3 1 3 9 1578 770 201 37 96.811676 deviations5 1 3 1 3 10 1798 773 73 36 96.904503 that5 1 3 1 3 11 1889 776 121 34 97.017647 would4 1 3 1 4 0 672 815 1337 58 -1 5 1 3 1 4 1 672 815 208 36 95.389427 undermines 1 3 1 4 2 893 817 58 36 95.389427 thes 1 3 1 4 3 964 819 229 37 96.372147 coordinated5 1 3 1 4 4 1207 821 238 39 75.984650 interaction. Merger Guidelines, Section 2.1. Therefore, we must examine the conditions in the market for mass and suspension PVC homopolymer, and reach a judgment concerning the likelihood that firms in the market could arrive at terms of coordination or police a collusive agreement. Because the increase in concentration is marginal, I would have to find that the industry is one where conditions are very conducive to collusion in order to conclude that this marginal increase in concentration meaningfully increases the likelihood of collusion. If even some market characteristics make it difficult to reach and police mutually profitable terms of coordination, then this acquisition likely will have no effect on competition. I now turn to the other evidence concerning the likelihood of such collusive pricing. IV. THE EVIDENCE ON THE COMPETITIVE EFFECT In B.F, Goodrich, the Commission concluded that mass and suspension copolymer is relatively5 1 5 1 2 5 1372 1807 316 47 91.533577 heterogeneous; that costs vary significantly because of differing reactor sizes, resin production emphases, and transportation costs; that the price elasticity of demand for PVC end products might constrain efforts to collude; and that these industry characteristics made it unlikely that the acquisition had anticompetitive effects in the market. 110 FTC at 347. The BF. Goodrich record is part of the record in this case. However, the majority concludes, based primarily on post-B.F. Goodrich record evidence, that the industry has changed sufficiently with respect to these characteristics to warrant reaching a different conclusion with relevant, . . . are most likely to be important where the Department's decision whether to challenge a merger is otherwise close." 1984 DOJ Guidelines, Section 3.4 (emphasis supplied). It is therefore not correct to say that this provision in the 1984 Guidelines is equivalent to the B.F. Goodrich approach adopted by the Commission and, in my view, reflected in the 1992 Guidelines. See Merger Guidelines, Section 1.51.

OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1283 1010 Statement respect to each factor, as well as on the ultimate proposition that anticompetitive effects are unlikely. I disagree.* A. Product Homogeneity -- Quality and Prices Coordination among firms need not be universal in terms of industry participants or dimensions of competition in order to have an anticompetitive effect. Merger Guidelines, Section 2.11. However, as products in the relevant market become more differentiated, collusion becomes more5 1 5 1 5 5 1330 1142 184 46 96.314148 complex because it is then necessary5 1 5 1 6 2 765 1202 36 29 96.986122 to5 1 5 1 6 3 822 1196 172 37 96.394562 establish5 1 5 1 6 4 1015 1198 68 35 96.793655 ands 1 5 1 6 5 1104 1199 146 36 96.751259 enforces 1 5 1 6 6 1272 1210 19 25 97.006920 a5 1 5 1 6 7 1311 1201 167 46 96.706680 complex5 1 5 1 6 8 1501 1202 171 36 96.864021 schedules 1 5 1 6 9 1692 1202 43 36 97.002892 of5 1 5 1 6 10 1751 1203 117 46 96.958984 prices4 1 5 1 7 0 531 1253 1335 54 -1 5 1 5 1 7 1 531 1253 279 46 96.863335 corresponding5 1 5 1 7 2 825 1260 35 30 96.928665 to5 1 5 1 7 3 874 1255 203 45 96.748375 gradations5 1 5 1 7 4 1093 1256 35 36 96.668411 in5 1 5 1 7 5 1144 1258 115 35 96.668411 actual5 1 5 1 7 6 1275 1268 41 25 96.517403 or5 1 5 1 7 7 1328 1259 192 45 96.517403 perceived5 1 5 1 7 8 1534 1260 136 47 97.003532 quality5 1 5 1 7 9 1685 1261 181 37 96.973213 attributes4 1 5 1 8 0 531 1312 1333 47 -1 5 1 5 1 8 1 531 1321 133 35 95.871147 among5 1 5 1 8 2 683 1312 58 35 96.709747 thes 1 5 1 8 3 760 1313 207 46 96.293289 competing5 1 5 1 8 4 986 1315 198 44 56.283012 products. B.F. Goodrich, 110 FTC at 315 (quoting 1984 DOJ Guidelines at J 3.411 (footnote omitted)); See also Merger Guidelines, Section 2.11 ("[RJeaching terms of coordination may be limited or impeded by product heterogeneity. . . ."). Heterogeneity substantially5 1 5 1 12 7 1537 1553 234 46 93.192642 complicates5 1 5 1 12 8 1805 1554 58 36 93.192642 thea 1 5 1 13 0 526 1600 1340 54 -1 5 1 5 1 13 1 526 1600 274 38 96.922523 determinations 1 5 1 13 2 827 1604 69 34 96.652184 ands 1 5 1 13 3 921 1605 245 36 96.609482 enforcement5 1 5 1 13 4 1192 1607 43 34 96.944099 of5 1 5 1 13 5 1255 1618 198 26 96.692307 consensus5 1 5 1 13 6 1478 1610 128 44 95.717720 prices.5 1 5 1 13 7 1656 1611 142 36 96.804283 Instead5 1 5 1 13 8 1824 1612 42 35 97.007050 of4 1 5 1 14 0 526 1659 1335 54 -1 5 1 5 1 14 1 526 1659 235 46 96.815720 establishing5 1 5 1 14 2 777 1672 19 23 96.804359 a5 1 5 1 14 3 814 1662 115 45 96.934677 singles 1 5 1 14 4 943 1662 97 45 96.911270 prices 1 5 1 14 5 1057 1663 56 35 96.833313 for5 1 5 1 14 6 1128 1675 19 23 96.833313 a5 1 5 1 14 7 1163 1665 116 45 96.719215 singles 1 5 1 14 8 1294 1666 271 46 96.809792 homogeneous5 1 5 1 14 9 1581 1669 161 44 96.637535 product,5 1 5 1 14 10 1759 1670 102 35 96.637535 firms4 1 5 1 15 0 525 1718 1336 52 -1 5 1 5 1 15 1 525 1722 95 30 96.644608 must5 1 5 1 15 2 640 1718 172 35 96.923225 establish5 1 5 1 15 3 834 1719 68 35 96.445091 ands 1 5 1 15 4 924 1720 171 35 96.934021 maintains 1 5 1 15 5 1117 1731 18 25 97.006516 a5 1 5 1 15 6 1157 1722 118 36 97.002167 whole5 1 5 1 15 7 1297 1724 109 35 96.782677 series5 1 5 1 15 8 1428 1725 43 35 96.729126 of5 1 5 1 15 9 1486 1725 117 45 96.960175 prices5 1 5 1 15 10 1624 1726 58 35 96.314583 for5 1 5 1 15 11 1702 1737 19 24 96.314583 a5 1 5 1 15 12 1742 1728 119 35 96.973434 whole4 1 5 1 16 0 525 1775 1286 48 -1 5 1 5 1 16 1 525 1775 109 34 96.698601 series5 1 5 1 16 2 650 1776 42 34 96.973007 of5 1 5 1 16 3 703 1777 151 44 96.648453 products 1 5 1 16 4 868 1779 157 44 75.872688 grades. B.F. Goodrich, 110 FTC at 316 n.151.

® Occidental argues that B.F. Goodrich precludes contrary findings in this case, in particular that the competitive factors have not changed significantly in5 1 7 1 2 13 1811 2070 47 29 96.808441 thea 1 7 1 3 0 523 2109 1335 38 -1 5 1 7 1 3 1 523 2109 81 29 96.683891 short5 1 7 1 3 2 629 2109 87 30 80.729012 time since B.F. Goodrich, and that stare decisis mandates that the Commission reverse the decision of the ALJ. R.A.B. at 46, 1. I agree with the majority that each5 1 7 1 5 4 850 2216 69 20 96.974091 cases 1 7 1 5 5 932 2213 78 24 96.582352 must5 1 7 1 5 6 1022 2208 38 29 96.838036 be5 1 7 1 5 7 1073 2208 126 31 96.371979 decided5 1 7 1 5 8 1212 2218 39 21 96.108650 on5 1 7 1 5 9 1264 2210 37 29 95.927330 its5 1 7 1 5 10 1315 2219 68 20 96.979591 owns 1 7 1 5 11 1396 2210 101 35 96.027870 facts, even where the same market is involved. Slip op. at 28. A contrary conclusion may mean that declining to find a violation when the market is in the 1000 range would preclude challenges to subsequent mergers in the same market as concentration progressively increased. An increase in the HHI from one merger to the next requires, at a minimum, a reassessment of the likelihood of anticompetitive effects given the higher concentration. Factors that may convince us that collusion is unlikely when there are 8 or 9 firms, may not convince us when there are 6 or 7 firms. However, the differences in concentration between this case and B.F. Goodrich are slight; and some of the record is identical. Therefore, the Commission should be certain that the evidence in this case is sufficient and distinguishable to outweigh the evidence upon which it earlier relied in finding no violation in this market. I disagree with the majority that Complaint Counsel has met its burden in this regard. Statement 115 F.T.C.

In B.F. Goodrich, the Commission noted that differences5 1 3 1 1 9 1966 659 36 35 96.925514 in4 1 3 1 2 0 664 716 1338 47 -1 5 1 3 1 2 1 664 716 151 45 96.483658 products 1 3 1 2 2 829 716 135 45 96.253929 quality5 1 3 1 2 3 980 726 82 35 96.767395 may5 1 3 1 2 4 1078 716 105 35 96.689003 makes 1 3 1 2 5 1197 716 97 45 96.533798 prices 1 3 1 2 6 1309 716 236 36 96.394958 differentials5 1 3 1 2 7 1561 727 190 36 96.421631 necessary5 1 3 1 2 8 1766 723 36 29 96.621864 to5 1 3 1 2 9 1816 717 152 46 95.963142 products 1 3 1 2 10 1982 728 20 24 95.963142 a4 1 3 1 3 0 665 773 1336 48 -1 5 1 3 1 3 1 665 774 113 36 95.240196 stable5 1 3 1 3 2 808 774 135 36 96.053368 markets 1 3 1 3 3 971 773 240 48 95.901604 equilibrium,5 1 3 1 3 4 1243 775 68 35 95.901604 ands 1 3 1 3 5 1341 774 189 47 96.664658 achieving5 1 3 1 3 6 1560 785 19 26 96.745636 a5 1 3 1 3 7 1607 785 198 27 96.287399 consensus5 1 3 1 3 8 1836 786 47 26 95.764175 on5 1 3 1 3 9 1913 776 88 36 96.033333 such4 1 3 1 4 0 664 833 1335 46 -1 5 1 3 1 4 1 664 833 237 35 96.964615 differentials5 1 3 1 4 2 917 833 30 35 96.922913 is5 1 3 1 4 3 964 833 111 46 96.262733 likely5 1 3 1 4 4 1091 839 36 29 96.983322 to5 1 3 1 4 5 1143 833 44 35 97.011215 be5 1 3 1 4 6 1204 833 187 35 85.158211 difficult. Jd. at 315 (footnote omitted).

There are three categories of PVC resins: pipe, general purpose, and speciality. Within each category,’ there are different grades of PVC, and within particular grades there are perceived differences in quality. Jd. at 315-16. According to the record in B.F. Goodrich, 75% of PVC resin was commodity grades, while 25% was specialty grades. Id. at 316.

Not only does such relative product heterogeneity make reaching a collusive agreement more difficult, because multiple prices must be agreed to, it also makes policing compliance more difficult. Multiple prices facilitate cheating on a cartel agreement, because a producer can sell a higher priced grade of PVC, and invoice it at a lower grade, effectively cutting the price to the buyer by the difference in the prices of the grades.

In this case, the majority focuses on two indicia of product homogeneity: (1) customers’ ability to substitute one producer's PVC for another's; and (2) producers’ ability to obtain a premiums 1 3 3 3 11 1877 1767 116 45 89.145172 price for product. Premium prices are defined as charging higher prices than other producers for the same type and grade of PVC. Slip op. at 34-36. The majority concludes that customers, in fact, do substitute between producers, and that it is not possible for a producer to obtain a premium price for his product. The majority concludes that PVC is homogeneous “within grade," slip op. at 34-36, 41, and that collusion would be facilitated. I do not agree. The ability of producers to obtain premium prices would make it objectively difficult to reach a collusive price agreement. However, the absence of such premiums does not mandate a conclusion that it would be easy to arrive at collusive prices. There continue to be multiple prices for different types and grades of PVC resins -- not only the so-called commodity-type grades of PVC, pipe resin, general purpose resin (priced one cent higher than pipe grade), and film grade resin (priced an additional cent higher than general purpose), that the * The evidence is unclear as to whether there is more than one grade of pipe grade PVC. There are multiple grades within the other categories. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1285 1010 Statement majority primarily focuses on, slip op. at 41-42, but also specialty grades of mass and suspension PVC homopolymer. The multiplicity of types and grades of PVC makes it more difficult to collude, even if each producer can produce each type and grade of PVC, and it also makes it easier to cheat on any collusive agreement, since producers can always disguise price discounts through deceptive billing. B. Production Cost Differences Differences in the costs of producing different types and grades of PVC are reflected in the price differentials between them. Some of the cost differences are due to the type of reactor used, large reactors having lower unit costs than small reactors. These cost differences for the various types and grades of PVC make achieving a price consensus more difficult.

The Commission in B.F. Goodrich determined that PVC4 1 5 2 2 0 524 1560 1336 48 -1 5 1 5 2 2 1 524 1562 213 46 96.500999 productions 1 5 2 2 2 754 1568 95 30 96.954506 costs5 1 5 2 2 3 866 1561 109 36 96.997215 differs 1 5 2 2 4 990 1561 244 47 96.664444 significantly5 1 5 2 2 5 1250 1561 93 36 96.498764 from5 1 5 2 2 6 1360 1572 68 25 96.375778 ones 1 5 2 2 7 1443 1560 82 37 96.261932 firms 1 5 2 2 8 1541 1568 36 28 96.081894 to5 1 5 2 2 9 1593 1561 177 36 89.908775 another. FTC at 321. Like the majority here, the Commission acknowledged that such costs were similar for producers using large reactors, which constituted two-thirds of installed capacity. Jd. However, the Commission focused on the remaining small reactors that produce a variety of specialty resins, with resulting significant variations in production costs, and noted that [mJost5 1 5 2 8 7 1417 1910 100 35 96.554520 firms5 1 5 2 8 8 1547 1917 143 39 96.631104 operates 1 5 2 8 9 1720 1911 138 35 96.631104 several4 1 5 2 9 0 523 1968 1334 40 -1 5 1 5 2 9 1 523 1969 166 36 96.431633 different5 1 5 2 9 2 705 1969 92 36 96.703285 sizes5 1 5 2 9 3 813 1968 42 36 96.645081 of5 1 5 2 9 4 867 1969 164 35 88.320709 reactor. /d. at 321 n.177. The Commission cited, for instance, evidence from the record showing that total plant operating costs varied among plants from 14 cents per pound to almost 22 cents per pound, because different5 1 5 2 12 8 1450 2142 102 36 96.747681 firms5 1 5 2 12 9 1568 2153 64 25 96.582474 uses 1 5 2 12 10 1647 2149 155 28 96.794647 reactors5 1 5 2 12 11 1820 2142 42 35 96.314331 of4 1 5 2 13 0 523 2200 1335 48 -1 5 1 5 2 13 1 523 2201 165 37 96.923492 different5 1 5 2 13 2 701 2201 91 37 96.428566 sizes5 1 5 2 13 3 806 2208 36 30 96.733894 to5 1 5 2 13 4 855 2202 155 46 96.938423 produces 1 5 2 13 5 1024 2201 163 36 96.829269 different5 1 5 2 13 6 1200 2200 93 36 96.530525 PVC5 1 5 2 13 7 1306 2200 110 36 92.224274 resins5 1 5 2 13 8 1433 2229 28 7 39.628914 ..5 1 5 2 13 9 1484 2230 1 6 66.287079 .5 1 5 2 13 10 1501 2200 226 36 95.489426 accentuated5 1 5 2 13 11 1741 2201 46 45 97.006081 by5 1 5 2 13 12 1801 2200 57 36 96.887466 thea 1 5 2 14 0 523 2259 1339 47 -1 5 1 5 2 14 1 523 2261 73 36 96.875740 facts 1 5 2 14 2 622 2262 73 35 96.369789 that5 1 5 2 14 3 722 2260 170 36 96.268784 different5 1 5 2 14 4 918 2260 93 36 96.355125 PVC5 1 5 2 14 5 1039 2260 192 46 96.584152 producers5 1 5 2 14 6 1260 2259 206 46 96.075058 emphasizes 1 5 2 14 7 1493 2260 58 35 96.075058 thes 1 5 2 14 8 1578 2259 214 46 96.318275 productions 1 5 2 14 9 1819 2259 43 35 96.583519 of4 1 5 2 15 0 523 2311 1335 53 -1 5 1 5 2 15 1 523 2319 170 36 96.201927 different5 1 5 2 15 2 723 2319 94 35 96.374138 PVC5 1 5 2 15 3 834 2319 157 45 95.367256 grades. Jd. at 322.'° It also noted cost differences stemming from the less efficient nature of the small reactors, and the greater technical customer service required with respect to specialty resins. Id.

10 The majority points to evidence suggesting a smaller, but significant, difference in production costs between large and small reactors (i.e., 14 to 22 percent of price). See slip op. at 7 n.19. Statement 115 F.T.C.

In this case, the majority acknowledges the substantial differences in costs of production, but concludes that the differences 1 3 1 2 10 1824 701 36 35 96.203468 in5 1 3 1 2 11 1876 709 138 29 96.972977 reactor4 1 3 1 3 0 675 750 1337 56 -1 5 1 3 1 3 1 675 750 74 36 96.576546 sizes 1 3 1 3 2 766 751 64 36 96.935982 has5 1 3 1 3 3 848 752 59 35 96.760551 led5 1 3 1 3 4 923 758 36 30 97.012436 to5 1 3 1 3 5 976 758 71 30 96.736320 two5 1 3 1 3 6 1064 752 82 37 96.860809 tiers5 1 3 1 3 7 1164 753 41 37 96.712494 of5 1 3 1 3 8 1217 755 180 45 93.080849 products,5 1 3 1 3 9 1416 785 5 6 89.629593 .5 1 3 1 3 10 1442 785 6 6 72.569382 .5 1 3 1 3 11 1471 785 3 7 72.569382 .5 1 3 1 3 12 1492 757 115 37 96.502579 rather5 1 3 1 3 13 1622 758 82 36 96.835770 than5 1 3 1 3 14 1721 758 177 48 96.486855 disparate5 1 3 1 3 15 1915 768 97 29 96.995079 costs4 1 3 1 4 0 674 810 1337 53 -1 5 1 3 1 4 1 674 819 132 37 96.640198 among5 1 3 1 4 2 823 810 225 46 78.740402 producers.”5 1 3 1 4 3 1079 811 77 48 96.141281 Slips 1 3 1 4 4 1171 823 58 37 96.653076 op.5 1 3 1 4 5 1247 819 33 30 90.724030 at5 1 3 1 4 6 1294 813 58 37 73.649284 47,5 1 3 1 4 7 1383 815 74 36 96.325958 Thes 1 3 1 4 8 1472 815 166 48 96.322845 majority5 1 3 1 4 9 1652 818 196 36 96.322845 concludes5 1 3 1 4 10 1865 819 72 35 96.814331 that5 1 3 1 4 11 1954 820 57 35 97.000961 thea 1 3 1 5 0 672 869 1339 49 -1 5 1 3 1 5 1 672 869 97 46 96.973724 prices 1 3 1 5 2 783 869 215 37 95.993782 differences5 1 3 1 5 3 1013 881 57 26 96.769501 ares 1 3 1 5 4 1084 881 41 26 96.884270 so5 1 3 1 5 5 1138 878 97 40 96.606415 great5 1 3 1 5 6 1247 873 72 36 96.871681 that5 1 3 1 5 7 1332 874 92 36 96.738983 PVC5 1 3 1 5 8 1438 875 104 36 96.812698 made5 1 3 1 5 9 1556 875 35 36 96.891403 in5 1 3 1 5 10 1606 876 101 36 96.245911 small5 1 3 1 5 11 1722 884 152 30 96.631462 reactors5 1 3 1 5 12 1890 879 121 36 96.803780 would4 1 3 1 6 0 673 928 1334 53 -1 5 1 3 1 6 1 673 933 61 30 97.005035 not5 1 3 1 6 2 749 928 172 35 96.958717 undercut5 1 3 1 6 3 936 929 97 46 96.906418 prices 1 3 1 6 4 1048 929 180 37 96.984970 increases5 1 3 1 6 5 1244 941 47 26 96.297722 on5 1 3 1 6 6 1306 932 94 36 95.603767 PVC5 1 3 1 6 7 1415 934 126 44 96.693207 grades5 1 3 1 6 8 1558 935 104 35 96.344772 made5 1 3 1 6 9 1677 935 35 36 96.344772 in5 1 3 1 6 10 1729 936 97 45 96.601974 large5 1 3 1 6 11 1840 944 167 29 96.473877 reactors.4 1 3 1 7 0 670 980 79 41 -1 5 1 3 1 7 1 670 980 79 41 87.514328 Id. However, the majority's definition of the product market, in which I have concurred, does not divide the market into submarkets, and the opinion does not share the quite correct emphasis of the B.F. Goodrich opinion on the additional difficulties in colluding in the market defined by the majority. Moreover, the majority dismisses the ability of the small reactors to have an impact on the prices of PVC produced in large reactors, because small reactors are owned by the same manufacturers who produce PVC in large reactors. Such manufacturers, the argument goes, would have no incentive to undercut price agreements on PVC produced in large reactors. This approach does not take into sufficient account the question of whether companies, who own different proportions of small (high cost) and large (low cost) reactor capacity, would find it easy to reach a collusive agreement, and the fact that the variations undermine collusion. Such differences increase the number of variables that must be agreed upon, and are available as a source of cheating. C. Transportation Cost Differentials In finding that mass and suspension PVC is relatively4 1 5 1 2 0 658 2198 1336 52 -1 5 1 5 1 2 1 658 2198 316 45 76.412552 heterogeneous, the Commission in B.F. Goodrich also pointed to transportation cost differences. The Commission noted that, while several manufacturers operate plants in the Gulf Coast area, others are in5 1 5 1 5 3 829 2374 131 46 96.195908 widely5 1 5 1 5 4 991 2376 173 35 96.145386 scattered5 1 5 1 5 5 1193 2376 207 36 0.000000 locations. 110 FTC at 317. While acknowledging that mass and suspension PVC is generally5 1 5 1 6 9 1850 2438 80 35 96.582497 sold5 1 5 1 6 10 1945 2449 47 24 96.425522 on4 1 5 1 7 0 655 2491 1337 47 -1 5 1 5 1 7 1 655 2501 19 26 96.925003 a5 1 5 1 7 2 691 2491 184 36 96.638847 delivered5 1 5 1 7 3 891 2491 98 47 97.010620 prices 1 5 1 7 4 1006 2491 127 43 95.659164 basis, the Commission concluded that it was not clear whether that price was uniform throughout the geographic market, and that any lack of uniformity would complicate5 1 5 1 9 10 1839 2614 59 36 96.960030 thes 1 5 1 9 11 1913 2615 78 35 96.625717 task2 1 6 0 0 0 652 2703 595 15 -1 3 1 6 1 0 0 652 2703 595 15 -1 4 1 6 1 1 0 652 2703 595 15 -1 5 1 6 1 1 1 652 2703 595 15 95.000000 2 1 7 0 0 0 652 2740 1339 99 -1 3 1 7 1 0 0 652 2740 1339 99 -1 4 1 7 1 1 0 731 2740 1260 57 -1 5 1 7 1 1 1 731 2740 21 21 31.889938 |5 1 7 1 1 2 765 2753 73 29 88.975319 Likes 1 7 1 1 3 849 2754 47 29 96.992516 thes 1 7 1 1 4 908 2753 135 39 96.608269 majority5 1 7 1 1 5 1054 2755 77 33 96.690216 here,5 1 7 1 1 6 1144 2755 47 29 96.687973 thes 1 7 1 1 7 1202 2755 202 30 96.645050 Commissions 1 7 1 1 8 1416 2756 28 29 92.896278 in5 1 7 1 1 9 1456 2757 66 28 89.692139 B.F.5 1 7 1 1 10 1536 2757 149 29 96.789085 Goodrich5 1 7 1 1 11 1698 2758 233 39 96.757767 acknowledged5 1 7 1 1 12 1943 2759 48 29 97.016647 thea 1 7 1 2 0 652 2801 741 38 -1 5 1 7 1 2 1 652 2801 83 29 96.587570 trends 1 7 1 2 2 748 2802 112 29 96.796791 towards 1 7 1 2 3 874 2801 79 38 96.881439 large5 1 7 1 2 4 966 2808 137 24 96.140434 reactors.5 1 7 1 2 5 1132 2803 55 29 96.499985 1105 1 7 1 2 6 1199 2803 75 30 96.487450 FTC5 1 7 1 2 7 1286 2809 27 24 96.595909 at5 1 7 1 2 8 1326 2803 67 30 95.920197 321. OCCIDENTAL PETROLEUM CORPORATION, ETAL. 1287 1010 Statement of developing a single consensus price, particularly given the fact that PVC plants are scattered all over the country." Jd. at 317 n.152, 322. The majority determines, based on the record in this case, that PVC is sold5 1 3 2 2 4 841 794 45 25 95.055908 on5 1 3 2 2 5 911 794 19 25 96.626404 a5 1 3 2 2 6 954 782 157 36 96.537460 uniforms 1 3 2 2 7 1134 781 182 37 96.641594 delivered5 1 3 2 2 8 1339 780 97 46 96.829536 prices 1 3 2 2 9 1459 779 97 36 96.977592 basis5 1 3 2 2 10 1580 777 217 46 96.709602 throughout5 1 3 2 2 11 1820 776 59 36 96.725212 thea 1 3 2 3 0 541 837 1338 50 -1 5 1 3 2 3 1 541 843 134 36 95.976143 United5 1 3 2 3 2 693 844 126 38 97.009346 States,5 1 3 2 3 3 836 842 140 45 96.793770 usually5 1 3 2 3 4 993 840 85 36 96.968750 with5 1 3 2 3 5 1094 851 20 24 96.993347 a5 1 3 2 3 6 1129 846 72 29 96.933731 two5 1 3 2 3 7 1216 845 81 29 96.453812 cents 1 3 2 3 8 1312 837 177 48 95.947823 premiums 1 3 2 3 9 1503 837 58 35 95.947823 for5 1 3 2 3 10 1574 842 199 29 96.177933 customers5 1 3 2 3 11 1790 840 89 30 96.446594 west4 1 3 2 4 0 541 893 1337 51 -1 5 1 3 2 4 1 541 901 43 36 96.386993 of5 1 3 2 4 2 598 902 59 34 96.861206 thes 1 3 2 4 3 673 899 188 42 77.016640 Rockies,”5 1 3 2 4 4 881 899 69 45 95.830803 slips 1 3 2 4 5 967 909 57 35 96.708878 op.5 1 3 2 4 6 1043 904 34 29 96.498039 at5 1 3 2 4 7 1092 898 60 40 96.498039 43;5 1 3 2 4 8 1170 897 73 36 96.198166 that5 1 3 2 4 9 1258 895 273 47 96.198166 transportation5 1 3 2 4 10 1549 893 217 36 96.979797 differences5 1 3 2 4 11 1784 903 58 24 96.833588 ares 1 3 2 4 12 1860 902 18 25 96.833588 a4 1 3 2 5 0 543 951 1336 54 -1 5 1 3 2 5 1 543 959 104 37 93.507645 small5 1 3 2 5 2 669 965 76 40 96.902420 parts 1 3 2 5 3 766 958 42 36 96.902420 of5 1 3 2 5 4 826 957 59 36 96.765701 thes 1 3 2 5 5 907 956 129 46 96.524811 selling5 1 3 2 5 6 1057 955 110 47 96.524811 price;5 1 3 2 5 7 1192 955 71 35 96.987526 that5 1 3 2 5 8 1285 955 58 35 96.966553 thes 1 3 2 5 9 1365 953 192 37 97.005966 locational5 1 3 2 5 10 1580 951 217 36 96.724464 differences5 1 3 2 5 11 1821 961 58 25 96.902069 area 1 3 2 6 0 541 1010 1339 53 -1 5 1 3 2 6 1 541 1016 262 47 96.688507 insignificant;5 1 3 2 6 2 820 1016 68 35 96.756836 ands 1 3 2 6 3 903 1015 195 36 96.350990 concludes5 1 3 2 6 4 1114 1014 73 35 96.720108 that5 1 3 2 6 5 1201 1024 69 35 96.988892 any5 1 3 2 6 6 1286 1013 88 35 96.972816 such5 1 3 2 6 7 1388 1011 230 41 96.771072 differences,5 1 3 2 6 8 1634 1016 36 30 96.998299 to5 1 3 2 6 9 1686 1010 59 35 96.280670 thes 1 3 2 6 10 1759 1015 121 29 96.569061 extent4 1 3 2 7 0 541 1067 1338 54 -1 5 1 3 2 7 1 541 1076 72 35 96.723534 that5 1 3 2 7 2 625 1076 82 45 96.793022 they5 1 3 2 7 3 721 1075 100 40 93.914948 exist,5 1 3 2 7 4 838 1074 75 36 68.361053 are not sufficient to complicate collusion and thereby to decrease the likelihood of anticompetitive effects stemming from this acquisition." Jd. at 43-45. I disagree. Transportation costs can make it harder for producers in an industry to reach and police a collusive uniform delivered price agreement, whenever those costs are significant, and plants are widely spread geographically so that the cost of servicing a particular customer location will vary from producer to producer. Differences in transportation costs make it harder to reach a consensus on prices because plants that have relatively higher transportation costs will seek to have a higher collusive price than plants with lower transportation costs. Differences in transportation costs make it harder to police a collusive price agreement, because each plant will have an incentive to cheat on the agreement to obtain customers closest to its own location.

The majority acknowledges that shipment costs vary, depending on the location of the plant and the customer, but argues that transportation costs are relatively small and the effects are relatively insignificant. However, the evidence cited by the majority suggests to me, as similar evidence did to the B.F. Goodrich Commission, that such costs are significant, vary widely, and may have a significant impact on the ability to collude. Slip op. at 43-44 n.98 (transportation costs range from 2.7 percent to 12 percent). Transportation costs are a significant variable cost; participants in the market do indeed vary their transportation costs by choosing a particular plant location to serve a given customer, a custom that could facilitate cheating on a price agreement. The majority denies that the plant locations are consequential in terms of defeating collusion. However, the plants discussed, See slip op. at 44-45, have not changed location since the Commission's Statement 115 F.T.C.

decision in B.F. Goodrich; they are the same plants with the same relative differences in transportation costs.’* Similarly, the majority's argument that PVC transportation cost differences may be offset by VCM transportation cost differences was previously rejected by the Commission in Goodrich because VCM5 1 3 1 5 6 1475 846 81 35 96.099411 may5 1 3 1 5 7 1571 835 172 45 96.810349 originates 1 3 1 5 8 1757 834 36 36 92.967773 in5 1 3 1 5 9 1807 845 20 24 92.967773 a5 1 3 1 5 10 1841 833 156 36 96.150658 location4 1 3 1 6 0 659 891 1337 44 -1 5 1 3 1 6 1 659 898 167 37 96.321053 different5 1 3 1 6 2 841 897 68 36 96.321053 ands 1 3 1 6 3 923 896 130 37 96.690788 distant5 1 3 1 6 4 1066 896 94 35 96.892776 from5 1 3 1 6 5 1174 896 58 35 96.902817 thes 1 3 1 6 6 1246 894 212 41 96.827644 destinations 1 3 1 6 7 1473 893 41 37 97.003067 of5 1 3 1 6 8 1525 893 58 36 96.609306 thes 1 3 1 6 9 1597 893 93 36 96.485695 PVC5 1 3 1 6 10 1705 893 74 35 95.859505 into5 1 3 1 6 11 1795 892 117 35 96.762833 which5 1 3 1 6 12 1927 891 26 36 96.788712 it5 1 3 1 6 13 1966 891 30 36 95.497444 is4 1 3 1 7 0 659 950 1337 55 -1 5 1 3 1 7 1 659 957 219 36 86.499260 converted. 110 FTC 322 n.182. The record in this case, in my view, does not support changing the basic finding in B.F. Goodrich that transportation cost differences do make collusion more difficult. D. Demand Elasticity Differences The Commission concluded in B.F. Goodrich that the likelihood4 1 5 1 2 0 661 1346 1340 55 -1 5 1 5 1 2 1 661 1356 42 36 96.847458 of5 1 5 1 2 2 722 1354 308 47 96.917046 anticompetitive5 1 5 1 2 3 1051 1353 130 36 92.247948 effects5 1 5 1 2 4 1206 1382 5 6 79.855919 .5 1 5 1 2 5 1237 1381 6 6 79.855919 .5 1 5 1 2 6 1270 1381 5 5 88.316086 .5 1 5 1 2 7 1299 1352 178 34 96.953423 increases5 1 5 1 2 8 1500 1361 37 25 96.953423 as5 1 5 1 2 9 1560 1350 58 35 96.966698 thes 1 5 1 2 10 1639 1349 98 46 96.952515 prices 1 5 1 2 11 1759 1347 177 46 96.916283 elasticity5 1 5 1 2 12 1960 1346 41 37 96.979393 of4 1 5 1 3 0 661 1407 1336 52 -1 5 1 5 1 3 1 661 1415 153 37 96.693474 demands 1 5 1 3 2 828 1414 56 35 96.483330 for5 1 5 1 3 3 897 1414 58 35 96.781540 thes 1 5 1 3 4 970 1413 148 46 96.908501 products 1 5 1 3 5 1132 1418 34 29 95.439323 at5 1 5 1 3 6 1180 1412 96 35 95.439323 issues 1 5 1 3 7 1291 1410 187 36 90.306686 declines. 110 FTC at 318 (footnote omitted). Firms find it easier to collude and the incentives to collude increase. Id. The opinion acknowledges that the price elasticity of demand for bulk and suspension PVC is relatively low, but notes that an5 1 5 1 7 2 750 1649 109 35 96.559647 efforts 1 5 1 7 3 883 1659 46 24 96.922676 on5 1 5 1 7 4 952 1647 59 35 96.447464 thes 1 5 1 7 5 1034 1652 76 40 96.805862 parts 1 5 1 7 6 1134 1645 41 35 96.394920 of5 1 5 1 7 7 1195 1644 94 36 96.847191 PVC5 1 5 1 7 8 1312 1644 192 45 96.494202 producers5 1 5 1 7 9 1529 1649 35 28 96.991600 to5 1 5 1 7 10 1588 1642 92 35 96.494781 raises 1 5 1 7 11 1703 1641 94 35 96.636612 PVC5 1 5 1 7 12 1821 1640 116 46 96.806549 prices5 1 5 1 7 13 1962 1646 35 28 96.386978 to4 1 5 1 8 0 661 1697 1336 55 -1 5 1 5 1 8 1 661 1705 340 47 90.734772 supracompetitive5 1 5 1 8 2 1018 1704 113 34 96.777260 levels5 1 5 1 8 3 1150 1713 82 34 97.010941 may5 1 5 1 8 4 1249 1702 45 34 97.005882 be5 1 5 1 8 5 1311 1701 226 35 96.902420 constrained5 1 5 1 8 6 1555 1707 35 27 96.798943 to5 1 5 1 8 7 1609 1710 100 24 96.326073 some5 1 5 1 8 8 1727 1699 129 44 96.957077 degrees 1 5 1 8 9 1875 1698 46 44 97.016853 by5 1 5 1 8 10 1940 1697 57 34 96.957512 thea 1 5 1 9 0 661 1755 1336 56 -1 5 1 5 1 9 1 661 1765 127 46 97.001442 higher5 1 5 1 9 2 803 1764 98 45 96.888260 prices 1 5 1 9 3 919 1762 177 45 96.901199 elasticity5 1 5 1 9 4 1114 1761 42 35 96.967224 of5 1 5 1 9 5 1170 1760 153 35 96.025467 demands 1 5 1 9 6 1340 1759 57 35 96.396484 for5 1 5 1 9 7 1413 1770 107 33 96.521057 many5 1 5 1 9 8 1537 1758 93 34 96.521057 PVC5 1 5 1 9 9 1648 1758 69 34 96.834984 ends 1 5 1 9 10 1736 1767 63 24 96.930992 uses 1 5 1 9 11 1816 1755 181 46 96.909500 products,4 1 5 1 10 0 662 1813 1336 53 -1 5 1 5 1 10 1 662 1823 69 35 96.828102 ands 1 5 1 10 2 751 1822 105 35 96.522804 made5 1 5 1 10 3 875 1831 99 35 96.906799 more5 1 5 1 10 4 994 1819 157 35 96.937347 difficult5 1 5 1 10 5 1169 1818 48 45 96.945816 by5 1 5 1 10 6 1237 1817 191 35 96.859802 variations5 1 5 1 10 7 1449 1816 35 35 96.987869 in5 1 5 1 10 8 1503 1815 97 46 96.987869 prices 1 5 1 10 9 1619 1814 177 45 96.829330 elasticity5 1 5 1 10 10 1817 1813 94 35 95.672287 from5 1 5 1 10 11 1930 1823 68 25 95.672287 one4 1 5 1 11 0 661 1871 1339 54 -1 5 1 5 1 11 1 661 1881 93 35 95.907051 PVC5 1 5 1 11 2 768 1880 68 34 95.907051 ends 1 5 1 11 3 850 1879 148 46 94.864227 products 1 5 1 11 4 1011 1885 36 28 94.864227 to5 1 5 1 11 5 1061 1876 174 36 93.289864 another. Jd. at 339 (footnote omitted). In other words, different types and grades of PVC face different elasticities of demand. Jd. at 319. Because the makers of PVC produce different mixes and would face different losses of sales from a collusive price increase, reaching a collusive price increase would be more difficult. The majority points to new evidence in the record, showing, in its view, that the elasticity of demand is lower than the Commission ? The majority also suggests that large reactor plants tend to be located near one another, while small reactor plants are more geographically dispersed, but that the small reactor specialty homopolymer plants make products that do not directly compete with suspension PVC homopolymer made in large reactor plants. Slip op. at 44-45, As a result, it is effectively argued, only transportation differences between large reactor plants, which are primarily located on the Gulf Coast, are important. As in the discussion of production cost differences supra, I find this line of argument inconsistent with the definition of the market to include the production and sale of all mass and suspension PVC homopolymer. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1289 1010 Statement believed in B.F. Goodrich. The opinion addresses pipe grade resins,” bottle applications, and calendaring applications.'* Slip op. at 48-50, However, it does not discuss other types of resin, and does not address the issue raised by the Commission in B.F. Goodrich of whether the elasticity of demand for PVC sold for different uses is different, even if the elasticity is relatively low throughout the industry. This difference in elasticity is important to firms attempting to reach a collusive price agreement, because it means that the firms will have different incentives with respect to the proposed price increases. Those firms that produce and sell relatively more PVC for the end uses where the demand is relatively elastic will want a collusive price level that is lower than firms that produce and sell relatively more PVC for end uses where the demand is relatively inelastic. I do not believe the evidence in this record sufficient to overturn the Commission's conclusion in B.F. Goodrich that varying elasticities of demand contribute to undermining the ability to collude in this industry.

3 The majority notes that, over time, the price of pipe grade resins rose, and yet demand stayed strong or increased, and concludes that demand must be very inelastic. Slip op. at 48-49. I do not believe that such anecdotal evidence is sufficient to conclude that the demand for pipe grade resins is necessarily inelastic. As the price of pipe grade resins rose over time, other changing economic variables may have induced an increase in the demand for pipe grade resin. In assessing the elasticity of demand for the various types of PVC resins, it is unclear whether all other variables have been held constant in the anecdotal evidence. '4 The majority notes that specialty PVC used for calendaring applications sells for more than general purpose PVC. The opinion concludes that [t}he5 1 6 1 2 13 1772 2283 102 39 96.985977 ability4 1 6 1 3 0 537 2333 1337 41 -1 5 1 6 1 3 1 537 2342 30 24 96.782410 to5 1 6 1 3 2 581 2337 101 29 96.874107 obtains 1 6 1 3 3 697 2346 15 20 96.279167 a5 1 6 1 3 4 726 2336 81 38 96.279167 prices 1 6 1 3 5 820 2336 147 38 96.464737 premiums 1 6 1 3 6 982 2335 46 30 96.936798 for5 1 6 1 3 7 1040 2334 78 31 96.834694 PVC5 1 6 1 3 8 1133 2334 65 31 96.288422 sold5 1 6 1 3 9 1213 2334 29 30 96.616722 in5 1 6 1 3 10 1257 2335 47 29 96.933441 thes 1 6 1 3 11 1318 2334 190 37 96.767662 calendaring5 1 6 1 3 12 1523 2339 134 32 96.810524 segments 1 6 1 3 13 1672 2333 24 29 96.661743 is5 1 6 1 3 14 1711 2333 163 30 96.995224 consistent4 1 6 1 4 0 537 2381 1337 40 -1 5 1 6 1 4 1 537 2385 70 28 96.839203 with5 1 6 1 4 2 619 2385 47 28 96.717758 thes 1 6 1 4 3 678 2383 173 30 96.605141 conclusions 1 6 1 4 4 864 2384 59 29 96.326576 that5 1 6 1 4 5 934 2384 47 28 96.856522 thes 1 6 1 4 6 993 2383 79 38 97.001526 prices 1 6 1 4 7 1084 2382 143 37 96.816597 elasticity5 1 6 1 4 8 1240 2382 35 29 96.909874 of5 1 6 1 4 9 1283 2382 125 29 96.405777 demands 1 6 1 4 10 1421 2382 46 29 96.956360 for5 1 6 1 4 11 1477 2382 78 28 96.682732 PVC5 1 6 1 4 12 1567 2382 24 28 97.004898 is5 1 6 1 4 13 1603 2382 84 28 93.605240 low. Slip op. at 50. Since the cost of producing speciality PVC for calendaring is higher that the cost of producing general purpose PVC, it would be reasonable to expect the price of speciality PVC for calendaring to exceed the price of general purpose PVC. However, this does not address the elasticity of demand for either speciality PVC for calendaring or general purpose PVC. The elasticity of demand measures the change in quantity demanded in response to a change in the price. The higher price for specialty PVC for calendaring can be consistent with either an elastic or inelastic demand for speciality PVC for calendaring. Final Order LIS F.T.C.

E. Conclusion While, as the majority points out, the Commission in B.F. Goodrich also noted some elements of homogeneity in this market, the Commission's purpose was to suggest that certain aspects of heterogeneity, that would complicate the life of potential colluders, also exist. While each of these elements might not, in and of itself, defeat a collusion story, all of these factors must be viewed as a whole. Irrespective of evidence cited by the majority, I believe that sufficient doubt still exists about prospects for potential collusion due to a variety of factors, in light of the marginal structure of the post-merger market. Accordingly, with respect to the majority's finding of a violation in this market, and its ordered divestiture of the Pasadena, Texas plant, I dissent.

FINAL ORDER This matter having been heard on the appeal of the respondents from the initial decision and on briefs and oral argument in support of and in opposition to the appeal, for the reasons stated in the attached opinion, the Commission has determined to deny the appeal. Accordingly, It is ordered, That the following order be and the same hereby is entered:

It is ordered, That the following definitions apply: A. Occidental means Occidental Petroleum Corporation and Occidental Chemical Corporation, two corporations organized under the laws of California with their principal places of business in Los Angeles, California, and their directors, officers, agents and employees and their subsidiaries, divisions, affiliates, successors and assigns;

B. Tenneco means Tenneco, Inc., and Tenneco Polymers, Inc., two corporations organized under the laws of Delaware with their OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1291 1010 Final Order principal places of business in Houston, Texas, and their directors, officers, agents and employees and their subsidiaries, divisions, affiliates, successors and assigns;

C. Acquired5 1 3 2 1 3 935 776 94 35 96.579308 PVC5 1 3 2 1 4 1045 776 135 34 94.148209 assets means the suspension PVC homopolymer manufacturing facility located at Pasadena, Texas, the suspension PVC and dispersion PVC manufacturing facility located at Burlington, New Jersey, and all assets, titles, properties, interests, rights and privileges, tangible and intangible, related to the PVC business that were acquired by Occidental from Tenneco on or about April 30, 1986, together with all improvements thereto; D. PVC means any vinyl chloride homopolymer with the repeating unit CH2=CHC1 and any copolymer of viny! chloride with varying amounts of other chemicals, including vinyl acetate, ethylene, propylene, vinylidene chloride or acrylates; E. Mass5 1 3 4 1 3 830 1416 108 36 96.233643 PVC means PVC produced from viny] chloride by the mass (also referred to as bulk) process;

F, Suspension5 1 3 5 1 3 954 1533 95 34 96.424980 PVC5 1 3 5 1 4 1062 1532 288 45 95.627380 homopolymer means PVC homopolymer produced from vinyl chloride by the suspension process; G. Suspension5 1 3 6 1 3 955 1648 93 35 96.637192 PVC5 1 3 6 1 4 1060 1648 223 44 95.873329 copolymer means any copolymer of vinyl chloride and vinyl acetate produced by the suspension process and containing more than 50 percent by weight of viny] chloride; H. “Dispersion PVC” means PVC produced by the emulsion or dispersion process.

Il.

It is ordered, That within twelve (12) months from the date this order, becomes final, Occidental shall divest, absolutely and in good faith, at no minimum price, the acquired PVC assets. The purpose of the divestiture is to establish the acquired PVC assets, either singly or separately, as a viable competitor in PVC, by ensuring the continuation of the assets as ongoing, viable enterprises in the PVC industry, and to remedy the lessening of competition resulting from the acquisition of the acquired PVC assets by Occidental. The divestiture(s) shall be made only to an acquirer or acquirers and only in a manner that receives the prior approval of the Federal Trade Commission.

Final Order 115 F.T.C.

Pending divestiture, Occidental shall take all measures necessary to maintain the acquired PVC assets in their present condition and to prevent any deterioration, except for normal wear and tear, of any part of the acquired PVC assets, so as not to impair the present operating viability and market value of the acquired PVC assets. Il.

It is further ordered, That at the time of the divestiture required by this order, Occidental shall provide to the acquirer or acquirers of the acquired PVC assets, on a nonexclusive basis, all PVC technology (including patent licenses and know-how) used by Occidental or developed by Occidental for use in connection with the acquired PVC assets; and For a period of one (1) year following the divestiture required by this order, Occidental shall provide the acquirer or acquirers of the acquired PVC assets, if the acquirer(s) so requests, such additional know-how as may reasonably be required to enable the acquirer(s) to manufacture and sell PVC. Occidental shall charge the acquirer(s) 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, Occidental shall assign to the acquirer(s) of the acquired PVC assets all supply agreements for VCM and other feedstocks for the manufacture of PVC, all PVC sales, toll or exchange agreements, and all PVC customer records and files relating to PVC produced in (or supplied by Occidental at any time since May 1, 1986, from) the acquired PVC assets. V.

It is further ordered, That if Occidental has not divested the acquired PVC assets 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. OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1293 1010 Final Order 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 Commission from seeking civil penalties and other relief available to it, including a court-appointed trustee, for any failure by Occidental 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 acquired PVC assets. 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 acquired PVC assets, and Occidental shall develop such financial or other information relevant to the acquired PVC assets as the trustee may reasonably request. Occidental shall cooperate with the trustee and shall take no action to interfere with or impede the trustee's accomplishment of the divestiture. Any delays in divestiture caused by Occidental 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's 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 and at the cost and expense of Occidental 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 Occidental, 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 Final Order 115 F.T.C.

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 the trustee's services, all remaining monies shall be paid to Occidental, and the trustee's power shall be terminated. The trustee's compensation shall be based at least in significant part on a commission arrangement contingent on the trustee divesting the acquired PVC assets. E. Occidental 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 willful or wanton acts or bad faith of the trustee. F, Promptly upon appointment of the trustee and subject to the approval of the Commission, Occidental shall, subject to the Federal Trade Commission's prior approval and consistent with the 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 acquired PVC assets.

J. The trustee shall report in writing to Occidental 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 this order becomes final, Occidental 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 PVC located in OCCIDENTAL PETROLEUM CORPORATION, ET AL. 1295 1010 Final Order the United States without the prior approval of the Federal Trade Commission.

Vil.

It is further ordered, That Occidental shall, within sixty (60) days after the date this order becomes final and every sixty (60) days thereafter until it has fully complied with 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 paragraph. 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 acquired PVC assets, including the name and address of all persons contacted, copies of all written communications to and from such persons and all internal memoranda, reports and recommendations concerning divestiture; and Occidental shall submit such further written reports of its compliance as the staff of the Commission may from time to time request in writing.

VII.

It is further ordered, That Occidental, 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: A. Reasonable access during the office hours of Occidental, 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 Occidental that relate to any matter contained in this order; and B. Subject to the reasonable convenience of Occidental, an opportunity to interview officers or employees of Occidental, who may have counsel present, regarding such matters. Final Order 115 F.T.C.

IX.

It is further ordered, That Occidental shall notify the 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 subsidiaries or any other change in the corporation that may affect compliance with the obligations arising out of this order. Commissioner Owen dissenting,’ and Commissioner Starek and Commissioner Yao not participating.

1 Commissioner Owen concurs with the result reached in the Opinion of the Commission with respect to the markets for suspension PVC copolymer and dispersion PVC and with the relief ordered with respect to those two markets, including the divestiture of the Burlington, New Jersey plant. RESPONSES TO PETITIONS TO QUASH 1297 Re: Petition of Brana Publishing, Inc. to Limit or Quash Civil Investigative Demand; Petition of Art Source International, Inc. to Limit or Quash Civil Investigative Demand; and Petition of Brana Enterprises, Inc. to Limit or Quash Civil Investigative Demand, File No. 872-3209.

March 26, 1992 Dear Mr. Fox:

This is to advise you of the Federal Trade Commission's ruling on the Petitions to Limit or Quash the Civil Investigative Demands for Documentary Material (collectively Petitions), which you filed on behalf of your clients Art Source International, Inc. ("Art Source"), Brana Publishing, Inc. ("Brana Publishing"), and Brana Enterprises, Inc. ("Brana Enterprises") (collectively Petitioners), in the abovereferenced matter. Because the petitions filed by Art Source, Brana Publishing, and Brana Enterprises raised the same issues, the Commission has responded with this single ruling covering all three petitions.

The ruling set forth herein has been made by Commissioner Deborah Owen pursuant to authority delegated under Commission Rule of Practice 2.7(d)(4). Pursuant to Rule 2.7(f), within three days after service of this decision, Petitioners may file with the Secretary of the Commission a request for full Commission review. Whatever briefs or other material the Petitioners wish the Commission to consider in reviewing this decision must accompany any such request in order to be considered as timely filed. The timely filing of such a request shall not stay the return date in this ruling, unless the Commission otherwise specifies.

' The oral presentation on the petitions filed by Brana Publishing and Art Source was held on February 25, 1992. At that time, counsel for Petitioners informed Commissioner Owen that he had also been retained to represent Brana Enterprises, which did not receive its C.1.D. until February 21, 1992. Counsel requested that the arguments he made at the oral presentation be treated as also made by Brana Enterprises. The arguments will be so treated. Commissioner Owen has carefully reviewed the Petitions and accompanying exhibits. She has also considered the oral presentation on the Petitions conducted on February 25, 1992. The Petitions are denied in part, and granted in part, for the reasons stated below. Petitioners’ obligations under the C.I.D.s are modified as set forth below.

I. Background On October 24, 1991, the Federal Trade Commission approved a Resolution Directing Use of Compulsory Process, authorizing the use of compulsory process in an investigation to determine: whether unnamed persons, partnerships, or corporations, engaged in the sale, advertising, and marketing of fine art prints, may be engaged in unfair or deceptive acts or practices in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, as amended, including but not limited to, misrepresenting the origins, authorship, edition size, or value of fine art prints. On January 28, as part of this investigation, civil investigative demands ("C.I.D.s") were issued to Art Source, Brana Enterprises, and Brana Publishing, firms engaged in the sale of fine art at charity and public auctions. The C.I.D.s were subsequently served on Petitioners.

Beginning on or about February 10, 1992, counsel for Petitioners and the staff of the Commission entered into negotiations concerning the C.l.D.s . Counsel for Petitioners expressed concerns over the scope, breadth, and alleged indefiniteness of the specifications in the C.I.D.s. He also expressed concerns over the protection of confidential business information contained in the documents. Counsel for Petitioners and the staff of the Commission were unable to resolve any of the issues that were raised. Counsel for Petitioners filed these Petitions.

RESPONSES TO PETITIONS TO QUASH 1299 II. Specific Objections A. Petitioners assert that the C.I.D.s seek information beyond the scope of the resolution authorizing compulsory process and asa result are unreasonable in terms of both relevance and burden.

Petitioners note that the Federal Trade Commission is limited to seeking information reasonably relevant to the specific inquiry the Commission has authorized, as5 1 5 1 3 5 1243 1131 52 30 96.932167 sets 1 5 1 3 6 1323 1124 93 35 96.359680 forth5 1 5 1 3 7 1444 1123 37 35 96.811661 in5 1 5 1 3 8 1509 1123 59 35 96.479752 thes 1 5 1 3 9 1597 1119 275 38 93.700760 Commission's4 1 5 1 4 0 535 1178 1337 55 -1 5 1 5 1 4 1 535 1189 231 37 81.576157 resolution.”5 1 5 1 4 2 798 1189 71 35 93.111626 Pet.5 1 5 1 4 3 887 1198 33 35 93.111626 p.5 1 5 1 4 4 938 1180 37 43 85.799896 5?5 1 5 1 4 5 992 1185 165 46 95.634933 (quoting5 1 5 1 4 6 1172 1184 92 35 93.281342 FTC5 1 5 1 4 7 1279 1195 27 23 93.012497 v.5 1 5 1 4 8 1328 1183 147 38 93.281273 Texaco,5 1 5 1 4 9 1494 1181 86 41 92.083809 Inc.,5 1 5 1 4 10 1597 1180 70 36 96.933304 5555 1 5 1 4 11 1685 1178 87 37 96.001862 F.2d5 1 5 1 4 12 1790 1178 82 40 96.693260 862,4 1 5 1 5 0 538 1236 1336 55 -1 5 1 5 1 5 1 538 1249 70 35 96.403343 8745 1 5 1 5 2 622 1248 104 43 94.095627 (D.C.5 1 5 1 5 3 742 1247 70 35 93.146889 Cir.5 1 5 1 5 4 832 1245 170 43 91.938950 1977)(en5 1 5 1 5 5 1015 1244 118 42 96.592293 banc),5 1 5 1 5 6 1148 1250 82 28 96.505035 cert.5 1 5 1 5 7 1248 1241 140 40 96.976974 denied,5 1 5 1 5 8 1402 1240 67 35 96.803017 4315 1 5 1 5 9 1486 1239 82 35 57.793926 U.S.5 1 5 1 5 10 1582 1238 73 36 95.785095 9745 1 5 1 5 11 1669 1237 139 43 96.582031 (1977).5 1 5 1 5 12 1834 1236 40 35 96.769768 In4 1 5 1 6 0 538 1295 1336 52 -1 5 1 5 1 6 1 538 1307 67 36 96.837860 this5 1 5 1 6 2 641 1316 94 31 96.294136 case,5 1 5 1 6 3 771 1306 58 35 96.890747 thes 1 5 1 6 4 862 1303 210 36 96.244194 Petitioners5 1 5 1 6 5 1107 1307 83 30 96.646584 notes 1 5 1 6 6 1225 1300 72 35 96.537010 that5 1 5 1 6 7 1331 1299 57 36 96.448074 thes 1 5 1 6 8 1422 1296 213 37 96.252251 Resolutions 1 5 1 6 9 1670 1295 110 36 92.228302 limits5 1 5 1 6 10 1816 1295 58 34 92.228302 thea 1 5 1 7 0 537 1353 1336 57 -1 5 1 5 1 7 1 537 1365 255 45 96.965218 investigations 1 5 1 7 2 818 1369 36 29 96.883804 to5 1 5 1 7 3 879 1362 158 35 96.971252 whether5 1 5 1 7 4 1061 1359 180 36 96.260612 unnamed5 1 5 1 7 5 1266 1357 140 36 96.881088 entities5 1 5 1 7 6 1432 1356 163 46 96.995186 engaged5 1 5 1 7 7 1621 1355 36 34 96.931107 in5 1 5 1 7 8 1684 1354 77 35 95.609344 the sale, advertising, and marketing of fine_art_prints" are in violation of Section 5 of the Federal Trade Commission Act. Resolution Directing Use of Compulsory Process (October 24, 1991)(emphasis added). However, the C.I.D.s seek the production of documents pertaining to the sale of artworks related to certain named artists, without regard to whether the artwork was a print. This, Petitioners assert, makes the C.I.D.s impermissible broad. The Petitioners are incorrect in asserting that because the C.I.D.s seek information related to artworks other than fine art prints, they are impermissible broad. The starting point in analyzing the relevance of information called for by a specification to a Commission investigation is recognition that courts give relevance a broad interpretation in enforcing Commission compulsory process. As the United States District Court for the District of Columbia stated, [b]ecause5 1 5 2 8 3 905 2235 59 34 96.991638 thes 1 5 2 8 4 978 2232 91 37 96.341064 needs 1 5 2 8 5 1084 2232 57 35 96.341064 for5 1 5 2 8 6 1155 2229 253 46 96.622261 investigating5 1 5 2 8 7 1424 2227 211 46 96.863289 allegations5 1 5 2 8 8 1651 2226 43 36 96.887878 of5 1 5 2 8 9 1705 2223 174 37 96.657768 unlawful4 1 5 2 9 0 544 2278 1335 62 -1 5 1 5 2 9 1 544 2295 142 45 96.034157 activity5 1 5 2 9 2 700 2295 29 34 96.789879 is5 1 5 2 9 3 744 2304 19 25 96.644478 a5 1 5 2 9 4 777 2291 203 38 96.005447 substantial5 1 5 2 9 5 994 2301 78 30 96.005447 one,5 1 5 2 9 6 1087 2290 57 36 95.917633 thes 1 5 2 9 7 1157 2289 68 36 95.917633 laws 1 5 2 9 8 1238 2287 153 46 96.304710 requires5 1 5 2 9 9 1405 2286 72 35 96.304710 that5 1 5 2 9 10 1489 2291 115 29 96.949326 courts5 1 5 2 9 11 1619 2284 82 45 97.012016 gives 1 5 2 9 12 1714 2278 165 55 96.665054 agencies4 1 5 2 10 0 543 2340 1337 58 -1 5 1 5 2 10 1 543 2355 140 43 96.965393 leeway5 1 5 2 10 2 708 2353 104 34 96.635246 when5 1 5 2 10 3 837 2349 228 46 96.191437 considering5 1 5 2 10 4 1090 2349 189 34 96.661613 relevance5 1 5 2 10 5 1303 2344 232 47 86.733978 objections. Federal Trade Commission v. Invention Submission Corp., 1991-1 Trade Cas. (CCH) J 69,338 (D.D.C. Feb. 14, 1991), appeal pending No. 91-5174 (D.C. Cir. argued March 9, 1992). More particularly, relevance is 2 References to the Petitions are cited as Pet.5 1 7 1 1 10 1403 2669 42 36 81.524643 p. with the appropriate page number. References to the transcript of the oral presentation on the Petitions, held on February 25, 1992, are cited as “Tr. p." with the appropriate page number. measured against the agency's general purpose in gathering the investigative materials as described by the underlying resolution authorizing compulsory process. Federal Trade Commission vy. Texaco Inc., 555 F. 2d 862, 874 (D.C. Cir. 1977)(en banc), cert. denied, 431 U.S. 974 (1977). As the Commission staff pursue this investigation into possible unfair or deceptive acts in the sale, advertising, or marketing of fine art prints, it may be necessary for the staff to gather some incidental information on the sale, advertising or marketing of other types of art for purpose of comparison. Such information can be relevant to this investigation, although one would expect that the focus of the material requested would be on art prints.

The staff has determined that, at this time, it does not need comparative information concerning certain types of artworks not related to fine art prints. During the oral presentation on the Petition, staff indicated that they were willing to limit the C.I.D.s to documents that relate to prints, if agreement were reached on an appropriate definition of the term prints. Tr. p. 13. At that time, counsel for Petitioners and counsel for the Commission seemed reasonably close to reaching agreement on the breadth of artworks to be covered by the C.I.D.s Tr. pp. 13-14. However, despite the urging of Commissioner Owen that both sides continue to negotiate, no agreement on this point has been reached. The Commission therefore feels compelled to define the artworks to be covered by the specifications of the C.I.D.s.

Definition 4 of the C.1.D.s shall be limited to artworks incorporating, in whole or in relevant part, the process of intaglio (¢.g., etchings, engravings, dry points), aquatint, lithography, serigraphy, silkscreen, woodcut, poster printing, or photographic, photomechanical, or photochemical reproduction, or any combination of the above media, by, after, or attributed to one of the seven artists listed in the C.I.D.s, including any reproductions, facsimiles, or composites of images, by or purportedly by the above artists. B. Petitioners assert that the scope of the documents sought by the C.I.D.s is too broad and burdensome, including the request for backup tapes or disks for computer systems. RESPONSES TO PETITIONS TO QUASH 1301 The Petitions assert that because each of the C.I.D.s seeks4 1 3 1 2 0 550 659 1337 51 -1 5 1 3 1 2 1 550 665 166 45 96.192314 virtually5 1 3 1 2 2 751 674 108 35 96.192314 every5 1 3 1 2 3 894 664 193 34 96.452087 documents 1 3 1 2 4 1121 662 118 35 96.452087 which5 1 3 1 2 5 1273 661 36 35 95.422020 in5 1 3 1 2 6 1344 671 68 36 95.422020 any5 1 3 1 2 7 1447 671 79 35 96.807259 ways 1 3 1 2 8 1561 661 100 34 96.204109 bears5 1 3 1 2 9 1696 670 98 35 91.693535 upon5 1 3 1 2 10 1828 659 59 35 91.693535 thea 1 3 1 3 0 550 718 1337 51 -1 5 1 3 1 3 1 550 723 225 46 96.747231 acquisition,5 1 3 1 3 2 792 723 73 35 96.987923 sales 1 3 1 3 3 880 722 67 35 96.997040 ands 1 3 1 3 4 961 721 156 45 96.915436 offerings 1 3 1 3 5 1131 720 56 35 96.911652 for5 1 3 1 3 6 1201 720 84 40 96.953064 sale,5 1 3 1 3 7 1300 719 42 36 96.969147 of5 1 3 1 3 8 1353 720 46 35 95.393135 all5 1 3 1 3 9 1414 719 150 35 96.900246 artwork5 1 3 1 3 10 1579 719 184 35 96.424812 attributed5 1 3 1 3 11 1777 725 37 27 96.403214 to5 1 3 1 3 12 1828 718 59 34 96.985672 thea 1 3 1 4 0 550 776 1339 48 -1 5 1 3 1 4 1 550 782 157 35 96.512794 relevant5 1 3 1 4 2 721 781 113 35 97.004967 artists5 1 3 1 4 3 849 780 140 36 96.817574 created5 1 3 1 4 4 1002 790 40 25 97.007072 or5 1 3 1 4 5 1053 779 164 36 97.007072 received5 1 3 1 4 6 1229 778 48 46 96.525871 by5 1 3 1 4 7 1291 779 58 34 97.007141 thes 1 3 1 4 8 1361 777 190 36 96.696106 Petitioners 1 3 1 4 9 1564 776 124 46 96.477684 during5 1 3 1 4 10 1702 787 20 25 95.737320 a5 1 3 1 4 11 1736 776 53 36 95.737320 six5 1 3 1 4 12 1804 786 85 35 96.786850 year4 1 3 1 5 0 550 835 1336 51 -1 5 1 3 1 5 1 550 840 154 46 86.363106 period, and because a response would require a review of literally4 1 3 1 6 0 550 893 1337 46 -1 5 1 3 1 6 1 550 899 181 34 96.532364 hundreds5 1 3 1 6 2 751 898 43 35 95.670204 of5 1 3 1 6 3 811 897 113 42 94.690941 files, each C.I.D. is overbroad and burdensome. In reviewing such claims of burden, it is instructive to restate the general rules that govern their consideration. First, thes 1 3 1 8 9 1693 1010 138 36 97.010025 burdens 1 3 1 8 10 1848 1009 43 36 96.972328 of4 1 3 1 9 0 551 1068 1336 51 -1 5 1 3 1 9 1 551 1073 167 46 96.902878 showings 1 3 1 9 2 733 1073 74 36 96.628342 that5 1 3 1 9 3 823 1084 43 24 96.765068 an5 1 3 1 9 4 883 1082 136 37 96.655907 agency5 1 3 1 9 5 1037 1072 184 45 96.114563 subpoenas 1 3 1 9 6 1236 1070 30 36 96.963715 is5 1 3 1 9 7 1282 1070 259 36 96.596153 unreasonable5 1 3 1 9 8 1556 1069 154 35 96.503136 remains5 1 3 1 9 9 1727 1068 85 36 96.696472 with5 1 3 1 9 10 1828 1068 59 36 96.891136 thea 1 3 1 10 0 550 1127 1335 50 -1 5 1 3 1 10 1 550 1132 244 45 94.103378 respondent. FTC v. Rockefeller, 591 F. 2d 182, 190 (2d Cir. 1979), quoting SEC v. Brigadoon Scotch Distributing Co., 480 F. 2d 1047, 1056 (2d Cir. 1973), cert. denied, 415 U.S. 915 (1974); accord FTC v. Texaco, Inc., 555 F. 2d. 862, 882 (D.C. Cir. 1977)(en banc). In Brigadoon, the Second Circuit added that where,5 1 3 1 14 8 1521 1370 38 25 96.881950 as5 1 3 1 14 9 1572 1359 92 41 96.407127 here,5 1 3 1 14 10 1678 1359 58 35 96.579330 thes 1 3 1 14 11 1750 1369 135 35 96.527611 agency4 1 3 1 15 0 550 1417 1336 49 -1 5 1 3 1 15 1 550 1421 138 45 96.857048 inquiry5 1 3 1 15 2 703 1421 31 34 96.857048 is5 1 3 1 15 3 750 1420 203 35 97.004402 authorized5 1 3 1 15 4 968 1419 47 46 96.636955 by5 1 3 1 15 5 1030 1419 68 35 96.324173 laws 1 3 1 15 6 1114 1419 67 34 96.982368 ands 1 3 1 15 7 1195 1419 58 34 96.937218 thes 1 3 1 15 8 1267 1418 177 35 96.143753 materials5 1 3 1 15 9 1460 1418 129 45 96.583504 sought5 1 3 1 15 10 1604 1428 57 24 96.436035 ares 1 3 1 15 11 1676 1417 159 35 96.361794 relevant5 1 3 1 15 12 1849 1422 37 30 96.988800 to4 1 3 1 16 0 549 1474 1191 50 -1 5 1 3 1 16 1 549 1479 58 34 96.976646 thes 1 3 1 16 2 622 1478 152 46 96.805092 inquiry,5 1 3 1 16 3 791 1478 73 35 96.711838 that5 1 3 1 16 4 878 1477 135 35 96.827637 burdens 1 3 1 16 5 1028 1477 30 35 96.880905 is5 1 3 1 16 6 1074 1483 61 29 96.594017 not5 1 3 1 16 7 1150 1476 112 45 96.247261 easily5 1 3 1 16 8 1277 1476 103 35 90.566231 met. 480 F.2d at 1056.

Second, as the court stated in Texaco, [wJe5 1 3 2 1 9 1516 1533 207 46 95.883911 emphasizes 1 3 2 1 10 1739 1533 72 36 96.871956 that5 1 3 2 1 11 1826 1533 60 36 96.854309 thea 1 3 2 2 0 549 1592 1338 49 -1 5 1 3 2 2 1 549 1595 167 46 96.614418 questions 1 3 2 2 2 757 1594 31 35 96.437126 is5 1 3 2 2 3 829 1594 159 35 96.325218 whether5 1 3 2 2 4 1026 1594 59 35 96.377884 thes 1 3 2 2 5 1126 1593 153 36 95.925400 demands 1 3 2 2 6 1320 1593 29 35 96.327286 is5 1 3 2 2 7 1391 1592 135 46 96.232101 unduly5 1 3 2 2 8 1565 1593 240 34 96.283119 burdensome5 1 3 2 2 9 1846 1602 41 24 96.325188 or4 1 3 2 3 0 549 1653 618 46 -1 5 1 3 2 3 1 549 1653 263 46 96.603645 unreasonably5 1 3 2 3 2 826 1653 142 36 94.692467 broad. It added:

Some burden on subpoenaed parties is to be expected and is necessary in furtherance of the agency's legitimate inquiry and the public interest. ... Thus, courts have refused to modify investigative subpoenas unless compliance threatens to unduly disrupt or seriously hinder normal operations of a business. 555 F.2d at 882 (emphasis in original)(footnotes omitted). Finally, in order to attempt to meet the burden of showing unreasonableness, Petitioners must present something more than unsupported conclusions and unsupported claims of burden. In Rockefeller, for example, respondents prepared and submitted estimates of compliance costs. 591 F. 2d at 190. From this, it should be clear that a challenge to agency compulsory process based upon aclaim of burden must be supported by some reasonable, substantial estimate of the cost of compliance and its relationship to the respondent's ongoing business operations. Unsubstantiated, conclusory claims wil] not meet the test -- they will not even come close. Federal Trade Commission Letter Ruling Re: Petition of Megatrend Telecommunications, Inc. to Limit and/or Quash CID, File No. 902 3281 (June 24, 1991).

1. Time for Compliance The Petitioners allege that the original deadline to comply with each C.I.D., each of which expired on February 19, 1992, was simply not enough time to physically review the literally5 1 5 1 3 9 1642 1007 175 37 95.991966 hundreds5 1 5 1 3 10 1832 1010 42 34 95.489426 of5 1 5 1 3 11 1884 1010 111 37 91.136406 files. Pet. pp. 3-4. Counsel for Petitioners requested a sixty-day extension. Tr. p. 7. In addition, counsel for Petitioners argues that the time period covered by each C.I.D., from January 1, 1986 to the present, is unduly burdensome. As an alternative, counsel for Petitioners suggests that Petitioners should initially be required to produce only documents relating to a two-year period, with documents from earlier time periods on to be produced if it is later determined that they are needed. Tr. pp. 6-7.

However, the Petitions lack the specific detail needed to support a finding of undue burden concerning the time period covered by the C.I.D.s Counsel for the Commission states that the staff has reason to believe that the entire period from January 1, 1986 to the present will provide relevant information.? The Commission will not modify that period. Concerning the time period for compliance with the C.I.D.s, the Commission is persuaded that the original time period, approximately 20 days, was too short. Counsel for the Commission does not object to a short extension of time. The Commission will extend the date for compliance with the C.I.D.s to thirty days from the date of this letter.‘ > It would be inappropriate at this time for the Commission to reveal the basis on which the six-year time period was chosen. 4 In addition to an extension of time, counsel for Petitioners asked that the Commission staff review the materials called for in the C.L.D.s in counsel’s New York offices, rather than in the Petitioners’ offices in California. Tr. pp. 8-9. The location of the document production is a matter best left to negotiation between the staff and counsel for the Petitioners, and the Commission will not order the staff to inspect and copy the documents in New York rather than in California. RESPONSES TO PETITIONS TO QUASH 1303 2. Alleged Ambiguities In the Petitions, Pet. p. 3, and the oral presentation, Tr. p. 9, counsel for Petitioners makes the allegation that terms used in the C.1.D.s were ambiguous, and thus make complete and accurate compliance with the C.I.D.s impossible. Petitioners allege that in this respect each C.I.D. violates Section 20(c)(3)(A) of the Federal Trade Commission Act. That Section provides that a C.I.D. for documentary material shall describes 1 4 1 7 5 1191 1082 87 35 96.880348 each5 1 4 1 7 6 1293 1081 92 36 96.568710 class5 1 4 1 7 7 1400 1081 42 35 96.776474 of5 1 4 1 7 8 1453 1081 253 44 96.209557 documentary5 1 4 1 7 9 1721 1078 159 37 96.546547 material4 1 4 1 8 0 543 1137 1337 51 -1 5 1 4 1 8 1 543 1148 35 30 97.000908 to5 1 4 1 8 2 591 1142 44 36 96.562424 be5 1 4 1 8 3 647 1142 180 46 96.930656 produced5 1 4 1 8 4 839 1141 110 35 96.477272 under5 1 4 1 8 5 960 1140 57 36 96.680969 thes 1 4 1 8 6 1030 1140 151 36 96.801224 demands 1 4 1 8 7 1195 1139 83 36 96.544250 with5 1 4 1 8 8 1291 1139 86 36 93.277313 such5 1 4 1 8 9 1390 1138 228 36 93.167130 definiteness5 1 4 1 8 10 1631 1138 69 35 96.955360 ands 1 4 1 8 11 1712 1137 168 45 96.881477 certainty4 1 4 1 9 0 543 1196 1335 51 -1 5 1 4 1 9 1 543 1212 38 24 96.503067 as5 1 4 1 9 2 602 1208 36 28 96.958931 to5 1 4 1 9 3 658 1200 130 47 96.876572 permits 1 4 1 9 4 808 1200 87 35 96.609200 such5 1 4 1 9 5 914 1199 160 36 96.478561 materials 1 4 1 9 6 1094 1205 36 29 97.006332 to5 1 4 1 9 7 1149 1199 45 34 96.660629 be5 1 4 1 9 8 1213 1198 105 45 96.727341 fairly5 1 4 1 9 9 1338 1197 256 36 23.577202 identified...5 1 4 1 9 10 1618 1197 25 36 23.577202 . 15 U.S.C.

57b-1(c)(3)(A).

The only specific term that Petitioners identified as ambiguous was the term cooperating5 1 4 2 2 5 1151 1371 159 36 72.710999 entities in Specification 3. The Commission staff offered a clarification of that term to counsel for Petitioners in their original conversation concerning the C.L.D.s In the oral presentation, counsel for the Commission stated for the record that the Commission staff used that term to mean organi-4 1 4 2 7 0 542 1662 1339 47 -1 5 1 4 2 7 1 542 1665 136 35 96.497505 zations5 1 4 2 7 2 694 1665 111 35 96.447945 under5 1 4 2 7 3 819 1664 122 35 96.567291 whose5 1 4 2 7 4 956 1664 163 45 96.718307 auspices5 1 4 2 7 5 1135 1674 44 24 96.718307 an5 1 4 2 7 6 1194 1663 142 35 96.470177 auctions 1 4 2 7 7 1352 1663 29 35 96.774055 is5 1 4 2 7 8 1396 1662 84 36 96.186409 held5 1 4 2 7 9 1494 1673 40 25 96.159615 or5 1 4 2 7 10 1548 1663 73 35 96.911667 that5 1 4 2 7 11 1634 1662 138 36 96.940460 benefits 1 4 2 7 12 1786 1662 95 35 96.702034 from4 1 4 2 8 0 544 1720 1334 47 -1 5 1 4 2 8 1 544 1734 43 24 96.499718 an5 1 4 2 8 2 602 1722 171 36 71.953049 auction.”5 1 4 2 8 3 802 1723 55 34 96.310326 Tr.5 1 4 2 8 4 873 1733 57 34 96.931061 pp.5 1 4 2 8 5 951 1722 118 35 96.768127 13-14.5 1 4 2 8 6 1097 1722 75 34 96.450638 Thes 1 4 2 8 7 1186 1721 246 36 96.051956 Commissions 1 4 2 8 8 1447 1722 126 44 96.051956 adopts5 1 4 2 8 9 1589 1722 72 33 97.006454 that5 1 4 2 8 10 1676 1720 202 35 96.852036 definition.3 1 4 3 0 0 543 1779 1338 445 -1 4 1 4 3 1 0 616 1779 1264 45 -1 5 1 4 3 1 1 616 1781 76 34 96.841255 Thes 1 4 3 1 2 721 1780 211 35 96.148178 Petitioners5 1 4 3 1 3 961 1779 60 36 96.568535 did5 1 4 3 1 4 1051 1786 61 29 96.424011 not5 1 4 3 1 5 1141 1779 152 45 96.433472 identify5 1 4 3 1 6 1322 1791 68 33 96.547142 any5 1 4 3 1 7 1420 1779 100 35 96.090538 others 1 4 3 1 8 1548 1785 107 29 96.090538 terms5 1 4 3 1 9 1684 1779 73 34 96.712677 that5 1 4 3 1 10 1786 1789 94 24 96.712677 were4 1 4 3 2 0 543 1836 1336 48 -1 5 1 4 3 2 1 543 1839 181 45 96.029686 allegedly5 1 4 3 2 2 742 1838 225 45 95.145111 ambiguous.5 1 4 3 2 3 1001 1837 160 35 96.674370 Counsels 1 4 3 2 4 1178 1837 57 35 96.969292 for5 1 4 3 2 5 1251 1838 58 34 96.674980 thes 1 4 3 2 6 1326 1836 247 36 96.559906 Commissions 1 4 3 2 7 1590 1836 106 35 96.035919 made5 1 4 3 2 8 1713 1837 95 33 96.035919 clears 1 4 3 2 9 1825 1836 54 33 96.980972 his4 1 4 3 3 0 543 1893 1338 48 -1 5 1 4 3 3 1 543 1896 221 45 96.687874 willingness5 1 4 3 3 2 777 1902 37 29 97.006340 to5 1 4 3 3 3 826 1895 132 35 96.822609 furthers 1 4 3 3 4 971 1895 125 45 97.007332 clarify5 1 4 3 3 5 1110 1896 58 33 97.017342 thes 1 4 3 3 6 1180 1901 89 28 96.773766 terms 1 4 3 3 7 1284 1894 246 46 95.870544 cooperating entities," or other specifications unclear to Petitioners. The Commission does not see any need to define other terms in the C.I.D.s. The Commission determines that the C.I.D.s, as clarified by counsel for the Commission, meet the requirements of Section 20(c)(3)(A) of the Federal Trade Commission Act.

3. Computer Backup Tape or Disk(s) A final point on burden raised by the Petitions is Specification 9 of each C.I.D., which requires Petitioners to produce a5 1 6 1 2 10 1660 2485 94 35 96.546219 copy5 1 6 1 2 11 1769 2474 43 35 96.992111 of5 1 6 1 2 12 1823 2474 59 35 96.817444 thea 1 6 1 3 0 544 2533 1339 48 -1 5 1 6 1 3 1 544 2544 95 29 96.642120 most5 1 6 1 3 2 667 2543 121 29 96.763985 recent5 1 6 1 3 3 815 2536 141 45 96.117310 backup5 1 6 1 3 4 985 2542 80 39 96.449310 tapes 1 6 1 3 5 1094 2546 39 24 92.855980 or5 1 6 1 3 6 1162 2534 133 43 91.773888 disk(s)5 1 6 1 3 7 1323 2534 57 35 96.901093 for5 1 6 1 3 8 1407 2533 259 46 45.830997 Respondent's5 1 6 1 3 9 1696 2538 187 40 96.836067 computer4 1 6 1 4 0 545 2590 1337 51 -1 5 1 6 1 4 1 545 2596 162 45 94.672485 system. Petitioners point out that this specification has no direct tie whatsoever to the stated nature and scope of the investigation because the Commission staff is requesting the production of whatever happens to have been encoded on the most recent backup tape or disk(s), whether or not it relates to the subject of the Commission's investigation. The Commission agrees that this specification is overly broad.

Definition 5 of each C.LD. defines the term documents to include computers 1 3 2 2 3 1035 834 80 35 96.305328 data5 1 3 2 2 4 1131 840 140 39 96.305328 storage5 1 3 2 2 5 1287 833 177 35 96.576309 materials5 1 3 2 2 6 1481 832 200 45 96.328331 (including5 1 3 2 2 7 1696 831 180 45 96.714790 magnetic5 1 3 2 2 8 1891 837 99 39 96.973640 tapes4 1 3 2 3 0 655 888 1340 48 -1 5 1 3 2 3 1 655 904 40 24 93.200066 or5 1 3 2 3 2 707 892 146 43 92.397949 disks). Therefore, each C.I.D. already calls for the production of specified relevant material on any computer backup tape not otherwise produced, which falls under Specifications 1 through 8 (as previously clarified by the staff and adopted herein), even if the documents are only available in the form of computer (machine) readable code on a magnetic tape, disk, or other computer storage device. In addition, Specification 9 calls for all information on the backup tape or disk that is not included in one of the other specifications. So long as the other information is relevant to the investigation, this request is permissible. However, Specification 9 does not include any limitations to restrict its scope to relevant information. Thus it does not meet the test set out in Invention Submission and Texaco. See supra pp. 2-3. The Commission therefore modifies Specification 9, limiting it to all documents stored on the most recent backup tape or disk(s) that relate, reflect, or refer to the purchase of, sale of, or trade in, any relevant artwork included in Definition 4, the definition of relevant artwork, as that definition is modified above. For the purposes of this request, any data bases, data compilations, or spreadsheets included on the backup tape or disk(s) that contain any data entries that relate reflect, or refer to the purchase of, sale of, or trade in such artworks, shall be considered a single document, and the entire data base or data compilation shall be produced. By this modification, the Commission does not intend to limit the obligations of Petitioners to search any backup tape or disk(s) for information relevant to Specifications 1 through 8. It may be noted that Direction 7 of the C.I.D. requires that documents responsive to more than one specification need not be submitted more than once. Therefore, to the extent documents contained on the most recent backup tape or disk(s) are produced in response to one of the previous specifications, they need not be produced again.

RESPONSES TO PETITIONS TO QUASH 1305 C. Petitioners assert that they should be given additional confidentiality protection.

Petitioners raise a number of concerns about the confidentiality of the information contained in their documents. First, in addition to the confidentiality protection provided by the Federal Trade Commission Act and Rules, Petitioners request that they be given 10 days advance notice before any of their confidential information is disclosed to other law enforcement agencies. Section 21(b)(6) of the Federal Trade Commission Act already sets forth the manner in which the Commission may disclose confidential information to other Federal law enforcement agencies and to State law enforcement agencies. 15 U.S.C. 57b-2(b)(6). This includes obtaining from the requesting State law enforcement agency a certification that such information will be maintained in confidence. The Commission's procedure for disclosing information to other law enforcement agencies does not permit disclosing to the owner of such information the fact that such information has been disclosed to another law enforcement agency if the other agency requests that the owner not be notified. Moreover, even if the owner of such information is notified, the notification is to occur at the time the information is provided to the other law enforcement agency. See Commission Rules of Practice 4.11(c). Furthermore, granting the Petitioners’ request for ten days advance notice could jeopardize other law enforcement agencies' confidential investigations, a tack the Commission declines to take.

Second, the Petitioners express concern that their confidential information could be disclosed to competitors. It is unclear, from either the Petitions or the oral presentation, what relief the Petitioners are seeking here. The Commission Rules already provide protection regarding the disclosure of such information. Commission Rules of Practice 4.10 (c) provides that only the Commission may determine to make public nonpublic information, with certain exceptions not relevant here. Moreover, Commission Rules of Practice 4.10 (e), (f), and (g) explain in which situations the Commission may disclose confidential information, and in which situations the supplier of such confidential information is provided advance notice of the disclosure. Furthermore, Commission Rule 2.16 prescribes detailed custodial requirements for material secured through compulsory process. The Petitions present no reason why the protection of these sections is not sufficient in the instant case. Therefore, the Commission declines to impose additional restrictions on the use of the Petitioners’ confidential information.

Finally, the Petitioners express concern about the adverse impact caused by the Commission staff contacting their customers. Petitioners fear that if the Commission staff merely contacts one of Petitioners' customers, that will raise concerns in the mind of the client concerning the artwork that client purchased. Petitioners note that they have neither been charged with, nor convicted of, any crime. Tr. pp. 19-21. They wish to ameliorate the concerns of their clients and minimize any damage to their business from the investigation. Petitioners suggest that the Commission staff be directed to begin any contact with one of Petitioners’ clients with a statement that the Commission is conducting an investigations 1 3 3 3 6 1538 1472 42 36 96.540199 of5 1 3 3 3 7 1590 1473 58 35 96.679596 thes 1 3 3 3 8 1662 1478 50 30 96.845688 arts 1 3 3 3 9 1724 1472 93 46 96.919403 prints 1 3 3 3 10 1829 1471 171 46 96.727081 industry,4 1 3 3 4 0 664 1530 1338 48 -1 5 1 3 3 4 1 664 1535 69 35 96.745270 ands 1 3 3 4 2 763 1535 72 42 96.745270 [thes 1 3 3 4 3 862 1533 98 43 91.740593 staff]5 1 3 3 4 4 989 1533 30 36 96.566559 is5 1 3 3 4 5 1047 1533 149 45 96.566559 seeking5 1 3 3 4 6 1223 1532 193 35 96.686005 additional5 1 3 3 4 7 1444 1530 232 37 96.752892 information5 1 3 3 4 8 1702 1530 151 45 96.462852 relating5 1 3 3 4 9 1879 1536 37 30 96.620415 to5 1 3 3 4 10 1943 1530 59 35 96.814133 thea 1 3 3 5 0 664 1588 1337 50 -1 5 1 3 3 5 1 664 1593 171 45 94.243698 industry.5 1 3 3 5 2 865 1592 83 35 94.243698 Ands 1 3 3 5 3 964 1592 72 34 96.151855 that5 1 3 3 5 4 1054 1591 72 42 96.792671 [thes 1 3 3 5 5 1143 1590 98 42 93.270859 staff]5 1 3 3 5 6 1260 1590 263 42 92.402184 understand[s]5 1 3 3 5 7 1541 1590 73 34 97.006653 that5 1 3 3 5 8 1632 1589 71 43 95.088654 [thes 1 3 3 5 9 1719 1588 194 42 96.731483 customer]5 1 3 3 5 10 1931 1588 70 35 96.713783 had4 1 3 3 6 0 664 1645 1334 50 -1 5 1 3 3 6 1 664 1662 102 25 96.474266 some5 1 3 3 6 2 791 1650 153 36 96.541382 artwork5 1 3 3 6 3 967 1650 73 36 96.886780 that5 1 3 3 6 4 1063 1659 74 26 96.289383 was5 1 3 3 6 5 1161 1649 198 46 96.289383 purchased5 1 3 3 6 6 1383 1648 94 35 96.647636 from5 1 3 3 6 7 1481 1641 25 58 96.879036 a5 1 3 3 6 8 1543 1647 140 36 96.734665 retailers 1 3 3 6 9 1707 1647 68 35 96.821823 ands 1 3 3 6 10 1803 1647 72 42 96.835251 [thes 1 3 3 6 11 1900 1645 98 44 96.889755 staff]4 1 3 3 7 0 664 1704 1336 49 -1 5 1 3 3 7 1 664 1709 142 43 89.277588 want[s]5 1 3 3 7 2 830 1714 36 29 96.494278 to5 1 3 3 7 3 886 1708 64 35 96.494278 asks 1 3 3 7 4 970 1707 184 46 96.446083 questions5 1 3 3 7 5 1176 1707 107 34 96.500114 about5 1 3 3 7 6 1303 1705 55 36 77.383408 it. Tr. p. 19. Petitioners seek to compel the Commission staff to give adequate5 1 3 3 8 8 1615 1762 228 36 95.983109 assurances to such clients that the person from whom they bought artwork has not been the subject of an investigation, but in fact is cooperating with an investigation of the entire industry. Tr. p. 20. In sum, Petitioner requests that the Commission staff assure the Petitioners’ clients that thes 1 3 3 13 2 756 2057 72 35 96.843224 facts 1 3 3 13 3 841 2057 73 35 96.861420 that5 1 3 3 13 4 931 2057 81 42 96.401588 [ones 1 3 3 13 5 1026 2055 42 36 97.007149 of5 1 3 3 13 6 1079 2055 58 35 97.018135 thes 1 3 3 13 7 1151 2055 220 42 96.371605 Petitioners]5 1 3 3 13 8 1388 2055 63 34 96.643028 has5 1 3 3 13 9 1465 2054 91 35 96.256859 been5 1 3 3 13 10 1573 2053 109 36 96.514053 asked5 1 3 3 13 11 1697 2052 57 36 96.502159 for5 1 3 3 13 12 1768 2052 233 35 96.078171 information4 1 3 3 14 0 664 2110 1336 48 -1 5 1 3 3 14 1 664 2116 127 36 96.440323 should5 1 3 3 14 2 804 2121 62 30 96.633713 not5 1 3 3 14 3 878 2115 45 36 96.988327 be5 1 3 3 14 4 936 2114 187 36 96.219208 construed5 1 3 3 14 5 1137 2120 35 29 96.350594 to5 1 3 3 14 6 1186 2124 103 25 96.968414 means 1 3 3 14 7 1302 2113 71 36 96.968414 that5 1 3 3 14 8 1386 2113 81 45 96.940430 they5 1 3 3 14 9 1482 2123 56 25 96.600334 ares 1 3 3 14 10 1552 2123 20 24 96.600334 a5 1 3 3 14 11 1585 2118 109 40 96.570694 targets 1 3 3 14 12 1707 2122 40 25 96.972778 or5 1 3 3 14 13 1759 2112 72 34 96.663780 that5 1 3 3 14 14 1845 2111 81 45 96.739220 they5 1 3 3 14 15 1941 2110 59 36 96.927086 did4 1 3 3 15 0 664 2169 1335 51 -1 5 1 3 3 15 1 664 2174 169 46 96.731384 anything5 1 3 3 15 2 848 2184 133 35 96.338135 wrong,5 1 3 3 15 3 997 2172 72 36 96.408920 that5 1 3 3 15 4 1082 2172 30 35 96.578209 is5 1 3 3 15 5 1127 2172 82 35 96.825974 how5 1 3 3 15 6 1224 2172 57 35 96.780853 thes 1 3 3 15 7 1295 2170 244 37 96.283241 Commissions 1 3 3 15 8 1554 2170 171 36 96.350296 conducts5 1 3 3 15 9 1741 2169 126 36 82.717430 itself. Tr. p.

21.

The C.I.D.s in this case are intended to gather evidence to allow the Commission to determine whether certain parties have engaged in unfair acts or practices in the sale, advertising or marketing of fine art prints. The possible unfair acts or practices include misrepresenting the origins, authorship, edition size, or value of such prints. In previous investigations, the staff has developed evidence of the existence of large numbers of fraudulent art prints in the United States. It would be inappropriate for the Commission staff to reassure the clients of the Petitioners, or of any art dealer -- whether RESPONSES TO PETITIONS TO QUASH 1307 or not that dealer is a target -- that there is nothing wrong with any particular artwork. Without examining the artwork, and perhaps without an expert opinion, the staff simply does not know if any particular artwork is genuine.

The Commission staff stated during the oral presentation that whenever such questions arise during interviews, the staff always states that there has been no finding of wrongdoing on the part of the company that they are investigating. The Commission assumes that to be staff's standard operating procedure. The Commission cannot go farther without unduly restricting the staff's investigation. The Commission will not consider doing so absent allegations of specific damage from the staff investigation, or allegations of staff misconduct. Even then, the legitimate interests of the Petitioners must be weighed against the Commission's obligations to conduct investigations. See Invention Submission at 65,353; Federal Trade Commission Letter Ruling Re: Petition of Invention Submission Corp. to Limit or Quash Civil Investigative Demands, File No. 882 3060, p. 15 (October 4, 1991). In this case, the Petitioners have not met the threshold burden of articulating specific allegations warranting Commission interference in the staff investigation. The Commission declines to restrict the staff's ability to contact clients of Petitioners, ITI. Conclusion For the foregoing reasons, the Petitions to Limit or Quash the Civil Investigative Demands for Documentary Material filed by Brana Publishing, Inc., Brana Enterprises, Inc., and Art Source International, Inc. are denied in part and granted in part. Petitioners are directed to comply with the Civil Investigative Demands by close of business on the April 27, 1992.

Pursuant to Rule 2.7(f), within three days after service of this ruling, Petitioners may file with the Secretary of the Commission a request that the full Commission review the ruling. Commission Rule of Practice 4.4(b) provides that a document shall be deemed filed when it is received by the Office of the Secretary. See 16 CFR 4.4(b). The timely filing of such a request shall not stay the return date of this ruling, unless the Commission otherwise directs. Re: Hang-Ups Art Enterprises, Inc.'s Petition to Limit or Quash the Civil Investigative Demand, File No. 872-3209.

March 31, 1992 Dear Mr. Steiner:

This is to advise you of the Federal Trade Commission's ruling on the Petition to Limit or Quash the Civil Investigative Demand for Documentary Material ("Petition"), which you filed on behalf of your client Hang-Ups Art Enterprises, Inc. ("Hang-Ups"or Petitioner), in the above referenced matter.

The ruling set forth herein has been made by Commissioner Deborah Owen pursuant to authority delegated under Commission Rule of Practice 2.7(d)(4). Pursuant to Rule 2.7(f), within three days after service of this decision, Petitioner may file with the Secretary of the Commission a request for full Commission review. Whatever briefs or other material the Petitioner wishes the Commission to consider in reviewing this decision must accompany any such request in order to be considered as timely filed. The timely filing of such a request shall not stay the return date in this ruling, unless the Commission otherwise specifies.

Commissioner Owen has carefully reviewed the Petition and accompanying exhibits. She has also considered the oral presentation on the Petition conducted on February 25, 1992. The Petition is denied in part, and granted in part, for the reasons stated below. Petitioner's obligations under the C.I.D. are modified as set forth below. I. Background On October 24, 1991, the Federal Trade Commission approved a Resolution Directing Use of Compulsory Process, authorizing the use of compulsory process in an investigation to determine: whether unnamed persons, partnerships, or corporations, engaged in the sale, advertising, and marketing of fine art prints, may be engaged in unfair or deceptive acts or practices in or affecting commerce in violation of Section 5 of the Federal Trade RESPONSES TO PETITIONS TO QUASH 1309 Commission Act, 15 U.S.C. 45, as amended, including but not limited to, misrepresenting the origins, authorship, edition size, or value of fine art prints. On January 28, 1992, as part of this investigation, a civil investigative demand was issued to Hang-Ups, a firm engaged in the sale of fine art at charity and public auctions. The C.I.D. was served on Petitioner on or about January 29, 1992. Pet. p.2.! On February 4, 1992, Petitioner retained counsel to represent it in this matter. Pet. p. 23. The C.I.D. required Petitioner to make the specified documents available on February 19, 1992 by 5:00 p.m. Beginning on February 5, 1992, counsel for Petitioner and the staff of the Commission entered into negotiations concerning the C.I.D. Counsel for Petitioner expressed concerns over the burden of the C.I.D., over what he considered a request to produce irrelevant information, and the possible damage to Petitioner's business if the Commission staff contacted Petitioner's clients. Counsel for Petitioner and the staff of the Commission were unable to resolve any of the issues that were raised. On February 18, 1992, counsel for Petitioner filed this Petition.

II. Specific Objections A. Petitioner asserts that the C.1.D. is vague and ambiguous and does not permit the responsive material to be fairly identified. Petitioner argues that the C.I.D. does not describe the documents requested with reasonable particularity. In particular, in the Petition, the Petitioner notes that the C.I.D. uses three terms, cooperating4 1 6 1 4 0 533 2215 1335 65 -1 5 1 6 1 4 1 533 2215 173 42 84.624527 entities, respondent, and transactions, that are so unclear, Petitioner asserts, that it cannot tell what is requested. Pet. p. 6. In addition, in the oral presentation, counsel for Petitioner noted additional terms that he alleged were ambiguous: medium, Tr. p. 20, and reproductions,5 1 6 1 8 3 925 2452 206 43 96.395226 facsimiles,5 1 6 1 8 4 1147 2456 67 34 97.003189 ands 1 6 1 8 5 1227 2458 216 44 96.552673 composites5 1 6 1 8 6 1457 2458 43 35 96.999931 of5 1 6 1 8 7 1509 2459 166 45 95.607674 images, Tr. p. 22. References to the Petition are cited as Pet.5 1 8 1 1 9 1385 2689 42 36 78.319405 p. with the appropriate page number. References to the transcript of the oral presentation on the petition, held on February 25, 1992, are cited as Tr.5 1 8 1 3 8 1099 2781 42 36 91.182884 p. with the appropriate page number. As a threshold matter, counsel for Petitioner failed to comply with Commission Rule of Practice Section 2.7(d)(2) with respect to these issues. Rule Section 2.7(d)(2) requires that [e]Jach5 1 3 1 3 8 1688 722 148 46 97.007240 petitions 1 3 1 3 9 1855 724 49 43 95.776756 [to5 1 3 1 3 10 1919 725 93 36 95.776756 limita 1 3 1 4 0 673 772 1336 58 -1 5 1 3 1 4 1 673 782 40 25 96.770493 or5 1 3 1 4 2 729 772 127 46 96.633339 quash]5 1 3 1 4 3 876 773 89 36 96.563362 shall5 1 3 1 4 4 983 773 44 36 96.993530 be5 1 3 1 4 5 1044 776 259 45 96.499474 accompanied5 1 3 1 4 6 1319 777 46 47 96.808548 by5 1 3 1 4 7 1383 788 19 25 96.896523 a5 1 3 1 4 8 1419 777 125 47 96.656364 signed5 1 3 1 4 9 1562 786 187 31 96.320702 statements 1 3 1 4 10 1765 783 244 47 96.871071 representing4 1 3 1 5 0 672 830 1337 50 -1 5 1 3 1 5 1 672 830 72 37 96.963318 that5 1 3 1 5 2 766 832 148 35 96.799934 counsels 1 3 1 5 3 936 832 57 36 96.957535 for5 1 3 1 5 4 1012 833 59 36 96.700180 thes 1 3 1 5 5 1092 834 190 46 96.651375 petitioners 1 3 1 5 6 1302 836 62 36 96.522270 has5 1 3 1 5 7 1387 837 187 37 96.081863 conferred5 1 3 1 5 8 1595 839 86 37 96.915558 with5 1 3 1 5 9 1702 842 149 35 96.958328 counsels 1 3 1 5 10 1874 842 57 36 96.671379 for5 1 3 1 5 11 1951 844 58 35 96.985474 thea 1 3 1 6 0 671 889 1337 56 -1 5 1 3 1 6 1 671 889 249 37 92.528679 Commissions 1 3 1 6 2 937 890 36 36 96.832214 in5 1 3 1 6 3 992 902 44 25 96.548767 an5 1 3 1 6 4 1052 891 109 37 95.522766 efforts 1 3 1 6 5 1177 893 37 35 95.522766 in5 1 3 1 6 6 1231 895 97 44 96.871880 goods 1 3 1 6 7 1345 894 88 36 96.871880 faith5 1 3 1 6 8 1451 902 36 29 95.637718 to5 1 3 1 6 9 1504 897 141 36 95.637718 resolves 1 3 1 6 10 1662 899 47 45 97.015793 by5 1 3 1 6 11 1727 908 206 37 97.001175 agreements 1 3 1 6 12 1950 902 58 34 97.017075 thea 1 3 1 7 0 670 947 1339 51 -1 5 1 3 1 7 1 670 947 115 36 96.981575 issues5 1 3 1 7 2 803 948 117 36 96.784752 raised5 1 3 1 7 3 938 950 46 44 96.821762 by5 1 3 1 7 4 1003 950 58 34 96.677086 thes 1 3 1 7 5 1078 951 150 45 28.249786 petitions 1 3 1 7 6 1248 953 108 34 28.249786 .... In the instant case, counsel for Petitioner made an effort, in apparent good faith, to resolve some of the issues raised in the Petition, but by his own admission, counsel for Petitioner never raised these issues with counsel for the Commission. Tr. p. 19.

The purpose of Rule Section 2.7(d)(2) is to insure that counsel for Petitioner makes an effort to resolve with counsel for the Commission questions that invariably arise in discovery, without the intervention of the Commission itself. In this case, the questions that arose -- how to define the terms in the C.L.D. -- are the type of questions that the attorneys involved should be able to resolve. During the oral cpresentation, counsel for the Commission readily agreed to define and narrow the contested terms, suggesting that the attorneys might have solved these issues. Despite the failure of counsel for Petitioner to raise these issues prior to filing the Petition, the Commission must insure that the C.1.D. complies with Section 20(c)(3) of the Federal Trade Commission Act. That Section provides that a C.D. for documentary material shall describes 1 3 3 5 4 1154 2000 89 35 96.790298 each5 1 3 3 5 5 1263 2001 92 36 96.540359 class5 1 3 3 5 6 1376 2001 42 36 97.011002 of5 1 3 3 5 7 1435 2002 255 48 96.077011 documentary5 1 3 3 5 8 1711 2004 160 37 96.908401 materials 1 3 3 5 9 1892 2012 36 29 96.911201 to5 1 3 3 5 10 1948 2006 45 36 96.969490 be4 1 3 3 6 0 655 2055 1337 54 -1 5 1 3 3 6 1 655 2055 184 45 96.707657 produced5 1 3 3 6 2 856 2057 112 34 96.548119 under5 1 3 3 6 3 982 2058 57 34 96.648018 thes 1 3 3 6 4 1055 2058 154 35 96.781158 demands 1 3 3 6 5 1226 2058 84 36 96.781158 with5 1 3 3 6 6 1327 2060 87 35 93.292244 such5 1 3 3 6 7 1430 2060 233 37 92.544945 definiteness5 1 3 3 6 8 1680 2064 69 34 96.966133 ands 1 3 3 6 9 1765 2064 172 45 96.716629 certainty5 1 3 3 6 10 1954 2075 38 24 97.009827 as4 1 3 3 7 0 655 2113 1335 50 -1 5 1 3 3 7 1 655 2119 36 29 96.662964 to5 1 3 3 7 2 714 2113 129 45 96.278069 permits 1 3 3 7 3 866 2115 87 34 96.278069 such5 1 3 3 7 4 976 2115 160 35 96.724342 materials 1 3 3 7 5 1159 2121 36 30 96.913422 to5 1 3 3 7 6 1218 2116 44 35 96.895096 be5 1 3 3 7 7 1285 2116 103 47 96.989449 fairly5 1 3 3 7 8 1411 2118 187 36 81.648209 identified5 1 3 3 7 9 1655 2121 91 34 81.648209 .... 15 U.S.C.

57b-1(c)(3).

While on its face the C.I.D. meets the requirements of Section 20(c)(3)(A), the Petition, and the oral presentation, raised some legitimate questions, particularly concerning cooperating5 1 3 4 3 6 1846 2354 141 46 83.595184 entity.”4 1 3 4 4 0 653 2405 1336 48 -1 5 1 3 4 4 1 653 2405 191 41 96.851456 However,5 1 3 4 4 2 868 2406 127 45 96.430740 during5 1 3 4 4 3 1018 2406 58 36 96.751503 thes 1 3 4 4 4 1099 2407 73 36 96.615707 oral5 1 3 4 4 5 1195 2409 250 44 96.180519 presentation,5 1 3 4 4 6 1470 2409 246 37 96.180519 Commissions 1 3 4 4 7 1741 2411 88 35 96.853241 staffs 1 3 4 4 8 1848 2412 141 36 96.730621 offered4 1 3 4 5 0 652 2463 1337 43 -1 5 1 3 4 5 1 652 2463 259 37 94.977852 clarifications5 1 3 4 5 2 929 2464 42 36 97.013130 of5 1 3 4 5 3 985 2475 102 25 96.218269 some5 1 3 4 5 4 1104 2465 41 35 96.451462 of5 1 3 4 5 5 1159 2466 100 36 96.408058 these5 1 3 4 5 6 1276 2473 117 30 96.408058 terms.5 1 3 4 5 7 1426 2468 75 35 96.699524 Thes 1 3 4 5 8 1519 2468 89 36 96.818321 staffs 1 3 4 5 9 1621 2469 134 36 96.636749 furthers 1 3 4 5 10 1771 2470 180 36 96.564896 indicated5 1 3 4 5 11 1969 2482 20 24 96.908562 a4 1 3 4 6 0 652 2521 1336 49 -1 5 1 3 4 6 1 652 2521 223 46 96.769043 willingness5 1 3 4 6 2 903 2529 35 29 96.840782 to5 1 3 4 6 3 966 2523 126 46 96.733444 clarify5 1 3 4 6 4 1120 2535 68 35 96.789055 any5 1 3 4 6 5 1216 2525 100 35 96.059395 others 1 3 4 6 6 1342 2532 106 29 96.094666 terms5 1 3 4 6 7 1476 2527 72 35 96.182472 that5 1 3 4 6 8 1575 2538 93 25 96.318489 were5 1 3 4 6 9 1695 2529 146 35 96.562103 unclear5 1 3 4 6 10 1867 2535 35 30 96.527893 to5 1 3 4 6 11 1930 2530 58 35 96.619186 thea 1 3 4 7 0 651 2581 1335 49 -1 5 1 3 4 7 1 651 2581 201 36 94.160789 Petitioner.5 1 3 4 7 2 883 2582 38 35 96.497055 In5 1 3 4 7 3 937 2582 103 35 96.497055 orders 1 3 4 7 4 1055 2589 36 28 96.970062 to5 1 3 4 7 5 1107 2583 119 35 96.661728 insures 1 3 4 7 6 1241 2584 225 46 96.385216 compliance5 1 3 4 7 7 1482 2585 85 36 96.868607 with5 1 3 4 7 8 1583 2587 146 35 93.189438 Sections 1 3 4 7 9 1745 2587 241 43 90.577820 20(c)(3)(A),4 1 3 4 8 0 651 2639 1335 53 -1 5 1 3 4 8 1 651 2649 37 25 96.919235 as5 1 3 4 8 2 706 2639 83 35 96.633789 wells 1 3 4 8 3 808 2650 37 24 96.633789 as5 1 3 4 8 4 862 2645 35 29 96.995224 to5 1 3 4 8 5 914 2639 171 36 96.900528 facilitates 1 3 4 8 6 1102 2641 58 35 96.761688 thes 1 3 4 8 7 1176 2642 225 45 96.804169 compliance5 1 3 4 8 8 1417 2643 43 34 93.300156 of5 1 3 4 8 9 1472 2644 212 46 91.844688 Hang-Ups,5 1 3 4 8 10 1702 2646 68 34 96.851959 ands 1 3 4 8 11 1787 2646 59 34 96.562195 thes 1 3 4 8 12 1862 2647 124 45 96.710930 timely4 1 3 4 9 0 649 2698 1337 51 -1 5 1 3 4 9 1 649 2698 221 44 96.828979 completion5 1 3 4 9 2 905 2698 42 34 96.887131 of5 1 3 4 9 3 978 2698 68 35 96.917107 this5 1 3 4 9 4 1081 2698 265 46 96.341164 investigation,5 1 3 4 9 5 1381 2701 58 35 96.660973 thes 1 3 4 9 6 1474 2701 246 36 96.536133 Commissions 1 3 4 9 7 1756 2704 126 45 95.266861 adopts5 1 3 4 9 8 1918 2705 68 35 96.029282 and RESPONSES TO PETITIONS TO QUASH 1311 incorporates, in this opinion and in the definitions of the C.I.D., the following clarifications offered by Commission staff. The Petition identified three terms which allegedly made the C.I.D. ambiguous: cooperating5 1 3 2 2 4 1184 821 168 42 83.198280 entities, respondent, and transac-4 1 3 2 3 0 556 872 1342 53 -1 5 1 3 2 3 1 556 872 124 37 65.822861 tions.”5 1 3 2 3 2 708 874 95 36 85.312225 With5 1 3 2 3 3 817 882 138 39 96.745590 respects 1 3 2 3 4 970 882 35 30 90.667702 to5 1 3 2 3 5 1023 877 247 48 90.667702 cooperating entities," the Commission staff Clarified that term to mean the civic5 1 3 2 4 8 1288 938 260 46 96.616867 organizations5 1 3 2 4 9 1564 941 67 35 96.448929 ands 1 3 2 4 10 1646 941 100 36 96.448929 others 1 3 2 4 11 1759 953 132 36 96.954544 groups4 1 3 2 5 0 553 989 1339 57 -1 5 1 3 2 5 1 553 989 73 36 95.833282 that5 1 3 2 5 2 661 990 91 36 96.123840 have5 1 3 2 5 3 788 992 198 45 96.734680 sponsored5 1 3 2 5 4 1021 993 58 36 96.908623 thes 1 3 2 5 5 1114 995 162 36 96.808998 auctions5 1 3 2 5 6 1312 996 35 36 96.277489 in5 1 3 2 5 7 1382 998 165 45 95.887840 questions 1 3 2 5 8 1583 999 69 36 96.674431 ands 1 3 2 5 9 1687 1011 68 35 95.957413 any5 1 3 2 5 10 1791 1001 101 36 95.957413 other4 1 3 2 6 0 553 1047 1337 48 -1 5 1 3 2 6 1 553 1047 247 38 96.782600 beneficiaries5 1 3 2 6 2 816 1049 43 36 96.988380 of5 1 3 2 6 3 869 1050 101 36 95.936531 those5 1 3 2 6 4 985 1052 190 42 95.936531 auctions, in which Petitioner offered relevant artworks for sale. Tr. p.32.

With respect to the second term, respondent, Definition 2 of the C.I.D. defines it to include others 1 3 3 2 7 1216 1229 139 37 96.605568 entities5 1 3 3 2 8 1371 1232 111 35 96.605568 under5 1 3 3 2 9 1496 1243 170 26 96.406593 common5 1 3 3 2 10 1681 1231 205 55 96.819870 ownership4 1 3 3 3 0 548 1282 1335 47 -1 5 1 3 3 3 1 548 1291 40 24 96.316902 or5 1 3 3 3 2 601 1282 168 35 95.282082 control. Petitioner stated that it does not know what that means. At the oral presentation, the staff clarified the definition, limiting the definition of respondent to include only entities with substantial4 1 3 3 6 0 545 1458 1337 55 -1 5 1 3 3 6 1 545 1464 171 26 96.559715 common5 1 3 3 6 2 744 1458 205 45 96.690193 ownership5 1 3 3 6 3 975 1469 40 24 96.951370 or5 1 3 3 6 4 1039 1461 169 35 37.180325 control. Tr. p. 33. Lest there be any confusion, the Commission hereby modifies the definition to include, within the term respondent, any company with 10% common ownership -- that is where 10% of the ownership is held by individuals or entities that hold at least 10% of the ownership of Hang-Ups.? With respect to the third term, transactions, the C.LD. in Specification 1 calls for the production of all documents relating5 1 3 4 2 11 1840 1883 35 28 96.988846 to4 1 3 4 3 0 538 1920 1334 53 -1 5 1 3 4 3 1 538 1920 261 45 96.389214 Respondent's5 1 3 4 3 2 820 1923 233 36 96.854340 transactions5 1 3 4 3 3 1073 1927 219 46 96.362274 concerning5 1 3 4 3 4 1312 1929 57 35 97.010544 thes 1 3 4 3 5 1387 1929 159 37 97.010544 relevant5 1 3 4 3 6 1566 1933 257 36 32.140060 artworks...5 1 3 4 3 7 1846 1935 26 34 78.011604 . The Petitioner expressed concern that the term transactions might require production of documents related to lease arrangements, transactions with attorneys, and the like Pet. p. 6. Petitioner's complaint is puzzling. If Petitioner has documents that relate to transactions concerning5 1 3 5 2 6 1385 2220 58 36 96.364136 thes 1 3 5 2 7 1474 2221 159 37 95.568283 relevant5 1 3 5 2 8 1666 2225 202 41 95.568283 artworks, Hang-Ups is instructed to produce them. To the extent that the specification would require the production of privileged material, the C.LD. instructions contain procedures for handling such documents Direction 2 of the C.I.D. requires Petitioner to provide all the documents in its possession, custody, or control, that fall within the specifications of the C.LD. The C.I.D. does not require Petitioner to produce documents in the possession, custody or control of companies under common ownership and control with Hang-Ups, unless the documents are also in the possession, custody and control of Hang-Ups. in a way that protects the privilege.? Petitioner's argument with respect to lease arrangements is a red herring -- it is difficult to envision a lease concerning5 1 3 1 3 5 1222 744 155 38 96.231834 relevant5 1 3 1 3 6 1390 749 196 35 75.427322 artworks. Moreover, it is hard to envision how staff could draw the line here more narrowly, without exempting documents essential to the investigation. In addition to the three terms identified in the Petition, at the oral presentation, counsel for Petitioner alleged that the additional terms, “artworks in any medium," reproductions, facsimiles, and “composites of images" are ambiguous. Tr. pp. 20-22. With respect to the definition of artworks5 1 3 2 5 6 1222 1152 36 36 96.978065 in5 1 3 2 5 7 1272 1164 67 36 96.991173 any5 1 3 2 5 8 1353 1155 185 42 95.569763 medium, it was unclear whether counsel for Petitioner was arguing that the term was ambiguous, or clear, but overbroad, because it called for production of documents related to artworks that were not prints. Tr. pp. 20-21. In either event, the staff agreed to narrow the definition of relevant artworks. Tr. pp. 31-32. Accordingly, the Commission limits the term relevant artworks to artworks incorporating, in whole or in relevant part, the process of intaglio (e.g., etchings, engravings, dry points), aquatint, lithography, serigraphy, silkscreen, woodcut, poster printing, or photographic, photomechanical, or photochemical reproduction, or any combination of the above media, by, after, or attributed to one of the seven artists listed in the C.I.D.s, including any reproductions, facsimiles, or composites of images, by or purportedly by the above artists. This should both narrow the definition and clarify it for Petitioner.

With respect to the other three terms, to facilitate compliance with the C.I.D., the Commission hereby defines the terms reproductions and facsimiles to mean: (1) any copy of an artwork which is an exact copy in all respects; (2) any copy or reproduction of an artwork which cannot be distinguished without close examination from the original; or (3) any artwork bearing a stamped, printed, or other signature imitating that of the artist. Reproductions and facsi-4 1 3 3 8 0 630 2428 1337 62 -1 5 1 3 3 8 1 630 2428 120 36 86.895676 miles include posters. The Commission hereby defines composites4 1 3 3 9 0 629 2486 1339 56 -1 5 1 3 3 9 1 629 2486 43 35 96.989677 of5 1 3 3 9 2 688 2487 157 46 93.598839 images to mean artworks that incorporate images from one or > It should be noted that no objection was raised with respect to those procedures for handling allegedly privileged materials. RESPONSES TO PETITIONS TO QUASH 1313 more works of an artist and combine them into a single image. The Commission defines composites5 1 3 1 2 4 1199 697 42 35 96.967964 of5 1 3 1 2 5 1263 697 152 46 95.803307 images to include pastiches.* It is expected that counsel for Petitioner and counsel for the Commission can resolve any other such questions without the intervention of the Commission.

B. Petitioner asserts that the C.I.D. is overbroad, in terms of both its scope and breadth.

Definition 4 of the C.L.D. states:

Relevant5 1 6 1 1 2 699 1275 149 28 94.129761 artworks means all artworks, in any medium, by, after, or attributed to the artists Marc Chagall, Salvador Dali, Joan Miro, Pablo Picasso, Alexander Calder, Victor Vasarely, and Philippe Noyer, including any reproductions, facsimiles, or composites of images by or purportedly by the above artists. Petitioner argues that the staff, having defined what is relevant in the definitions of the C.I.D., cannot now require the production of information which is not relevant, i.e. does not relate to one of the seven named artists.° It must be first noted that Petitioner claims not that the staff have attempted to obtain irrelevant documents that do not contain information about one of the seven listed artists, but rather that the staff have attempted to obtain irrelevant information contained in documents that admittedly also contain relevant information.© The solution counsel for Petitioner proposes for documents tainted5 1 7 1 10 3 913 2045 83 36 93.116669 with5 1 7 1 10 4 1010 2046 243 37 92.934868 non-relevant5 1 7 1 10 5 1266 2047 173 36 95.944679 material is that the documents be withheld by Hang-Ups, or that the Petitioner be permitted to redact all non-relevant information from the documents that it produces to the Commission staff.

“A pastiche is a pictures 1 9 1 1 6 1006 2403 32 19 96.961594 or5 1 9 1 1 7 1048 2395 78 28 96.698486 others 1 9 1 1 8 1136 2395 78 28 96.901276 works 1 9 1 1 9 1225 2395 32 28 96.713791 of5 1 9 1 1 10 1266 2401 38 23 96.713791 arts 1 9 1 1 11 1315 2396 55 29 96.996201 that5 1 9 1 1 12 1381 2396 89 34 96.993774 (often5 1 9 1 1 13 1482 2397 65 28 97.003090 with5 1 9 1 1 14 1560 2397 156 29 96.552437 fraudulent5 1 9 1 1 15 1726 2399 133 36 96.527756 purpose)4 1 9 1 2 0 524 2440 1335 43 -1 5 1 9 1 2 1 524 2440 123 30 96.997765 imitates5 1 9 1 2 2 669 2441 46 29 96.722244 thes 1 9 1 2 3 735 2442 73 37 96.962166 styles 1 9 1 2 4 827 2442 34 28 96.590797 of5 1 9 1 2 5 878 2451 15 19 96.590797 a5 1 9 1 2 6 912 2443 151 36 96.982681 particulars 1 9 1 2 7 1081 2443 77 29 96.957565 artists 1 9 1 2 8 1177 2444 37 36 97.013931 by5 1 9 1 2 9 1234 2444 125 37 96.754646 copying5 1 9 1 2 10 1379 2445 54 28 96.568306 ands 1 9 1 2 11 1453 2446 197 36 96.774750 recombining5 1 9 1 2 12 1670 2452 75 31 96.815346 parts5 1 9 1 2 13 1765 2446 34 29 96.682793 of5 1 9 1 2 14 1816 2447 43 28 96.912727 his4 1 9 1 3 0 523 2488 1273 39 -1 5 1 9 1 3 1 523 2488 142 27 96.419830 authentic5 1 9 1 3 2 679 2488 118 29 94.720886 works. The Concise Oxford Dictionary of Art and Artists 347 (1990). ° During the oral presentation, counsel for Petitioner may have also argued that the C.I.D. is overbroad because it called for information relating to all artworks, in any medium, by the named artists. Tr. p. 21. This objection is also dealt with above. oA possible exception is Specification 8, which requests a backup tape or disk of Hang-Ups' computer system. Counsel for Petitioner may be arguing that this specification requests copies of irrelevant documents. Petitioner's argument misses the point, both with respect to the utilization of redaction, and with respect to what information is relevant to the Commission's investigation. Redaction can be a useful way to segregate information into that which should be produced during discovery, and that which should be protected from disclosure during discovery. For example, parties might agree to redact information that is protected by a privilege against disclosure, or which is commercially sensitive and is unnecessary to the litigation. However, in this case, counsel for the Petitioner has made no claim of privilege. Counsel was unable to articulate any manner in which his client would be prejudiced if the Commission received documents complete with what Petition termed irrelevant information. Tr. p. 17. Thus, Petitioner should comply with the instructions in the C.I.D. to produce any document in its entirety, if it contains relevant information.

The starting point in analyzing the relevance of information called for by a specification in a Commission investigation is recognition that courts give relevance a broad interpretation in enforcing Commission compulsory process. As the United States District Court for the District of Columbia stated: Because5 1 3 2 5 10 1828 1746 58 34 96.474983 thes 1 3 2 5 11 1900 1746 90 34 96.410240 need4 1 3 2 6 0 653 1804 1335 48 -1 5 1 3 2 6 1 653 1808 56 35 96.989418 for5 1 3 2 6 2 722 1806 252 46 96.238953 investigating5 1 3 2 6 3 988 1806 208 45 96.760101 allegations5 1 3 2 6 4 1212 1805 41 35 96.760101 of5 1 3 2 6 5 1264 1804 170 36 96.429649 unlawful5 1 3 2 6 6 1450 1804 143 46 96.876884 activity5 1 3 2 6 7 1608 1804 29 35 96.745705 is5 1 3 2 6 8 1652 1815 20 24 96.824600 a5 1 3 2 6 9 1687 1804 207 35 96.824600 substantial5 1 3 2 6 10 1909 1815 79 30 96.954674 one,4 1 3 2 7 0 653 1862 1336 47 -1 5 1 3 2 7 1 653 1866 58 34 95.892906 thes 1 3 2 7 2 727 1866 68 34 96.448257 laws 1 3 2 7 3 811 1864 157 45 96.448257 requires5 1 3 2 7 4 984 1864 72 35 96.677078 that5 1 3 2 7 5 1071 1869 118 29 96.626045 courts5 1 3 2 7 6 1205 1863 83 45 96.823814 gives 1 3 2 7 7 1303 1863 166 45 96.381561 agencies5 1 3 2 7 8 1486 1863 137 44 96.631187 leeway5 1 3 2 7 9 1639 1863 105 34 96.717804 when5 1 3 2 7 10 1759 1862 230 44 96.165276 considering4 1 3 2 8 0 652 1920 1337 48 -1 5 1 3 2 8 1 652 1923 189 36 96.584839 relevance5 1 3 2 8 2 868 1922 232 46 81.014580 objections. Federal Trade Commission v. Invention Submission Corp., 1991-1 Trade Cas. (CCH) { 69,338 (D.D.C. Feb. 14, 1991), appeal pending No. 91-5174 (D.C. Cir. argued March 9, 1992). More particularly, relevance is measured against the agency's general purpose in gathering the investigative materials as described by the underlying resolution authorizing compulsory process. Federal Trade Commission v. Texaco Inc., 555 F. 2d 862, 874 (D.C. Cir. 1977)(en banc), cert. denied, 431 U.S. 974 (1977). The scope of the investigation is defined by the resolution authorizing the use of compulsory process. That resolution was not limited to the seven artists listed in Definition 4 of the C.1.D. Those seven listed artists merely establish the artists whose works are the RESPONSES TO PETITIONS TO QUASH 1315 current focus of the investigation.’ Information concerning the works of other artists may lead to the discovery of relevant evidence. Such information may allow comparisons between the transaction prices or methods of sale of artworks the staff believes are forged, and those the staff believe are genuine, which may help establish knowledge of the authenticity, or lack thereof, of the prints by the seven listed artists. In addition, such information may lead to the discovery of problems with the authenticity of additional prints. Finally, such information can provide a context to better understand the information that the documents contain regarding the seven listed artists. For these reasons, the Petitioner's argument that the C.I.D. is overbroad must be rejected as a basis to limit or quash the C.I.D. In addition, the Petitioner has claimed that the time period covered by the C.I.D. is excessive. The C.I.D. covers a time period from 1986 through the present. Counsel for Petitioner suggested instead that Petitioner produce documents for the time period from January 1, 1989 to the present. Petitioner then suggested that older documents could be produced at a later date. Tr. pp. 11-12. Petitioner, however, offers only generalities about the burden of producing the additional documents.

The staff have indicated a sound basis for requesting documents going back to January 1, 1986.° There is thus no basis for limiting the staff to documents in the period suggested by Petitioner. The Commission staff and the Petitioner are free to work out any mutually agreeable schedule for the production of documents. If it is convenient for the Commission staff and the Petitioner to stage the production of documents by time period, that can be worked out between the staff and Petitioner. However, in this case, the Petitioner falls short of making the necessary showing for the Commission to order the Commission staff to limit production to the period suggested by Petitioner.

7 In this regard, the terminology relevant5 1 5 1 1 8 1279 2532 103 29 96.195213 artists in Definition 4 may have been an unfortunate choice of words. Alternative language, such as a neutral term, listed4 1 5 1 3 0 526 2627 1336 35 -1 5 1 5 1 3 1 526 2629 114 33 94.238876 artists, or Definitions 1 5 1 3 4 877 2629 19 28 96.900597 45 1 5 1 3 5 907 2628 113 33 96.416168 artists, would have made it clear that neither he Commission, nor the staff, was limiting the investigation to information about the seven listed artists. 8 It is unnecessary to repeat on the public record staffs basis for desiring documents as far back as 1986.

C. Petitioner asserts that compliance with the C.1.D. would be unduly burdensome, disrupt normal business operations, and damage Hang-Ups' reputation.

Petitioner operates an art auction business. According to the Petition, Hang-Ups has twelve employees, ten of whom work in the warehouse and would have no familiarity with Hang-Ups' business records, or how those records are maintained. Allegedly, only two of the three principals of Hang-Ups, the vice-president and the secretary/treasurer, are capable of identifying documents responsive to the C.I1.D. According to the Petition, both of these individuals are scheduled to travel extensively over the next few months to conduct auctions, and cannot remain in Hang-Ups' office to produce the requested documents without disrupting their auction schedule, foregoing substantial sales revenue, and disrupting customer relations. The Petition concludes that compliance with the C.I.D. is therefore unduly burdensome.

The Petition also alleges that the breadth of the C.I.D requesting documents for the period from January 1, 1986 to the present, is unnecessary and unwarranted. The extended period for which Petitioner is required to produce documents allegedly exacerbates the disruption to Hang-Ups' business that complying with the C.I.D. purportedly will cause.

In reviewing such claims of burden, it is instructive to restate the general rules that govern their consideration. First, thes 1 4 3 2 9 1799 2105 137 35 96.927658 burdens 1 4 3 2 10 1954 2105 42 35 95.910469 of4 1 4 3 3 0 656 2160 1336 47 -1 5 1 4 3 3 1 656 2160 166 46 96.491928 showings 1 4 3 3 2 838 2160 73 35 96.274635 that5 1 4 3 3 3 927 2171 43 24 96.903511 an5 1 4 3 3 4 987 2171 137 35 96.723526 agency5 1 4 3 3 5 1141 2161 184 46 94.861282 subpoenas 1 4 3 3 6 1340 2161 29 36 94.861282 is5 1 4 3 3 7 1386 2163 259 34 96.233269 unreasonable5 1 4 3 3 8 1660 2163 154 35 96.574272 remains5 1 4 3 3 9 1831 2163 86 35 96.770172 with5 1 4 3 3 10 1933 2164 59 35 96.634155 thea 1 4 3 4 0 654 2219 1336 45 -1 5 1 4 3 4 1 654 2219 244 45 96.094513 respondent. FTC v. Rockefeller, 591 F, 2d 182, 190 (2d Cir. 1979), quoting SEC v. Brigadoon Scotch Distributing Co., 480 F. 2d 1047, 1056 (2d Cir. 1973), cert. denied, 415 U.S. 915 (1974); accord FTC v. Texaco, Inc., 555 F, 2d. 862, 882 (D.C. Cir. 1977)(en banc). In Brigadoon, the Second Circuit added that where,5 1 4 3 8 8 1624 2465 37 24 96.990555 as5 1 4 3 8 9 1675 2455 92 41 96.828247 here,5 1 4 3 8 10 1782 2455 58 35 96.533699 thes 1 4 3 8 11 1854 2466 135 35 96.743408 agency4 1 4 3 9 0 652 2510 1337 48 -1 5 1 4 3 9 1 652 2510 140 46 96.418129 inquiry5 1 4 3 9 2 807 2511 29 34 97.010765 is5 1 4 3 9 3 853 2511 204 35 96.798882 authorized5 1 4 3 9 4 1071 2512 47 45 96.798882 by5 1 4 3 9 5 1133 2512 67 34 96.869728 laws 1 4 3 9 6 1216 2512 68 34 96.731804 ands 1 4 3 9 7 1299 2512 57 34 96.691399 thes 1 4 3 9 8 1370 2512 176 35 96.764488 materials5 1 4 3 9 9 1563 2513 128 45 96.823318 sought5 1 4 3 9 10 1707 2524 58 24 96.877457 ares 1 4 3 9 11 1779 2514 159 34 96.771088 relevant5 1 4 3 9 12 1954 2520 35 28 97.000908 to4 1 4 3 10 0 652 2568 1216 47 -1 5 1 4 3 10 1 652 2568 58 35 96.100311 thes 1 4 3 10 2 725 2568 153 46 96.227470 inquiry,5 1 4 3 10 3 895 2569 71 34 96.558754 that5 1 4 3 10 4 981 2569 135 35 96.889290 burdens 1 4 3 10 5 1131 2569 30 35 95.236031 is5 1 4 3 10 6 1176 2575 61 29 96.829941 not5 1 4 3 10 7 1252 2569 112 46 96.266235 easily5 1 4 3 10 8 1380 2570 102 35 95.542473 met. 480 F. 2d at 1056.

Second, as the court stated in Texaco, [w]Je5 1 4 4 1 9 1619 2629 207 45 96.422523 emphasizes 1 4 4 1 10 1842 2630 73 34 96.770180 that5 1 4 4 1 11 1930 2630 58 35 96.176682 thea 1 4 4 2 0 652 2684 1337 47 -1 5 1 4 4 2 1 652 2684 167 46 96.281898 questions 1 4 4 2 2 860 2684 30 35 96.712502 is5 1 4 4 2 3 932 2685 158 34 96.629257 whether5 1 4 4 2 4 1129 2686 58 34 96.457542 thes 1 4 4 2 5 1228 2686 153 34 96.794594 demands 1 4 4 2 6 1421 2686 30 34 96.922768 is5 1 4 4 2 7 1493 2686 135 45 96.261520 unduly5 1 4 4 2 8 1668 2686 241 36 93.655815 burdensome5 1 4 4 2 9 1950 2698 39 24 93.655815 or4 1 4 4 3 0 652 2743 617 45 -1 5 1 4 4 3 1 652 2743 262 45 96.418388 unreasonably5 1 4 4 3 2 929 2743 141 36 94.610497 broad. It added:

RESPONSES TO PETITIONS TO QUASH 1317 Some burden on subpoenaed parties is to be expected and is necessary in furtherance of the agency's legitimate inquiry and the public interest. ... Thus, courts have refused to modify investigative subpoenas unless compliance threatens to unduly disrupt or seriously hinder normal operations of a business. 555 F.2d at 882 (emphasis in original)(footnotes omitted). Finally, in order to attempt to meet the burden of showing unreasonableness, respondents must present something more than conclusory and unsupported claims of burden. In Rockefeller, for example, respondents prepared and submitted estimates of compliance costs. 591 F. 2d at 190. From this, it should be clear that a challenge to agency compulsory process based upon a claim of burden must be supported by some reasonable, substantial estimate of the cost of compliance and its relationship to the respondent's ongoing business operations. Unsubstantiated, conclusory claims will not meet the test -- they will not even come close. Federal Trade Commission Letter Ruling Re: Petition of Megatrend Telecommunications, Inc. to Limit and/or Quash CID, File No. 902 3281 (June 24, 1991).

While Petitioner attempts to place a specific cost on complying with the C.LD., it falls short of the required threshold showing to quash the C.LD. on this basis. The Petition explains the potential cost to Hang-Ups if the vice-president and the secretary/treasurer are forced to cease holding art auctions while they search for documents. However, the Petition admits that Hang-Ups has a clerical employee and a third principal. Much of the documentary material called for in the C.LD. should be easily identified. For instance, if a catalog lists a work by one of the artists listed in Definition 4, it should be produced; if a purchase order covers an artwork by one of the artists listed in Definition 4, it should be produced. This type of document production does not appear to require an intimate knowledge of the art in question. Hang-Ups does not explain why the existing clerical employee and other principal cannot be given instructions by the vice-president and the secretary/treasurer and do much of the work identifying documents called for by the C.I.D. It should be noted that the Commission staff has not objected to Petitioner's request for additional time to respond to the C.1.D. In addition, the staff offered to limit the initial burden by allowing 11S F.T.C.

Hang-Ups to produce documents relating to sales of relevant artworks to clients whose last names began with the letters R through Z. Staff offered to give Hang-Ups an indefinite extension on production of such documents for clients whose last names began with the letters A through Q. Letter from Monica Tait, Esq. to David Steiner, Esq. (February 13, 1992).° Petitioner falls short of the showing of burden necessary to quash the C.D. However, the Commission is persuaded by Petitioner's argument that the original time period in which to comply with the C.I.D., approximately 20 days, was too short. The Commission will modify the C.I.D. and extend the date for compliance with the C.LD.s to thirty days from the date of this letter. D. Petitioners assert that the disclosure of Hang-Ups' charity customers, as well as private purchasers, would destroy Hang-Ups' ability to do business with these customers in the future.

The Petitioner identifies this as perhaps its most critical concern. Petitioner alleges that the mere contacting of potential auction sponsors by the Commission staff, and identification of Hang-Ups as the target of the investigation, will likely cause the contacted party to refrain from doing business with Hang-Ups in the future. Petitioner identifies two instances when adverse publicity allegedly severely impacted the ability of an art auction firm to obtain customers. Petitioner argues that it is unfair to damage its business before it is even accused of any wrongdoing. The relief that Petitioner seeks is not a ban on the staff contacting its customers; indeed, the Petitioner recognizes that some customers must be contacted. Rather, the ° Staff reserved the ri ght to request the production of such documents on thirty days notice, if the staff decided that they needed the additional documents. RESPONSES TO PETITIONS TO QUASH 1319 Petitioner seeks some limitation on the staff, to prevent the wholesale contacting of customers. Tr. p. 24."° The Commission has faced this issue before. See Invention Submission at 65,353; Federal Trade Commission Letter Ruling Re: Petition of Invention Submission Corp. to Limit or Quash Civil Investigative Demands, File No. 882 3060 (October 4, 1991). In this case, the staff has disavowed any intention to contact all the customers, stating that they would contact only a small sampling of customers. In fact, the staff acknowledge that they only have the resources to contact a smal] sampling in any event. Tr. p. 37. The staff previously offered to forego the immediate production of any documents relating to Petitioner's customers whose names began with the letters A through Q. Staff would only request those documents if, after examining the other documents produced by Hang-Ups, the staff determined the additional documents were necessary. Letter from Monica Tait, Esq. to David Steiner, Esq. (February 13, 1992). What the staff seeks is to retain the flexibility to determine for themselves, as the investigation progresses, how to construct a reasonable sample of clients. The Commission agrees that it is reasonable to allow the staff that flexibility. The Commission denies Hang-Ups' request to limit the C.I.D. in this way. E. Petitioner asserts that the request for Hang-Ups' backup tape or disks for their computer system is not warranted. Petitioner argues that 15 U.S.C. 44 is the statute controlling what constitutes documentary evidence that the Commission may seek in the C.I.D., and that the statute does not include computer tapes or disks. Therefore Petitioner argues that Specification 8 of the C.I.D., 10 In the Petition at page 5, Petitioner also requested that the Commission staff be directed to tell those customers that it does contact, that there has been no specific accusation of wrongdoing made against Hang-Ups. In the oral presentation, Petitioner seems to have abandoned this request, stating that any such statement by staff would not affect the adverse impact on Hang-Ups' business. Tr. p. 13. Nevertheless, the Commission notes that Petitioner's concern is addressed by staff's policy to respond to the inquiries of interviewees that there has been no finding of wrongdoing on the part of the company about which they are asking questions. which calls for the production of the most recent backup tape or disk for Hang-Ups' computer system, is inappropriate. The statute under which the Commission issued the C.L.D. to Hang-Ups is Section 20 of the Federal Trade Commission Act, 15 U.S.C. 57b-1. Section 20(a)(5) defines documentary5 1 3 2 3 7 1771 872 180 35 95.387665 material”5 1 3 2 3 8 1969 879 37 28 97.015312 to4 1 3 2 4 0 667 916 1337 60 -1 5 1 3 2 4 1 667 916 147 36 96.508095 includes 1 3 2 4 2 844 917 77 36 89.155594 the original or any copy of any book, record, report, memorandum, paper, communication, tabulation, chart, or other document." (Emphasis supplied.) There is no requirement in the statute that a document created by a computer must have been printed on paper before the Commission can compel its production. Although Petitioner cites no authority for its position, it seeks to impose this requirement on the Commission. The statutory language covers documents of the types listed, without regard to whether they exist only in computer (machine) readable code or on a piece of paper.

Definition 5 of the C.I.D. defines the term documents to include material stored in computers, or in computer storage devices, including magnetic tapes or disks. Therefore, the Commission understands the C.I.D. to already call for the production of all documents which fall under Specifications 1 through 7, even if the documents are only available in the form of computer (machine) readable code on a magnetic tape, disk, or other computer storage device. Specification 8 calls, in addition, for all information on the backup tape or disk that is not called for by one of the other specifications. So long as the other information is relevant to the investigation, this request would be permissible. However, the Commission staff is requesting the production of whatever happens to have been encoded on the most recent backup tape or disk(s), without regard to whether it is in any way relevant to this investigation. The Commission concludes that this is overly broad.

The Commission therefore modifies Specification 8, limiting it to all documents stored on the most recent backup tape or disk(s) that relate, reflect, or refer to the purchase of, sale of, or trade in any relevant artwork included in Definition 4, the definition of relevant artwork, as that definition is modified above. For the purposes of this request, any data bases, data compilations, or spreadsheets included on the backup tape or disk(s) that contain any data entries that relate, RESPONSES TO PETITIONS TO QUASH 1321 reflect, or refer to the purchase of, sale of, or trade in such artworks shall be considered a single document, and the entire data base or data compilation shall be produced. By this modification, the Commission does not intend to limit the obligations of Petitioner to search any backup tape or disk(s) for information relevant to Specifications 1 through 7. It may be noted that Direction 7 of the C.I.D. requires that documents responsive to more than one specification need not be submitted more than once. Therefore, to the extent documents contained on the most recent backup tape or disk(s) are produced in response to one of the previous specifications, they need not be produced again.

III. Conclusion For the foregoing reasons, the Petition to Limit or Quash the Civil Investigative Demand for Documentary Material filed by Hang-Ups Art Enterprises, Inc. is granted in part and denied in part. Petitioners are directed to comply with the Civil Investigative Demand by close of business on April 30, 1992.

Pursuant to Rule 2.7(f), within three days after.service of this ruling, Petitioner may file with the Secretary of the Commission a request that the full Commission review the ruling. Commission Rule of Practice 4.4(b) provides that a document shall be deemed filed when it is received by the Office of the Secretary. See 16 CFR 4.4(b). The timely filing of such a request shall not stay the return date of this ruling, unless the Commission otherwise directs. Re: Petition of Japan Automobile Manufacturers Association, Inc. to Limit or Quash Subpoena Duces Tecum, File No. 901-0106.

April 20, 1992 Dear Mr. Tanaka:

This is to advise you of the Federal Trade Commission's ruling on the Petition to Limit or Quash Subpoena Duces Tecum, which you filed on behalf of your client, the Japan Automobile Manufacturers Association, Inc. ("JAMA" or Petitioner). The ruling set forth herein has been made by Commissioner Deborah Owen pursuant to authority delegated under Commission Rule of Practice 2.7(d)(4). Pursuant to Rule 2.7(f), within three days after service of this decision, Petitioner may file with the Secretary of the Commission a request for full Commission review. Whatever briefs or other material the Petitioner wishes the Commission to consider in reviewing this decision must accompany any such request in order to be considered as timely filed. The timely filing of such a request shall not stay the return date set forth in this ruling, unless the Commission otherwise specifies.

The Petition is granted in part and denied in part for the reasons stated below.

I. Background This subpoena arises in the context of the Commission's investigation of certain business practices of Japanese automobile manufacturers operating in the United States to determine whether they are or may be engaged in acts or practices in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, as amended. JAMA is a trade association whose membership includes thirteen Japanese automobile manufacturers. JAMA is based in Japan and has a United States office in Washington, D.C. On June 5, 1990, the Commission approved a resolution authorizing the use of compulsory process in this investigation. On February 11, 1992, the Commission issued to JAMA the subpoena RESPONSES TO PETITIONS TO QUASH 1323 duces tecum at issue in this Petition. The subpoena contained nine specifications and set forth a March 3, 1992 return date. Petitioner objected to producing certain documents under the subpoena. On several occasions, JAMA and the Commission's investigating staff discussed JAMA's concerns to limit or modify the subpoena. During the negotiations, staff extended the return date on the subpoena, pursuant to Commission Rule 2.7(c), until March 17, 1992. Staff denied JAMA's request to extend the deadline for filing a petition to quash or limit the subpoena, pursuant to Rule 2.7(d)(3). On March 2, 1992, JAMA filed the instant Petition. JAMA advances several arguments in support of its Petition: (1) the subpoena is outside the scope of the Commission's authority; (2) the subpoena requires production of confidential documents, including responsive documents that are politically5 1 3 3 4 7 1579 1379 202 40 87.448929 sensitive; (3) the subpoena seeks documents that are irrelevant to this investigation; (4) the subpoena is vague and indefinite; (5) the subpoena is unduly burdensome; and (6) JAMA is entitled to reimbursement of expenses incurred in complying with the subpoena. In connection with its burden argument, Petitioner also has requested a staggered production schedule to govern its compliance with the subpoena. Finally, Petitioner has requested that it be permitted to review any translations of foreign language documents obtained by the Commission or review the resume of any Commission-hired translator. JAMA has submitted a Memorandum of Law in Support of the Petition in which it elaborated upon the arguments raised in the Petition.

Commissioner Owen has carefully reviewed the Petition, accompanying exhibits, and supporting Memorandum. She has also considered the oral presentation on the Petition conducted on March 18, 1992. Petitioner's objections to the subpoena are discussed below.

II. Petitioner's Objections A. Petitioner alleges that the subpoena is outside the scope of the Commission's authority and that the subpoena was not issued for a lawful purpose.

115 F.T.C, Petitioner contends that the subpoena was5 1 3 1 1 7 1633 613 123 37 96.681808 issued5 1 3 1 1 8 1772 614 57 37 96.849419 for5 1 3 1 1 9 1844 626 175 36 96.709343 purposes4 1 3 1 2 0 680 664 1339 57 -1 5 1 3 1 2 1 680 664 102 36 97.015732 others 1 3 1 2 2 798 664 83 36 96.908722 than5 1 3 1 2 3 899 665 58 36 96.617027 thes 1 3 1 2 4 973 677 131 35 96.617027 proper5 1 3 1 2 5 1120 677 87 27 96.873688 ones5 1 3 1 2 6 1226 668 111 36 96.853676 under5 1 3 1 2 7 1354 670 58 35 96.668571 thes 1 3 1 2 8 1429 670 274 38 94.515877 Commission's5 1 3 1 2 9 1722 673 207 48 95.415970 authority, and that thes 1 3 1 3 3 881 734 80 37 96.493019 ways 1 3 1 3 4 987 725 36 36 96.512787 in5 1 3 1 3 5 1048 725 119 36 96.979744 which5 1 3 1 3 6 1195 727 71 43 96.577698 [thes 1 3 1 3 7 1291 728 198 47 95.606049 subpoena]5 1 3 1 3 8 1516 729 30 37 97.016975 is5 1 3 1 3 9 1571 730 108 48 97.016327 beings 1 3 1 3 10 1704 732 172 37 96.685532 enforced5 1 3 1 3 11 1900 734 31 35 96.818192 is5 1 3 1 3 12 1957 741 62 29 96.818192 nota 1 3 1 4 0 678 783 1340 48 -1 5 1 3 1 4 1 678 789 172 38 96.486542 pursuant5 1 3 1 4 2 869 788 36 30 96.570465 to5 1 3 1 4 3 927 794 19 24 96.811394 a5 1 3 1 4 4 967 783 123 36 96.696854 lawful5 1 3 1 4 5 1110 786 186 44 51.357094 purpose. JAMA Pet. at 2, Mem. at 11. In support of these allegations, Petitioner argues that the Commission's delay in issuing the subpoena, more5 1 3 1 6 7 1427 903 82 36 96.335297 than5 1 3 1 6 8 1525 910 133 41 96.516853 twenty5 1 3 1 6 9 1673 907 162 35 95.344536 months after the first round of subpoenas, somehow suggests that the Commission issued the subpoena for purposes that are not authorized by law. Petitioner further states that staff's refusal to make any5 1 3 1 9 10 1789 1082 224 46 95.309059 meaningful4 1 3 1 10 0 675 1130 1338 55 -1 5 1 3 1 10 1 675 1130 254 37 91.856522 concessions suggests that the Commission's action is not pursuant to a proper investigation, but to5 1 3 1 11 7 1417 1195 101 35 96.376495 shows 1 3 1 11 8 1547 1196 72 36 96.795265 that5 1 3 1 11 9 1648 1197 57 35 96.610168 thes 1 3 1 11 10 1735 1197 276 38 96.653641 Commission's4 1 3 1 12 0 673 1248 1336 54 -1 5 1 3 1 12 1 673 1248 178 37 96.612923 activities5 1 3 1 12 2 875 1249 36 36 96.980728 in5 1 3 1 12 3 934 1250 69 36 96.854851 this5 1 3 1 12 4 1027 1262 81 25 96.749794 areas 1 3 1 12 5 1131 1262 58 25 96.999550 ares 1 3 1 12 6 1212 1252 125 42 96.561264 active,5 1 3 1 12 7 1362 1254 122 45 96.950089 tough,5 1 3 1 12 8 1508 1254 69 36 93.248611 ands 1 3 1 12 9 1600 1256 289 46 84.956345 nonnegotiable.5 1 3 1 12 10 1916 1286 6 6 64.767029 .5 1 3 1 12 11 1949 1286 6 7 64.767029 .5 1 3 1 12 12 1982 1258 27 35 85.540886 . JAMA Pet. at 2.

This investigation and the attendant subpoena are plainly within the Commission's statutory authority. The FTC Act expressly provides that the Commission may prosecute5 1 3 2 3 7 1582 1500 67 34 96.433784 any5 1 3 2 3 8 1664 1490 139 45 96.415771 inquiry5 1 3 2 3 9 1818 1501 188 35 96.599388 necessary4 1 3 2 4 0 669 1541 1337 52 -1 5 1 3 2 4 1 669 1547 35 28 96.755272 to5 1 3 2 4 2 723 1541 44 35 96.742149 its5 1 3 2 4 3 785 1542 116 35 96.668922 duties5 1 3 2 4 4 919 1542 37 35 96.637146 in5 1 3 2 4 5 974 1553 69 35 96.637146 any5 1 3 2 4 6 1059 1549 76 39 97.004280 parts 1 3 2 4 7 1152 1544 43 34 96.844551 of5 1 3 2 4 8 1209 1544 57 34 96.983948 thes 1 3 2 4 9 1284 1545 131 35 96.736412 United5 1 3 2 4 10 1434 1545 133 36 96.590897 States and has the power to “gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce, excepting banks, savings and loan institutions * * * Federal credit unions * * * and common carriers * **" 15 U.S.C. 43, 46(a). Sections 6 and 9 of the FTC Act, 15 U.S.C. 46, 49, enumerate the Commission's specific investigative powers, including its authority to issue various forms of compulsory process. In particular, Section 9 authorizes the Commission to requires 1 3 2 14 2 835 2123 46 45 96.776505 by5 1 3 2 14 3 898 2124 183 45 96.878975 subpoenas 1 3 2 14 4 1095 2124 57 35 96.988708 thes 1 3 2 14 5 1168 2126 205 35 96.959579 attendance5 1 3 2 14 6 1388 2127 68 34 96.970100 ands 1 3 2 14 7 1471 2127 190 46 96.019958 testimony5 1 3 2 14 8 1676 2127 43 35 96.929283 of5 1 3 2 14 9 1729 2128 186 36 96.342232 witnesses5 1 3 2 14 10 1932 2130 68 34 96.582191 anda 1 3 2 15 0 663 2181 1336 51 -1 5 1 3 2 15 1 663 2181 57 34 96.405121 thes 1 3 2 15 2 743 2181 214 45 96.330086 productions 1 3 2 15 3 980 2181 43 35 96.994637 of5 1 3 2 15 4 1042 2182 46 35 90.003189 all5 1 3 2 15 5 1113 2182 86 36 96.686691 such5 1 3 2 15 6 1224 2184 254 46 96.686691 documentary5 1 3 2 15 7 1502 2184 174 37 96.688950 evidences 1 3 2 15 8 1697 2185 151 46 96.688950 relating5 1 3 2 15 9 1871 2193 36 28 96.108917 to5 1 3 2 15 10 1931 2197 68 35 96.813774 any4 1 3 2 16 0 662 2240 1336 46 -1 5 1 3 2 16 1 662 2244 125 30 96.549042 matters 1 3 2 16 2 805 2240 112 35 96.673935 under5 1 3 2 16 3 937 2240 284 46 58.908199 investigation.”5 1 3 2 16 4 1258 2242 132 35 94.420952 JAMA5 1 3 2 16 5 1409 2243 110 35 96.756805 raises5 1 3 2 16 6 1540 2253 46 25 96.414780 no5 1 3 2 16 7 1606 2244 206 35 96.414780 contentions 1 3 2 16 8 1832 2245 72 35 96.983337 that5 1 3 2 16 9 1923 2245 26 36 96.780190 it5 1 3 2 16 10 1969 2246 29 35 96.959846 is4 1 3 2 17 0 662 2298 1335 49 -1 5 1 3 2 17 1 662 2298 188 35 96.131721 somehow5 1 3 2 17 2 871 2305 143 39 96.773048 exempts 1 3 2 17 3 1034 2298 94 36 96.064590 from5 1 3 2 17 4 1149 2299 251 47 95.827843 investigations 1 3 2 17 5 1422 2312 39 24 95.801254 or5 1 3 2 17 6 1480 2301 143 46 96.443100 beyond5 1 3 2 17 7 1644 2302 57 36 96.857689 thes 1 3 2 17 8 1722 2303 275 36 92.208054 Commission's4 1 3 2 18 0 661 2356 331 47 -1 5 1 3 2 18 1 661 2356 185 46 95.897270 subpoenas 1 3 2 18 2 861 2367 131 36 96.842072 power.3 1 3 3 0 0 656 2415 1341 398 -1 4 1 3 3 1 0 734 2415 1263 49 -1 5 1 3 3 1 1 734 2415 219 36 92.889206 Petitioner's5 1 3 3 1 2 976 2416 207 36 96.845764 contentions 1 3 3 1 3 1204 2417 72 35 96.249260 that5 1 3 3 1 4 1296 2418 58 35 96.249260 thes 1 3 3 1 5 1376 2418 183 46 96.334663 subpoenas 1 3 3 1 6 1581 2430 72 25 96.193062 was5 1 3 3 1 7 1676 2419 121 36 96.064751 issued5 1 3 3 1 8 1819 2419 57 37 96.709358 for5 1 3 3 1 9 1896 2431 101 25 96.350609 some4 1 3 3 2 0 659 2473 1337 49 -1 5 1 3 3 2 1 659 2473 183 46 96.353394 improper5 1 3 3 2 2 859 2485 155 35 96.069221 purposes 1 3 3 2 3 1032 2475 31 35 96.795601 is5 1 3 3 2 4 1082 2476 85 34 96.873840 both5 1 3 3 2 5 1187 2477 241 45 96.727577 unsupported5 1 3 3 2 6 1448 2478 68 34 96.925156 ands 1 3 3 2 7 1534 2485 135 29 95.751976 untrue.5 1 3 3 2 8 1705 2479 76 35 96.740677 Thes 1 3 3 2 9 1799 2479 197 36 96.334061 resolution4 1 3 3 3 0 659 2531 1336 52 -1 5 1 3 3 3 1 659 2531 225 46 96.457703 authorizing5 1 3 3 3 2 909 2533 57 34 96.719330 thes 1 3 3 3 3 991 2544 62 24 96.528244 uses 1 3 3 3 4 1077 2533 42 35 96.796913 of5 1 3 3 3 5 1139 2535 230 44 96.909134 compulsory5 1 3 3 3 6 1392 2545 146 35 96.566002 process5 1 3 3 3 7 1563 2536 35 34 96.988075 in5 1 3 3 3 8 1623 2536 67 35 97.004715 this5 1 3 3 3 9 1715 2543 126 29 96.916298 matters 1 3 3 3 10 1863 2538 132 45 96.171402 clearly4 1 3 3 4 0 659 2590 1336 50 -1 5 1 3 3 4 1 659 2600 204 25 96.782639 announces5 1 3 3 4 2 879 2602 44 24 96.778603 an5 1 3 3 4 3 937 2590 251 46 95.916428 investigations 1 3 3 4 4 1204 2592 42 34 96.612732 of5 1 3 3 4 5 1256 2592 130 35 96.977341 certain5 1 3 3 4 6 1401 2593 163 36 96.960617 business5 1 3 3 4 7 1579 2594 172 45 96.981613 practices5 1 3 3 4 8 1767 2595 43 34 96.360840 of5 1 3 3 4 9 1841 2606 154 34 96.843971 Japanese4 1 3 3 5 0 658 2647 1338 48 -1 5 1 3 3 5 1 658 2647 214 36 96.358101 automobiles 1 3 3 5 2 886 2648 271 36 96.358101 manufacturers5 1 3 3 5 3 1172 2650 177 45 96.791092 operating5 1 3 3 5 4 1363 2651 35 34 96.805962 in5 1 3 3 5 5 1412 2651 56 35 96.957794 thes 1 3 3 5 6 1481 2651 129 35 96.553085 United5 1 3 3 5 7 1624 2652 111 35 96.919739 States5 1 3 3 5 8 1750 2653 82 42 96.646645 (ands 1 3 3 5 9 1847 2653 41 35 96.401901 of5 1 3 3 5 10 1898 2653 98 36 96.958794 other4 1 3 3 6 0 658 2707 1338 49 -1 5 1 3 3 6 1 658 2707 177 34 96.681892 unnamed5 1 3 3 6 2 850 2707 144 45 95.712196 parties)5 1 3 3 6 3 1009 2707 36 36 95.712196 in5 1 3 3 6 4 1060 2708 103 35 95.822441 orders 1 3 3 6 5 1178 2714 35 29 94.295334 to5 1 3 3 6 6 1241 2709 194 35 94.295334 determines 1 3 3 6 7 1452 2710 157 35 96.779419 whether5 1 3 3 6 8 1623 2721 68 35 96.836632 any5 1 3 3 6 9 1708 2711 86 35 96.715034 such5 1 3 3 6 10 1810 2722 130 34 95.778572 persons 1 3 3 6 11 1957 2722 39 25 96.734306 or4 1 3 3 7 0 656 2765 1337 48 -1 5 1 3 3 7 1 656 2774 148 35 96.385292 persons5 1 3 3 7 2 820 2775 81 36 96.577705 may5 1 3 3 7 3 915 2765 44 35 96.569817 be5 1 3 3 7 4 974 2766 161 45 96.569817 engaged5 1 3 3 7 5 1149 2766 47 41 96.714485 in,5 1 3 3 7 6 1212 2776 38 25 96.714485 or5 1 3 3 7 7 1264 2777 79 35 96.616966 may5 1 3 3 7 8 1358 2767 91 35 96.439072 have5 1 3 3 7 9 1464 2769 161 44 96.439072 engaged5 1 3 3 7 10 1639 2768 46 41 96.908997 in,5 1 3 3 7 11 1700 2769 116 35 96.487991 unfair5 1 3 3 7 12 1830 2770 163 35 96.393456 methods RESPONSES TO PETITIONS TO QUASH 1325 of competition in violation of Section 5. Seeking relevant records from the trade association that represents these manufacturers is hardly an unusual or questionable action. The subpoena is designed to elicit information that pertains to the lawful purposes of this investigation as cited in the resolution and authorized by law. The fact that the subpoena was issued later, rather than earlier, in the course of a complex investigation is irrelevant. Petitioner's related argument, that the staff's alleged unwillingness to negotiate somehow demonstrates an improper motive, is similarly without foundation. Petitioner's allegations as to the staff's unwillingness to negotiate the impact of the subpoena are belied by various modifications made by the staff during the course of its discussions with Petitioner's counsel and voluntarily proposed to the Commission at the hearing.' Hence, Petitioner's objection to the subpoena on grounds that it is outside the Commission's authority or was issued for an improper purpose is denied. B. Petitioner alleges that confidential and politically4 1 4 1 2 0 673 1646 863 45 -1 5 1 4 1 2 1 673 1647 192 33 77.013580 sensitive documents need not be produced.

Petitioner argues that it should not be required to produce certain responsive documents that contain confidential information. See JAMA Mem. at 24-25 (stating that Specification 7 seeks confidential documents analyzing sales, marketing, pricing, promotion or production of automobiles). Petitioner also argues that it should be permitted to produce redacted versions of politically5 1 5 1 6 8 1667 2052 190 36 90.868782 sensitive documents for fear that such documents would be turned over to persons other than Commission personnel, producing embarrassment. Hearing Tr. at 18-19. JAMA objects to the production of politically4 1 5 1 10 0 523 2285 1336 41 -1 5 1 5 1 10 1 523 2286 189 34 63.630424 sensitive’5 1 5 1 10 2 752 2286 212 35 96.363419 documents5 1 5 1 10 3 1002 2286 57 34 96.608963 for5 1 5 1 10 4 1096 2292 72 28 96.026421 two5 1 5 1 10 5 1205 2296 156 25 66.768860 reasons.5 1 5 1 10 6 1437 2285 100 41 90.840492 First,5 1 5 1 10 7 1576 2286 26 35 95.900208 it5 1 5 1 10 8 1640 2292 107 29 92.847145 states5 1 5 1 10 9 1786 2286 73 35 88.862053 that4 1 5 1 11 0 522 2343 1337 46 -1 5 1 5 1 11 1 522 2343 248 36 95.652893 Commissions 1 5 1 11 2 789 2355 122 24 96.652733 access5 1 5 1 11 3 930 2350 36 29 96.043907 to5 1 5 1 11 4 985 2344 43 35 96.043907 its5 1 5 1 11 5 1048 2355 144 24 96.802155 sources5 1 5 1 11 6 1211 2343 42 36 96.912849 of5 1 5 1 11 7 1268 2343 230 36 96.289528 information5 1 5 1 11 8 1516 2344 150 35 96.380814 without5 1 5 1 11 9 1684 2344 175 45 96.575249 adequate4 1 5 1 12 0 522 2401 1334 47 -1 5 1 5 1 12 1 522 2401 206 46 96.555153 safeguards5 1 5 1 12 2 743 2402 120 35 96.676109 would5 1 5 1 12 3 878 2402 44 35 96.974426 be5 1 5 1 12 4 937 2402 219 35 96.716507 detrimental5 1 5 1 12 5 1172 2408 36 29 96.656143 to5 1 5 1 12 6 1223 2402 43 35 96.864403 its5 1 5 1 12 7 1281 2402 163 35 96.511330 business5 1 5 1 12 8 1459 2402 213 46 96.249176 operations.5 1 5 1 12 9 1702 2402 154 41 96.905869 Second,4 1 5 1 13 0 521 2461 1337 45 -1 5 1 5 1 13 1 521 2461 26 33 96.856529 it5 1 5 1 13 2 574 2461 189 34 96.655083 maintains5 1 5 1 13 3 791 2461 72 34 96.526695 that5 1 5 1 13 4 889 2461 199 45 96.635674 producing5 1 5 1 13 5 1116 2461 87 34 95.878136 such5 1 5 1 13 6 1233 2461 206 34 88.086586 sensitive" documents without redacting the identities and corporate affiliations of JAMA's sources of information may subject such individuals to potential retaliation. ' See, e.g., note 8, infra (discussing staff's suggested modifications). Petitioner proposed to redact the identities of individuals and produce redacted copies to Commission staff. In addition, JAMA proposed to permit one Commission representative to review the original, unredacted documents in JAMA's offices.

1. Confidential information The confidential nature of certain information does not place it beyond the reach of the Commission's compulsory processes. As the United States District Court for the District of Columbia has stated: Congress, in authorizing the Commission's investigatory power, did not condition the right to subpoena information on the sensitivity of the information sought. So long as the subpoena meets the requirements of the FTC Act, is properly authorized, and within the bounds of relevance and reasonableness, the confidential information is properly requested and [the subpoena] must be complied with. FTC v. Invention Submission Corp., 1991-1 Trade Reg. Rep. (CCH) { 69,338 at 65,353 (D.D.C. Feb. 14, 1991), appeal pending, No. 91-5174 (D.C. Cir. argued March 9, 1992) (footnote omitted).” In addition, extensive statutory safeguards protect confidential information once supplied. Section 21 of the FTC Act mandates that information obtained by compulsory process during the course of a Commission investigation must be kept confidential.? 15 U.S.C. * There is abundant case law upholding the Commission's authority to obtain confidential documents. See, e.g., FTC v. Gibson Products of San Antonio, Inc., 569 F.2d 900, 908 (Sth Cir. 1979); FTC v. Lonning, 539 F.2d 202, 206, 209-210 (D.C. Cir. 1976); FTC v. Tuttle, 244 F.2d 605, 616 (2d Cir.), cert. denied, 354 U.S. 925 (1957); TK-7 Corp. v. FTC, 738 F. Supp. 446, 447 (W.D. Okla. 1990); FTC v. Karr, 1978-1 Trade Cas. (CCH) { 61,932 (D.D.C. 1978).

Prior to enactment of Section 21 of the FTC Act, the confidentiality of information obtained by compulsory process during the course of a Commission investigation (with the exception of trade secrets and customer identity, which were governed by Section 6(f) of the FTC Act) was governed by the terms of the Freedom of Information Act, 5 U.S.C. 552. The authority granted agencies under subsection (b) of that Act to withhold information is discretionary. The effect of Section 21(b) of the FTC Act was to replace discretion to withhold with a mandatory requirement to withhold.

Section 21 was enacted in 1980 as Section 14 of the Federal Trade Commission Improvements Act of 1980. Senator Wendell H. Ford, the Senate Manager of the legis- RESPONSES TO PETITIONS TO QUASH 1327 57b-2(b); See also 15 U.S.C. 46(f); 16 CFR 4.10. Section 21(b)(6) sets forth the manner in which the Commission may disclose confidential information received pursuant to process to other federal law enforcement agencies and to state law enforcement agencies. 15 U.S.C. 57b-2(b)(6). In particular, the Commission must secure from the requesting law enforcement agency a certification that such information will be maintained in confidence. Jd. In addition, Section 21(b)(3)(C) provides for the disclosure of documents or testimony obtained by the Commission's compulsory process to congressional committees or subcommittees upon request. In such instances, however, the Commission immediately must notify the owner or provider of the requested information about the congressional access request, if the requested information is designated as confidential by the owner or provider of the information.’ These statutory safeguards for confidential information, obtained by compulsory process during the course of a Commission investigation, were enacted, in part, to confirm and facilitate the Commission's ability to obtain confidential information in the course of its investigations and to safeguard that information once obtained. lation, provided some background leading to enactment of this provision, stating that: the problem of obtaining information at the Commission does exist. Businesses frequently take the Federal Trade Commission to court to quash subpoenas, because of the fear that the FTC will release their confidential information to competitors. . . . The FTC Conference Report emphasizes that this provision was adopted due to the special circumstances surrounding the difficulty of receipt of information by the FTC. 126 Cong. Rec. 11914 (1980), reprinted in 7 Kintner, The Legislative History of the Federal Antitrust Laws and Related Statutes, 5911 (1983). During the hearing, Petitioner's counsel conceded that Congress has the authority to subpoena JAMA's documents on its own initiative, and that the Commission is not a necessary conduit for congressional access to such documents. Hearing Tr. at 33. Congress has inherent constitutional authority to investigate, and individual committees and subcommittees are delegated authority by the full House of Representatives and Senate to subpoena witnesses, testimony, and documents. See McGrain v. Daugherty, 273 U.S. 135, 174-75 (1927); See also Standing Rules of the Senate, 102nd Congress, Second Session, Rule 26(1) (Revised to March 18, 1992) [S. Doc. 102-17]; Rules of the House of Representatives, 102nd Congress, Rule XI], cl. 2(m)(1) (adopted Jan. 3, 1991) [H. Doc. 101-256]. The Commission finds that the subpoena issued to JAMA meets the test enunciated by the U.S. District Court in Invention Submission. Accordingly, Petitioner's objection to the production of confidential information is denied. Responsive confidential information is properly requested and must be produced.

2. Politically5 1 4 1 1 3 1305 995 188 36 90.504028 sensitive documents Petitioner states that the primary basis for its objections to the subpoena is that it requires the production of politically5 1 5 1 2 10 1826 1173 190 36 91.361412 sensitive documents. JAMA objects to the production of these documents because it believes such documents are marginally5 1 5 1 4 8 1689 1290 206 45 96.769318 responsive5 1 5 1 4 9 1910 1297 36 29 97.006279 to5 1 5 1 4 10 1960 1291 57 35 97.012543 thea 1 5 1 5 0 680 1345 1335 44 -1 5 1 5 1 5 1 680 1345 213 44 95.312721 subpoena, and because of the sensitive nature of these documents. JAMA Mem. at 9. Petitioner has offered to redact the identities and corporate affiliations of individuals mentioned in these documents and to permit a single designated Commission staff representative to review the nonredacted original documents in JAMA's offices. However, Petitioner has failed to offer any legal precedent to support this proposal.

The Commission can compel the production of complete and unexpurgated responsive documents. See FTC v. United States Borax & Chem. Co., 1978-1 Trade Reg. Rep. (CCH) J 61,939 (D.D.C. Feb. 17, 1978); See also SEC v. Vacuum Can Co., 157 F.2d 530, 531 (7th Cir. 1946); In re Indusco, Inc., 15 F.R.D. 7, 10 (S.D.N.Y.1953). Requiring the production of complete, nonredacted documents facilitates the Commission's understanding of such documents. Relevant information often may be useful only if it is presented in the same context in which it was originally created. Further, to sustain the subpoena, a court need only find that the requested documents are relevant to a lawfully authorized inquiry. See Indusco, 15 F.R.D. at 10. Accordingly, the Commission has the authority to subpoena any of these politically5 1 5 2 13 4 1097 2452 188 35 85.972832 sensitive documents that are relevant to the investigation, and as previously discussed, adequate procedures are provided to protect such information.

Staff recently made a proposal to Petitioner in an attempt to limit its obligations to produce politically5 1 5 3 2 6 1394 2686 183 35 91.104271 sensitive documents that might not be relevant to this investigation. Petitioner agreed to staff's proposal that two staff attorneys be afforded an opportunity to RESPONSES TO PETITIONS TO QUASH 1329 examine these politically5 1 3 1 1 4 1039 614 187 38 72.069046 sensitive documents for relevancy in the offices of either Petitioner or its counsel. On April 10, 1992, two Commission staff members examined politically5 1 3 1 3 6 1532 724 189 37 89.460411 sensitive documents that were made available for their review in the offices of Petitioner's counsel. From that examination, the staff was able to determine that some “politically sensitive" documents are relevant and would further this investigation. Accordingly, Petitioner is hereby required to produce all relevant documents, regardless of their “political sensitivity."

C. Petitioner asserts that some other specifications are also irrelevant.

The courts give relevance a broad interpretation in enforcing Commission compulsory process. As the United States District Court for the District of Columbia recently stated: Because the need for investigating allegations of unlawful activity is a substantial one, the law requires that courts give agencies leeway when considering relevance objections.

FTC v. Invention Submission Corp., at 65, 351. More particularly, relevance is measured against the agency's general purpose in gathering investigative materials, as described by the underlying resolution authorizing compulsory process. FTC v. Texaco Inc., 555 F.2d 862, 874 (D.C. Cir. 1977), cert. denied, 431 U.S. 974 (1977). JAMA has raised five objections on relevance grounds. First, JAMA opposes specifications seeking information relating to the manufacture of automobiles, as opposed to automobile parts procurement. Second, it objects to the production of documents dating back to January 1, 1988. Third, JAMA challenges Specification 4, which seeks minutes and other documents that describe JAMA meetings. Fourth, it argues that Specification 6 requires the production of documents relating to competition among auto manufacturers in the United States, including documents discussing agreements, coordination efforts, meetings, communications or conversations among such manufacturers. Fifth, JAMA challenges Specification 9, which seeks documents relating to future plans or efforts to substitute auto parts manufactured in the United States for other parts.

1. Documents relating to the manufacture of automobiles In its papers, Petitioner challenges Specifications I(e), 2, 3(c), 6(c) and 7, because they require production of information relating to the manufacture of automobiles. JAMA argues that this investigation focuses only on the procurement of parts by manufacturers manufacturing automobiles in the United States, and that documents pertaining to automobile manufacturing are therefore irrelevant. During its oral presentation, Petitioner conceded that the Commission's resolution describes this investigation to include the restriction of competition in the United States auto parts industry or the automobile industry.° Given this admission, and the clear language of the resolution, its objection to production of plainly relevant information on automobile manufacturing is denied. 2. Documents dating back to January 1, 1988 In its papers, JAMA challenged the relevancy of 1988-89 documents, stating that such documents would be stales 1 7 1 2 9 1873 1855 69 35 96.960533 ands 1 7 1 2 10 1968 1854 42 36 96.365768 of4 1 7 1 3 0 669 1913 1336 47 -1 5 1 7 1 3 1 669 1917 185 35 96.411095 historical5 1 7 1 3 2 885 1916 105 35 93.269821 values 1 7 1 3 3 1021 1915 115 45 85.606438 only.. JAMA Mem. at 12. During its oral presentation, however, Petitioner conceded both the relevancy of 1988-89 documents that discussed auto parts procurement and that the Commission's resolution encompasses the possible restriction of competition in both the United States auto parts industry and the automobile industry. Hearing Tr. at 6-8. At the hearing, JAMA > Atthe hearing, Commissioner Owen asked whether it was Petitioner's position that the subpoena is not within the scope of the Commission's resolution authorizing compulsory process, or instead that the specifications are covered by the resolution but are not within the focus of the Commission's investigation. Petitioner's counsel responded that JAMA took the latter position. He further stated that the Commission clearly has the authority under the resolution to seek documents specified in the subpoena. Petitioner's counsel, however, suggested that both the title of this investigation -- Foreign5 1 10 1 7 4 1072 2706 76 26 96.732506 Auto5 1 10 1 7 5 1161 2704 77 28 96.947983 Parts5 1 10 1 7 6 1251 2703 218 37 93.260300 Investigation -- and the congressional hearings that preceded it indicate that automobile parts procurement practices are the real focus. Hearing Tr. at 6-8.

RESPONSES TO PETITIONS TO QUASH 1331 agreed to produce 1988-89 documents that discuss auto parts procurement, but continued its objection to production of 1988-89 documents that discuss automobile manufacturing. Petitioner did not pose a wholesale challenge to the relevancy of 1990-91 documents sought under the subpoena (although it has objected to production of certain documents on other grounds).

Administrative agencies vested with investigatory power have broad discretion to require the disclosure of information concerning matters within their jurisdiction. Phillips Petroleum Co. v. Lujan, 951 F.2d 257, 260 (10th Cir. 1991) (upholding agency's right to request and obtain documents more than six years old). Further, a district court must enforce an administrative subpoena unless the evidence sought is plainly incompetent or irrelevant to any legal purpose of the agency. /d., citing Endicott Johnson v. Perkins, 317 U.S. 501, 509 (1943).

Petitioner's documents dating back to January 1988 are relevant to this investigation because Japanese-owned automobile and parts manufacturers have been operating in the United States since before 1988.° In addition, when Chairman Steiger testified on behalf of the Commission before the Committee on the Judiciary of the United States House of Representatives on May 3, 1990, she publicly announced this investigation. JAMA documents prepared in 1988-89 are therefore particularly important since documents created after this investigation became public may be colored by knowledge of its existence.

The four-year time period covered by the subpoena is not contemporaneous with the entire tenure of Japanese car manufacturing in the United States. Honda began manufacturing cars in the United States in 1982, Nissan in 1985, and Mazda in 1987. See United States Department of Commerce Study on Foreign Direct Investment in the United States, August 1991, at 19, 55. Japanese automobile parts companies began making substantial investments in parts manufacturing facilities in this country in the mid-1980s. See Department of Commerce Study on Japanese Direct Investment in United States Manufacturing, August 1991, at 19. JAMA began conducting its business in Washington, D.C. in mid-1976 and notes in its Petition and supporting papers that it has played an important role in encouraging Japanese-owned automobile and parts manufacturers to open facilities in this country since 1980. See JAMA Certificate and Application for Certificate of Authority, filed with District of Columbia Department of Consumer & Regulatory Affairs, Business Regulation Administration, Corporations Division (Jan. 23, 1992), at 3. Counsel for Petitioner admitted during its oral presentation that 1988-89 documents could contain information about a violation of Section 5 during that time period.’ Such documents are clearly relevant, given the activities of Japanese-owned automobile and parts manufacturers in this country during that period. For the foregoing reasons, Petitioner's objection to producing 1988-89 documents discussing automobile manufacturing is denied. 3. Documents pertaining to all JAMA meetings Petitioner objected to Specification 4 on relevancy grounds. That Specification seeks documents pertaining to all JAMA meetings. Subsequent to the filing of JAMA's Petition and pursuant to Rule 2.7(c), staff modified Specification 4 and limited its scope to the following documents:

All minutes and other documents recording or describing meetings of JAMA and any JAMA chapter, subdivision, office and affiliate that relate to the manufacturing of automobiles in the United States or the procurement _of parts by manufacturers manufacturing automobiles in the United States. See Letter from Michael D. McNeely to H. William Tanaka (March 9, 1992) (emphasis added). The Commission now must determine whether the documents sought under this Specification are relevant and whether the modification imposes any undue burden on Petitioner.

As noted earlier, Petitioner has conceded that the Commission's resolution authorizing the use of compulsory process in this investigation encompasses both the automotive industry and the auto 7 COMMISSIONER OWEN: Well, now, is it your position that the documents pertaining to this 1988 to 1990 period would not be probative of any wrongdoing that may have taken place during that period? MR. TANAKA: Well, if it is first of all still information which may be of some historical value.

COMMISSIONER OWEN: Well, it might be historical value about a violation of Section 5, might it not? MR. TANAKA: Conceivably, yes.

COMMISSIONER OWEN: Hypothetically speaking. Hearing Transcript at 20.

RESPONSES TO PETITIONS TO QUASH 1333 parts industry. We find that, as modified by the staff, Specification 4 lies within the bounds of relevance, and this further limitation imposes no undue burden on Petitioner. We therefore adopt staff's modification to this Specification as set forth in staff's March 9, 1992 letter to Petitioner's counsel.

4. Specification 6 JAMA objected to Specification 6 on grounds that it requires production of documents relating to virtually every aspect of its activities, irrespective of their relevance to this investigation. JAMA Mem. at 24. This specification seeks documents relating to competition among automobile manufacturers in the United States, including documents discussing agreements, coordination efforts, meetings, communications, or conversations among such manufacturers.

Petitioner fails to offer, and we cannot determine, any basis for finding such documents to be outside the scope of this investigation. As noted earlier, courts give relevance a broad interpretation in enforcing the Commission's compulsory process. This investigation is to determine, inter alia, whether certain persons or entities are restricting competition in the United States auto parts or automotive industry. The Commission's process resolution enumerates certain anticompetitive practices that may have been the means used in restricting competition. These practices include equity exchanges, interlocking directorates, intra-group financial commitments, joint research and development efforts, membership in exclusive management councils or clubs with certain auto parts manufacturers, and predatory or discriminatory pricing or refusals to deal with certain groups or suppliers. We are persuaded that documents that discuss competition among auto manufacturers that manufacture in the United States would likely bear upon whether certain persons or entities have engaged in any of the foregoing anticompetitive practices. Likewise, documents that discuss or relate to agreements, meetings, communications or conversations between or among manufacturers, concerning the manufacture, sale, or distribution of automobiles or parts procurement, would likely bear upon whether Petitioner or its members have engaged in these practices in restraint of trade.

We find that documents described in Specification 6 are properly within the scope of this investigation and are relevant to whether manufacturers may be restricting competition involving either the auto parts or the automotive industry. Accordingly, Petitioner's objection to Specification 6 on relevancy grounds is denied. 5. Documents that discuss future plans or efforts Petitioner objects to Specification 9, which seeks documents relating to present or future plans or efforts to substitute auto parts manufactured in the United States for other parts. JAMA contends that future plans or efforts are irrelevant to the conduct at issue, which is alleged to have occurred between 1988 and the present. JAMA Mem. at 24.

We find that documents relating to future plans or efforts are relevant to the Commission's investigation. Future business plans of Petitioner and its members may bear upon how they conduct themselves now. Such documents also could assist in interpreting other documents that describe current or recent business practices. In addition, such documents are likely to shed light on past parts procurement practices. Accordingly, Petitioner's objection to the production of documents relating to future plans or efforts to substitute auto parts manufactured in the United States for others is denied.

D. Petitioner alleges that the subpoena is vague and indefinite. Petitioner argues that the subpoena fails to describe material sought with sufficient particularity or definiteness. However, although JAMA asserts that certain definitions and specifications within the subpoena are vague and indefinite, it fails to identify them. We are given no specific language from the subpoena that is purportedly ambiguous or unclear, and Petitioner must provide more than rhetorical flourishes in order to prevail. Accordingly, Petitioner's conclusory and unsupported objection on grounds of vagueness or indefiniteness is denied.

RESPONSES TO PETITIONS TO QUASH 1335 E. Petitioner argues that the subpoena is unduly burdensome. Petitioner objects to the subpoena on burdensomeness grounds for several reasons, each of which is discussed separately in the following sections. Before turning to the merits of Petitioner's arguments, it is instructive to restate the general rules that govern claims of burden.

Our analysis is guided by several standards. First, thes 1 4 2 1 10 1676 1040 134 35 96.512215 burdens 1 4 2 1 11 1825 1038 42 36 96.512215 of4 1 4 2 2 0 526 1097 1338 57 -1 5 1 4 2 2 1 526 1109 166 45 96.686172 showings 1 4 2 2 2 709 1109 73 34 96.568054 that5 1 4 2 2 3 797 1118 45 25 96.947624 an5 1 4 2 2 4 857 1116 137 36 96.928490 agency5 1 4 2 2 5 1011 1104 185 46 96.769745 subpoenas 1 4 2 2 6 1211 1103 30 35 96.949043 is5 1 4 2 2 7 1257 1100 260 38 96.710083 unreasonable5 1 4 2 2 8 1532 1099 155 36 96.710083 remains5 1 4 2 2 9 1703 1097 86 36 97.008003 with5 1 4 2 2 10 1805 1097 59 35 96.973717 thea 1 4 2 3 0 525 1155 1337 57 -1 5 1 4 2 3 1 525 1166 244 46 74.595802 respondent. FTC v. Rockefeller, 591 F.2d 182, 190 (2d Cir. 1979), quoting SEC v. Brigadoon Scotch Distributing Co., 480 F.2d 1047, 1056 (2d Cir. 1973), cert. denied, 415 U.S. 915 (1974); accord FTC y. Texaco, Inc., 555 F.2d at 882. In Brigadoon, the Second Circuit added that where,5 1 4 2 7 4 914 1407 38 25 96.980927 as5 1 4 2 7 5 967 1396 95 40 96.938217 here,5 1 4 2 7 6 1079 1395 58 36 96.623566 thes 1 4 2 7 7 1153 1404 137 36 96.623566 agency5 1 4 2 7 8 1306 1392 141 47 96.441551 inquiry5 1 4 2 7 9 1462 1392 30 35 96.503792 is5 1 4 2 7 10 1510 1389 206 38 96.503792 authorized5 1 4 2 7 11 1732 1389 47 46 96.975800 by5 1 4 2 7 12 1795 1389 69 35 96.901093 law4 1 4 2 8 0 526 1448 1339 52 -1 5 1 4 2 8 1 526 1458 69 36 96.997482 ands 1 4 2 8 2 608 1458 57 35 97.009064 thes 1 4 2 8 3 679 1456 175 36 96.968513 materials5 1 4 2 8 4 868 1455 127 45 96.840363 sought5 1 4 2 8 5 1009 1464 57 25 96.990768 ares 1 4 2 8 6 1078 1453 155 35 96.778122 relevant5 1 4 2 8 7 1246 1458 36 29 96.926109 to5 1 4 2 8 8 1295 1452 58 35 96.963531 thes 1 4 2 8 9 1366 1450 148 47 96.998192 inquiry,5 1 4 2 8 10 1529 1449 72 36 96.878899 that5 1 4 2 8 11 1612 1449 135 35 96.927307 burdens 1 4 2 8 12 1761 1448 29 34 96.721176 is5 1 4 2 8 13 1804 1453 61 29 96.721176 nota 1 4 2 9 0 526 1511 592 49 -1 5 1 4 2 9 1 526 1516 113 44 96.405006 easily5 1 4 2 9 2 655 1515 102 35 95.045326 met. 480 F.2d at 1056.

Second, as the court stated in Texaco, [w]e5 1 4 3 1 9 1495 1566 207 46 96.670364 emphasizes 1 4 3 1 10 1718 1565 73 35 97.001572 that5 1 4 3 1 11 1807 1564 57 35 97.016876 thea 1 4 3 2 0 526 1624 1339 53 -1 5 1 4 3 2 1 526 1632 169 45 96.366966 questions 1 4 3 2 2 736 1631 29 34 95.938889 is5 1 4 3 2 3 806 1630 159 34 95.677223 whether5 1 4 3 2 4 1004 1629 59 34 95.677223 thes 1 4 3 2 5 1102 1627 155 35 96.431442 demands 1 4 3 2 6 1297 1626 31 34 95.419899 is5 1 4 3 2 7 1369 1626 136 44 95.060631 unduly5 1 4 3 2 8 1544 1624 241 35 95.060631 burdensome5 1 4 3 2 9 1826 1633 39 23 95.767532 or4 1 4 3 3 0 527 1686 618 47 -1 5 1 4 3 3 1 527 1689 264 44 96.423157 unreasonably5 1 4 3 3 2 805 1687 141 35 89.174393 broad. It added:

Some burden on subpoenaed parties is to be expected and is necessary in furtherance of the agency's legitimate inquiry and the public interest. ... Thus, courts have refused to modify investigative subpoenas unless compliance threatens to unduly disrupt or seriously hinder normal operations of a business. 555 F.2d at 882 (emphasis in original) (footnotes omitted). Finally, in order to meet the burden of showing unreasonableness, respondents must present something more than conclusory and unsupported claims of burden. In Rockefeller, for example, respondents prepared and submitted estimates of compliance costs. 591 F.2d at 190. From this, it should be clear that a challenge to agency compulsory process based upon a claim of burdensomeness must be supported by some reasonable, substantiated estimate of the cost of compliance and its relationship to the respondent's ongoing business operations. Unsubstantiated, conclusory claims will not meet the test -- they will not even come close. This requirement is consistent with the Commission's previous rulings on petitions to limit or quash subpoenas or civil investigative demands. See generally Commission ruling on Petition of Brana Publishing, Inc. to Limit or Quash CID, letter to Lawrence I. Fox, Esquire (March 26, 1992), File No. 872-3209; Commission ruling on Petition of Winnebago Industries, Inc. to Quash or Limit CIDs, letter to Christopher Smith, Esquire (July 26, 1991), File No. 902-3240; Commission ruling on Petition of Megatrend Telecommunications, Inc. to Limit and/or Quash CID, letter to Daniel Shepro, Esquire (June 24, 1991), File No. 902-3281. 1. Effect on normal business operations Petitioner asserts that compliance with this unduly5 1 5 1 1 8 1777 1220 241 37 96.304977 burdensome4 1 5 1 2 0 678 1265 1340 60 -1 5 1 5 1 2 1 678 1265 68 35 96.977272 ands 1 5 1 2 2 768 1268 264 46 96.347511 unreasonably5 1 5 1 2 3 1052 1269 129 36 96.196663 broad subpoena threatens to unduly disrupt or seriously hinder its normal operations. JAMA Mem. at 19-20. In its oral presentation, Petitioner stated that it suffers from personnel changes every several years, and as a result, its files have not been kept in a systematized fashion that would facilitate the search for responsive documents. However, although JAMA stated in its papers that it has only four employees in its Washington, D.C. office, it emphasized in its oral presentation that manpower would not be a problem because any number of paralegals from its law firm could be enlisted to conduct the document search. JAMA indicated that approximately ninety boxes of documents are responsive to the subpoena. Hearing Tr. at 26.

Petitioner's unsupported assertions are insufficient to warrant a limitation on production of lawfully demanded documents on burdensomeness grounds. In the absence of any specificity in this regard, and given the lack of manpower constraints, Petitioner has not demonstrated that production of the relevant information could amount to the type of burden that would unduly5 1 5 2 6 10 1624 2265 135 46 96.957497 disrupt5 1 5 2 6 11 1772 2277 40 24 96.873466 or5 1 5 2 6 12 1826 2267 174 47 96.873466 seriously4 1 5 2 7 0 660 2313 1338 49 -1 5 1 5 2 7 1 660 2313 127 36 96.953499 hinders 1 5 2 7 2 817 2316 136 34 96.621292 normal5 1 5 2 7 3 985 2317 205 45 96.521881 operations5 1 5 2 7 4 1222 2318 42 35 95.800888 of5 1 5 2 7 5 1291 2329 19 24 95.800888 a5 1 5 2 7 6 1340 2319 196 43 95.709702 business, as the standard was described in Texaco, 555 F.2d at 882. Moreover, Petitioner has failed to offer evidence to substantiate its claim that its normal business operations would be unduly disrupted or seriously hindered. Accordingly, its objection on such grounds is denied. RESPONSES TO PETITIONS TO QUASH 1337 2. Time for compliance The reasonableness of the return date is measured under the general rules for evaluating burdensomeness described above. Petitioner offers some substantive information on which to determine the reasonableness of the time allowed for response to the subpoena. Although JAMA did not specifically object to the time for compliance in its Petition, the supporting memorandum states, inter alia:

A return date of March 3, 1992 is patently unreasonable. Considering the extremely broad scope of the Commission's subpoena, requiring JAMA to respond in less than three weeks is clearly unreasonable. The subpoena seeks virtually every document in JAMA's custody or control. Thousands of documents, many in Japanese, will have to be reviewed. Thus, it is not physically possible for JAMA to comply by the return date.

OK Ok After JAMA counsel explained the unduly burdensome nature of compliance with the subpoena in such a short period of time, Commission staff extended the deadline for compliance with the subpoena until March 17 and denied the scope and other issues raised by JAMA counsel. Under the circumstances, an extension of time until only March 17 is not meaningful.

JAMA Mem. at 14.

Petitioner also has noted that Instruction 5 imposes an additional burden on it in meeting the Commission deadline because some of its documents are in Japanese. JAMA states that an attorney and an interpreter must review each Japanese document to identify privileged material. JAMA agrees to produce all responsive Japanese documents without translation, but with all privileged material redacted. JAMA Mem. at 16.

The Commission is persuaded that the original time period, approximately 21 days, was too short, given the exceptional circumstances of this case, including the nature of Petitioner's business, the nature of the document request, and the hurdles presented in identifying privileged communications among JAMA's foreign language documents. The Commission will extend the date for compliance with the subpoena to May 20, 1992. 3. Schedule of privileged documents Petitioner objects to Instruction 5 of the subpoena, which requires it to state, in writing, individually for each document withheld under a claim of privilege:

its type, title, subject matter, and date; the names, addresses, positions, and organizations of each author and recipient; and the specific grounds for claiming that the document is privileged as well as facts sufficient to support such a claim. JAMA asserts that this requirement imposes an unreasonable and unfair burden, “tantamount to an arbitrary and unlawful denial of a reasonable opportunity to assert the privilege." JAMA Mem. at 15. Providing the information required under Instruction 5 is a predicate to asserting a claim of privilege here. Commission Rule 2.8A requires any person withholding material responsive to an investigational subpoena, if so directed in the subpoena, to submit the information called for in Instruction 5. Federal courts impose similar requirements for litigants withholding documents based on a claim of privilege. See, e.g., Peat, Marwick, Mitchell & Co. v. West, 748 F.2d 540 (10th Cir. 1984), cert. dismissed, 469 U.S. 1199 (1985), Eureka Financial Corp. v. Hartford Accident and Indemnity Co., 19 Fed. R. Serv. 3d 1448 (E.D. Cal. March 27, 1991). The court in Eureka Financial explained that:

(t]he purpose of the specific objection requirement is to provide the party seeking discovery with a basis for determining what documents the party asserting the privilege has withheld. Otherwise, how could this opposing party ever know whether the documents withheld under a blanket privilege objection were withheld correctly, incorrectly, or maliciously? [The objecting party] would have the court believe that an opposing party must simply trust the good faith and diligence of the party asserting the privilege.

19 Fed. R. Serv. 3d at 1454.

For the foregoing reasons, and in light of the additional time for compliance granted to Petitioner, supra, Petitioner's objection on grounds that Instruction 5 imposes undue burden is denied. RESPONSES TO PETITIONS TO QUASH 1339 4. Documents available from public sources Petitioner argued both in its papers and in its oral presentation that a significant quantity of its responsive documents is publicly available (e.g., newspaper and magazine articles, proposed legislation, books, etc.). According to Petitioner, an estimated thirty to forty percent of the roughly ninety boxes of responsive documents encompass publicly available documents. When the Commission issued the subpoena now in dispute, it was unaware that JAMA's files contained such a large proportion of publicly available documents. In an effort to limit any unnecessary burden that might have been imposed on JAMA as a result of the subpoena, staff has excluded certain categories of publicly available documents from the scope of production. We emphasize that the foregoing exclusions of certain publicly available documents from the scope of production have no effect upon any such documents that contain handwritten notations, including interlineations or marginalia. Responsive documents containing any handwritten notations or other alterations must be produced. Petitioner has agreed to these exclusions from production.® We find that such exclusions of various categories of publicly 8 While negotiating this agreement, Petitioner furnished staff with a list of publicly available print materials that it wished to exclude from the scope of this production. Staff reviewed the list and eliminated those publicly available sources of general circulation to which it has access and reduced the scope of publicly available sources within the scope of the subpoena. Staff further limited the scope of production by agreeing that Petitioner is not required to produce the following categories of publicly available documents contained in Petitioner's files: (1) congressional correspondence with federal and state agencies; (2) drafts of federal or state legislation; (3) announcements of federal or state legislation; (4) federal or state regulations on automobile emissions or fuel economy; (5) text of congressional hearings; (6) text of press conferences held by U.S. Representatives or Senators; (7) statements made on the floor of the Senate or House of Representatives; (8) reference materials prepared by Senators, Representatives or their staffs; (9) news releases issued by federal agencies; (10) books; (11) studies and legal briefs prepared by federal and state agencies relating to automobile emissions; and (12) annual and quarterly reports of General Motors, Ford or Chrysler. Following the hearing, staff further sought to minimize Petitioner's compliance burden and extended an offer that JAMA need not produce documents that relate solely to trade balances between the United States and Japan. Petitioner agreed that such documents would be excluded from production. available documents sufficiently limit the scope of production of publicly available documents. Petitioner is required to produce all responsive documents contained in its files that are available from public sources and not otherwise expressly excluded from production pursuant to its agreement with staff.

5. Documents previously produced to staff by JAMA or other sources Petitioner, citing undue burden, makes two arguments that the subpoena is duplicative. First, it contends that the subpoena requires production of documents that JAMA has already provided to staff voluntarily. Second, Petitioner claims the subpoena is duplicative because it seeks documents already obtained by staff from other sources during this investigation.

No list of the documents JAMA previously submitted to staff was ever created. Such documents have since been integrated with other materials obtained throughout this investigation. In an effort to identify documents previously submitted, staff has reviewed correspondence from Petitioner's counsel that accompanied two voluntary submissions of documents in April and June, 1990. Based on this correspondence, staff reviewed its files and identified approximately twenty-eight documents previously submitted by JAMA. Staff has agreed that Petitioner need not provide these documents again. To the extent that staff identifies additional documents previously submitted by JAMA prior to the final return date set forth below, Petitioner is not required to resubmit such documents.

To the extent that Petitioner can identify documents that staff has previously obtained from other sources during this investigation, such documents must be submitted, unless staff may choose not to require their production. We must allow staff some discretion in this regard, since confidentiality restrictions may prevent staff from acknowledging its previous access to such documents and their source. Furthermore, certain documents, although already given to staff by other sources, must be produced because their existence in JAMA's files may be of independent significance. RESPONSES TO PETITIONS TO QUASH 134] F. Petitioner requests reimbursement for compliance costs. Petitioner seeks reimbursement for all search,5 1 4 1 1 7 1714 699 176 41 96.348297 retrieval,4 1 4 1 2 0 554 758 1338 57 -1 5 1 4 1 2 1 554 769 247 46 96.825371 compilation,5 1 4 1 2 2 823 767 68 36 96.768883 ands 1 4 1 2 3 909 765 221 47 96.927406 duplication5 1 4 1 2 4 1149 770 96 30 96.839378 costs5 1 4 1 2 5 1265 762 162 37 96.519180 incurred5 1 4 1 2 6 1446 761 35 36 96.519180 in5 1 4 1 2 7 1501 760 208 46 97.006172 complying5 1 4 1 2 8 1729 758 85 36 96.683037 with5 1 4 1 2 9 1833 758 59 36 96.956207 thea 1 4 1 3 0 555 824 628 50 -1 5 1 4 1 3 1 555 827 215 47 87.012642 subpoena. JAMA Mem. at 26.

Pursuant to the subpoena duces tecum, Petitioner must relinquish its responsive documents to the Commission. Section 9 of the FTC Act sets forth the Commission's authority to require by subpoena the production of documentary evidence relating to any matter under investigation. It has been the Commission's practice to accept from a subpoena addressee either original documents or photocopies thereof.

Recipients of subpoenas are expected to bear the cost of compliance, which is considered to be part of the public duty of providing evidence. See SEC v. OKC Corp., 474 F. Supp. 1031, 1037-37 (N.D. Tex. 1979). The Commission has stated, [a]4 1 4 3 5 0 555 1516 1341 56 -1 5 1 4 3 5 1 555 1526 233 46 96.925827 subpoenaed5 1 4 3 5 2 805 1530 99 40 96.990044 party5 1 4 3 5 3 921 1524 30 35 96.795784 is5 1 4 3 5 4 969 1523 174 46 96.643982 expected5 1 4 3 5 5 1159 1529 36 28 96.658684 to5 1 4 3 5 6 1213 1521 129 36 96.947327 absorbs 1 4 3 5 7 1358 1521 59 35 96.352638 thes 1 4 3 5 8 1433 1519 209 36 96.352638 reasonable5 1 4 3 5 9 1659 1528 176 35 96.628632 expenses5 1 4 3 5 10 1854 1516 42 36 97.006691 of4 1 4 3 6 0 555 1575 1337 53 -1 5 1 4 3 6 1 555 1583 229 45 96.634453 compliance5 1 4 3 6 2 803 1593 37 24 96.697174 as5 1 4 3 6 3 860 1592 20 24 94.942116 a5 1 4 3 6 4 898 1587 77 29 94.942116 costs 1 4 3 6 5 994 1581 42 34 97.017166 of5 1 4 3 6 6 1051 1581 110 44 97.013901 doing5 1 4 3 6 7 1179 1579 178 40 96.681099 business,5 1 4 3 6 8 1375 1578 63 35 96.940903 but5 1 4 3 6 9 1455 1577 295 35 95.929169 reimbursements 1 4 3 6 10 1768 1575 46 45 97.012993 by5 1 4 3 6 11 1834 1575 58 33 96.870377 thea 1 4 3 7 0 554 1633 1339 54 -1 5 1 4 3 7 1 554 1647 202 40 96.806213 proponent5 1 4 3 7 2 778 1640 42 35 96.763580 of5 1 4 3 7 3 838 1641 58 33 97.017921 thes 1 4 3 7 4 919 1639 184 45 95.891106 subpoenas 1 4 3 7 5 1124 1638 30 35 95.891106 is5 1 4 3 7 6 1177 1637 223 46 97.012337 appropriate5 1 4 3 7 7 1421 1635 57 36 96.629539 for5 1 4 3 7 8 1498 1641 96 29 96.629539 costs5 1 4 3 7 9 1617 1635 125 34 96.853081 shown5 1 4 3 7 10 1765 1634 46 44 95.937424 by5 1 4 3 7 11 1835 1633 58 35 97.005569 thea 1 4 3 8 0 556 1691 1336 53 -1 5 1 4 3 8 1 556 1698 227 46 96.582390 subpoenaed5 1 4 3 8 2 796 1704 98 39 96.980042 party5 1 4 3 8 3 908 1704 36 28 96.606575 to5 1 4 3 8 4 957 1697 45 35 96.889595 be5 1 4 3 8 5 1016 1695 282 36 90.334892 unreasonable. In re ITT Corp., 97 FTC 202, 203 (1981). In an interlocutory order in the ITT matter, the Commission ruled that, to determine whether the costs of compliance are reasonable, the ALJ should compares 1 4 3 11 7 1428 1869 58 36 97.012985 thes 1 4 3 11 8 1501 1875 95 29 96.771858 costs5 1 4 3 11 9 1612 1867 42 36 96.871895 of5 1 4 3 11 10 1666 1866 227 47 96.845299 compliance4 1 4 3 12 0 555 1925 1337 48 -1 5 1 4 3 12 1 555 1935 36 34 95.130524 in5 1 4 3 12 2 609 1933 151 36 95.130524 relations 1 4 3 12 3 778 1939 37 29 96.785660 to5 1 4 3 12 4 832 1933 58 34 96.401741 thes 1 4 3 12 5 907 1932 74 35 96.401741 sizes 1 4 3 12 6 1000 1932 67 34 97.013847 ands 1 4 3 12 7 1084 1940 185 26 96.274803 resources5 1 4 3 12 8 1287 1929 42 35 96.983078 of5 1 4 3 12 9 1342 1929 58 34 96.606102 thes 1 4 3 12 10 1418 1927 229 46 96.865608 subpoenaed5 1 4 3 12 11 1664 1926 131 46 83.700005 party. Jd., citing SEC v. OKC Corp. Other courts have denied requests for reimbursement because imposing reproduction costs on the Commission would derogate its power to issue administrative subpoenas. FTC v. Texaco, 555 F.2d at 883; See also EEOC v. Maryland Cup Corp., 785 F.2d 471, 477 (4th Cir.), cert. denied, 419 U.S. 815 (1986).

The Commission finds that no reimbursement for either search or copying costs is warranted in this case. The Commission's Operating Manual states that no reimbursement will be provided for search costs incurred by a subpoena addressee. Furthermore, no reimbursement will be provided for copying costs except in exceptional circumstances. See FTC Operating Manual Chapter 3.3.6.5. Petitioner has failed to raise any facts or arguments to suggest that there are exceptional circumstances that would require such reimbursement for copying. Petitioner has cited no other authority that would require reimbursement for search costs or copying costs on these facts. Moreover, Petitioner's burden has been reduced to some extent by the limitations on the subpoena as outlined herein. For the foregoing reasons, Petitioner's request for reimbursement for search and copying costs is denied.”

G. Petitioner requests a staggered production schedule. Petitioner has proposed a staggered production, whereby the initial stage of production would be restricted to production of a4 1 5 1 3 0 652 1290 1336 48 -1 5 1 5 1 3 1 652 1293 101 36 92.867401 small5 1 5 1 3 2 767 1293 148 35 96.818497 random5 1 5 1 3 3 929 1292 175 46 96.387444 sampling5 1 5 1 3 4 1117 1291 42 35 96.766655 of5 1 5 1 3 5 1169 1291 237 35 91.407799 documents. JAMA Mem. at 25. We find this unacceptable because it would permit production of a few documents selected at Petitioner's discretion. Furthermore, it is unnecessary in light of staff's modifications and the Commission's extension of time for compliance.

H. Petitioner requests that it be permitted to review either the Commission translations of Japanese documents or the resume of any Commission-hired translator. Petitioner has stated that it is prepared to produce all Japanese language documents, without translation, but that any privileged excerpts would be redacted. JAMA Mem. at 16. The subpoena, by its terms, does not require Petitioner to obtain translations for its foreign language documents. Petitioner has expressed concern that Japanese language documents are particularly susceptible to mistranslation, and as an additional safeguard, Petitioner requests that it be permitted to review the Commission-translated documents for accuracy. Hearing Tr. at 21-22. Petitioner also has proposed that it be permitted to supply the Commission with a list of prospective ° Subsequent to its Petition, JAMA has stated that it will make all responsive documents available for staff's inspection and copying subject to the disposition of its Petition. See Letter from H. William Tanaka to Michael D. McNeely (March 20, 1992). We note that Commission staff has offered, but is not required, to allow Petitioner to make responsive documents available for duplication by staff. RESPONSES TO PETITIONS TO QUASH 1343 translators or to review the resume of any Commission-hired translator. See JAMA Mem. at 16-17; See also Rule 2.7(d)(2) Statement at 3, accompanying JAMA Petition. Nothing precludes Petitioner from submitting a list of translators it would recommend; however, neither the Commission nor its staff would be obligated to retain any of the JAMA-approved translators. Moreover, nothing precludes Petitioner from obtaining for the Commission its own translations of any documents that it believes are susceptible to mistranslation. Petitioner offers no legal authority or Commission precedent to support its proposals that it be permitted to review either the translated documents or the resume of any Commission-hired translator. We find that such outside involvement in a Commission investigation would be inappropriate and hereby deny Petitioner's proposals. This ruling in no way forecloses any subsequent opportunity Petitioner might have to raise any objections relating to any alleged mistranslation of its documents. IJ. Conclusion For the foregoing reasons, the Petition to Limit or Quash Subpoena Duces Tecum filed by Japan Automobile Manufacturers Association, Inc. is denied in part and granted in part. Pursuant to Rule 2.7(e), JAMA is directed to comply with the subpoena issued to it by 5:00 p.m. on May 20, 1992.

Pursuant to Rule 2.7(f), within three days after service of this ruling, Petitioner may file with the Secretary of the Commission a request that the full Commission review the ruling. Commission Rule of Practice 4.4(b) provides that a document shall be deemed filed when it is received by the Office of the Secretary. See 16 CFR 4.4(b). The timely filing of such a request shall not stay the return date of this ruling, unless the Commission otherwise directs. Re: Hang-Ups Art Enterprises, Inc.'s Petition to Limit or Quash the Civil Investigative Demand, File No. 872-3209.

April 29, 1992 Dear Mr. Steiner:

The Commission has considered (a) the Petition to Limit or Quash the Civil Investigative Demand that you filed on behalf of Hang-Ups Art Enterprises, Inc. ("Petition"), including the affidavits of Max Klein and David Paul Steiner that were filed with it; (b) the March 31, 1992 letter ruling granting in part, and denying in part, the petition; (c) the transcript of the oral presentation on the petition, held February 25, 1992; (d) your request for Commission review filed April 6, 1992; and (e) the Civil Investigative Demand at issue. The Commission has determined that your request for full Commission review does not raise any new issues regarding the Petition, and that the Petition was properly denied in part and granted in part for the reasons stated in the March 31, 1992 ruling. The Commission also denies your request for a stay of the April 30 return date for the documents. Accordingly, the full Commission concurs with and hereby adopts the March 31, 1992 letter ruling in this matter. Hang-Ups Art Enterprises, Inc. is directed to comply with the Civil Investigative Demand by April 30, 1992. RESPONSES TO PETITIONS TO QUASH 1345 Re: _ Petition of Center Art Galleries-Hawaii, Inc. to Limit or Quash the Civil Investigative Demand, File No. 872-3209.

June 22, 1992 Dear Mr. Bain:

This is to advise you of the Federal Trade Commission's ruling on the Petition to Limit or Quash the Civil Investigative Demand for Documentary Material ("Petition"), which you filed on behalf of your client Center Art Galleries-Hawaii, Inc. ("Center Art" or Peti-4 1 6 1 5 0 548 1316 794 44 -1 5 1 6 1 5 1 548 1316 161 44 89.591713 tioner), in the above-referenced matter.

The ruling set forth herein has been made by Commissioner Deborah Owen pursuant to authority delegated under Commission Rule of Practice 2.7(d)(4). Pursuant to Rule 2.7(f), within three days after service of this decision, Petitioner may file with the Secretary of the Commission a request for full Commission review. Whatever briefs or other material the Petitioner wishes the Commission to consider in reviewing this decision must accompany any such request in order to be considered as timely filed. The timely filing of such a request shall not stay the return date in this ruling, unless the Commission otherwise specifies.

Commissioner Owen has carefully reviewed the Petition and accompanying exhibits. She has also considered the oral presentation, on the Petition conducted on April 8, 1992. The Petition is denied in part, and granted in part, for the reasons stated below. Petitioner's obligations under the Civil Investigative Demand ("CID") are modified as set forth below.

I. Background On October 24, 1991, the Federal Trade Commission approved a Resolution Directing Use of Compulsory Process, authorizing the use of compulsory process in an investigation to determine: whether unnamed persons, partnerships, or corporations, engaged in the sale, advertising, and marketing of fine art prints, may be engaged in unfair or deceptive acts or practices in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, as amended, including but not limited to, misrepresenting the origins, authorship, edition size, or value of fine art prints. On January 28, 1992, as part of this investigation, a CID was issued to Center Art, a firm engaged in the sale of fine art at charity and public auctions. On March 3, 1992, Center Art was served a copy of the CID by the United States Marshal’s service. By letter dated March 9, 1992, the Bureau of Consumer Protection staff extended Center Art's time to produce documents and file a motion to quash. Pet. p. 2.’ Counsel for Petitioner and the staff of the Commission entered into negotiations concerning the CID. Initially, counsel for Petitioner and the staff were unable to resolve the issues raised by Petitioner. On March 30, 1992, counsel for Petitioner filed this Petition. Counsel for Petitioner and the staff of the Commission continued negotiations up to and during the eve of the oral presentation on April 8, 1992. Counsel for Petitioner and the staff were able to resolve many of the issues that were raised.” However, several issues remained.

1 References to the Petition are cited as Pet.5 1 6 1 1 10 1504 2021 43 38 88.537521 p. with the appropriate page number. References to the transcript of the oral presentation on the Petition, held on April 8, 1992, are cited as Tr.5 1 7 1 2 9 1221 2121 44 38 76.618568 p. with the appropriate page number. > Counsel for Petitioner and the Commission staff resolved a number of objections to the definitions in the CID, by referring to the Letter Ruling on the Petition of Brana Publishing, Inc. to Limit or Quash Civil Investigative Demand; Petition of Art Source International, Inc. to Limit or Quash Civil Investigative Demand; and Petition of Brana Enterprises Inc. to Limit or Quash Civil Investigative Demand, File No. 872-3209, issued March 26, 1992 ("Brana Letter Ruling"). Counsel for Petitioner agreed to accept (1) the definition of artwork, Tr. p. 5; (2) the definition of cooperating5 1 8 1 8 9 1381 2533 142 34 76.513367 entities,”5 1 8 1 8 10 1537 2533 46 29 93.207230 Tr.5 1 8 1 8 11 1597 2542 28 28 92.915123 p.5 1 8 1 8 12 1639 2532 49 34 96.976166 22;5 1 8 1 8 13 1703 2532 56 29 96.994690 ands 1 8 1 8 14 1774 2532 48 28 96.700912 thes 1 8 1 8 15 1835 2530 158 30 96.841095 limitation4 1 8 1 9 0 656 2578 1336 44 -1 5 1 8 1 9 1 656 2596 39 20 96.889084 on5 1 8 1 9 2 709 2587 49 29 96.578011 thes 1 8 1 9 3 771 2586 123 29 96.970131 breadth5 1 8 1 9 4 907 2584 36 30 96.925468 of5 1 8 1 9 5 953 2585 48 29 96.952873 thes 1 8 1 9 6 1015 2584 197 38 96.852119 requirements 1 8 1 9 7 1225 2588 30 23 96.858360 to5 1 8 1 9 8 1269 2582 129 38 96.458267 produces 1 8 1 9 9 1411 2581 77 30 96.458267 backs 1 8 1 9 10 1501 2590 39 29 96.756676 up5 1 8 1 9 11 1554 2585 153 33 96.703056 computers 1 8 1 9 12 1720 2585 91 32 96.703056 tapes,5 1 8 1 9 13 1826 2579 46 29 89.980743 Tr.5 1 8 1 9 14 1888 2588 26 29 89.980743 p.5 1 8 1 9 15 1930 2578 62 34 96.988342 5-6,4 1 8 1 10 0 656 2627 1337 41 -1 5 1 8 1 10 1 656 2635 156 30 96.584778 contained5 1 8 1 10 2 825 2635 29 28 96.932587 in5 1 8 1 10 3 865 2634 48 29 96.964691 thes 1 8 1 10 4 924 2634 96 28 96.559608 Brana5 1 8 1 10 5 1031 2633 96 29 96.799431 Letters 1 8 1 10 6 1138 2631 116 37 96.280487 Ruling.5 1 8 1 10 7 1276 2631 61 28 96.863457 Thes 1 8 1 10 8 1349 2629 202 30 96.594444 Commissions 1 8 1 10 9 1564 2629 103 38 96.715538 adopts5 1 8 1 10 10 1679 2629 47 28 96.559059 thes 1 8 1 10 11 1739 2637 81 20 96.559059 same5 1 8 1 10 12 1831 2627 111 38 96.791275 rulings5 1 8 1 10 13 1955 2636 38 20 96.423416 on4 1 8 1 11 0 656 2676 1203 37 -1 5 1 8 1 11 1 656 2684 83 29 96.372620 these5 1 8 1 11 2 751 2683 81 29 96.993210 three5 1 8 1 11 3 845 2683 96 28 96.811668 issues5 1 8 1 11 4 955 2681 28 29 96.602707 in5 1 8 1 11 5 996 2680 57 30 96.894966 this5 1 8 1 11 6 1066 2680 126 30 96.590866 Petitions 1 8 1 11 7 1205 2689 32 20 96.968330 as5 1 8 1 11 8 1249 2679 157 29 96.984245 contained5 1 8 1 11 9 1420 2678 28 29 97.006676 in5 1 8 1 11 10 1462 2678 47 29 96.837769 thes 1 8 1 11 11 1522 2678 97 29 97.006180 Brana5 1 8 1 11 12 1631 2677 97 29 96.993187 Letters 1 8 1 11 13 1739 2676 120 37 96.617973 Ruling.3 1 8 2 0 0 658 2724 1335 95 -1 4 1 8 2 1 0 730 2724 1263 41 -1 5 1 8 2 1 1 730 2731 135 30 95.909645 Counsels 1 8 2 1 2 882 2731 47 29 97.007988 for5 1 8 2 1 3 946 2730 160 30 96.256721 Petitioners 1 8 2 1 4 1123 2728 151 30 96.669922 withdrew5 1 8 2 1 5 1292 2728 48 29 96.654922 thes 1 8 2 1 6 1357 2727 151 38 96.936531 objections 1 8 2 1 7 1525 2732 31 23 97.016769 to5 1 8 2 1 8 1573 2726 47 29 97.016922 thes 1 8 2 1 9 1638 2734 53 21 96.856262 uses 1 8 2 1 10 1708 2725 36 30 96.984596 of5 1 8 2 1 11 1759 2725 48 30 96.725052 thes 1 8 2 1 12 1825 2730 73 24 96.555054 terms 1 8 2 1 13 1916 2724 77 29 97.002060 sales4 1 8 2 2 0 658 2779 277 40 -1 5 1 8 2 2 1 658 2781 114 38 96.926498 scripts,5 1 8 2 2 2 784 2781 47 28 88.170204 Tr.5 1 8 2 2 3 845 2789 27 29 88.170204 p.5 1 8 2 2 4 887 2779 48 30 96.635155 23. RESPONSES TO PETITIONS TO QUASH 1347 II. Specific Objections A. Petitioner asserts that the scope of the documents sought by the CID is unduly broad and burdensome.

Petitioner first asserts that the structure of the CID, given the manner in which Center Art maintains its files, would require the review of virtually all documents maintained by Center Art. In addition, Petitioner originally asserted that the specifications are insufficiently detailed to permit Petitioner to identify the specific documents required under the CID. The issue of the definiteness of the specifications was resolved by agreement between the staff and counsel for Petitioner.

The agreement on the meaning of terms did not fully dispose of the issue of burden. However, counsel for Petitioner offered to provide a subset of the requested documents on a staggered basis to reduce the burden on Petitioner, while, Petitioner asserted, providing Commission staff with the information they required. Counsel for Petitioner's offer addresses both this burden objection, and the reasonableness of the time period of the CID, and will be discussed immediately below.

B. Petitioner asserts that the CID does not prescribe a return date which will provide a reasonable period of time to assemble the documents.

Petitioner asserts that because of the volume of documents in the possession of Petitioner, the time period specified in the CID is unreasonably short. Unlike most other petitions to quash subpoenas and CIDs that have come before the Commission, in this case, Petitioner has at least attempted to catalogue the type and volume of documents allegedly in its possession. Petitioner estimates that it possesses over 6,500,000 documents that would have to be reviewed to identify the documents requested by the CID. Pet. pp. 8-10. Furthermore, while the CID requires the production of documents that contain information on artworks by certain artists, Petitioner's documents contain information by artwork title, without identifying the artist in the document. Tr. p. 28. According to Petitioner, this 115 F.C.

requires that someone knowledgeable about the artworks and artists review the documents, Center Art argues that it has only one employee and a part-time helper qualified to undertake that search. Tr. p. 28.

In addition, Center Art has a group of documents that, the United States District Court for the District of Hawaii has ruled, were illegally seized in 1987 by law enforcement officers, acting under the leadership of postal inspectors from the United States Postal Service, during an unrelated investigation of Center Art. In re Motion for Return of Property Pursuant to Rule 41, Federal Rules of Criminal Procedure, 681 F.Supp. 677 (D.Haw.1988), aff'd, Center Art Galleries-Hawaii, Inc. v. United States, 875 F.2d 747 (9th Cir. 1989) (hereinafter “Motion for Return’). These documents were returned to Center Art pursuant to the Court's order. However, according to Petitioner, the documents were returned without apparent organization, and were never re-integrated into Center Art's filing system, Tr. p. 10; moreover, according to Petitioner, the boxes are stored in what may be described as a makeshift manner. Tr. p. 14. In addition to arguing that these documents should not be produced during the pendency of litigation between Center Art and the postal authorities, discussed below, Petitioner alleges that the condition of these documents is such as to require an enormous amount of time to produce pursuant to the CID.

Leaving aside the documents that were seized by the postal authorities, Petitioner has proposed staggered production of some of the documents requested by the CID. First, Petitioner offers to produce certain files within two weeks of an agreement with the staff. These documents include: (1) documents denoted as artists files; (2) employee tax forms to the extent necessary to identify employees;’ and (3) receiving logs post-dating the document seizure in 1987. Tr. p. 46-7.* With respect to other documents that are maintained in the general chronological files of the company, the Petitioner has offered > Petitioner agreed to annotate the forms to the extent of their ability with the positions held by the employees. Tr. p. 7. “ The Commission understands that the Petitioner has already produced at least some of the documents that were offered within the two-week period. RESPONSES TO PETITIONS TO QUASH 1349 to produce documents from its files for two-month periods of each year covered by the CID beginning with the last half of 1987. Tr. p. 12. Petitioner has offered to produce those documents within 60 days. Tr. p. 9.

The Commission staff agree to accept the Petitioner's proposal if they have a right to require the production of additional documents responsive to the CID from the files of Center Art, at a later date, upon sixty days notice to the Petitioner. The Commission agrees with the Petitioner and the staff on the proposed staggered production schedule for documents created after the postal authority seizure and modifies the CID accordingly.

To the extent that they have not already been produced, Petitioner shall produce within two weeks of the date of this letter (1) artists files, (2) employee tax forms sufficient to identify employees annotated to the extent possible with the employee's position, and (3) receiving logs post-dating the document seizure in 1987. Within sixty days of the date of this letter, the Petitioner shall produce all other documents responsive to the CIDs for two months of each year since and including 1987; however, the months of 1987 shall be after the document search. This schedule amounts to twelve months worth of documents chosen from the period 1987 to the present. The staff and Petitioner have already agreed upon November and December of 1987 and January and February of subsequent years. Petitioner shall be obligated to produce additional documents from its general chronological files if, after receiving the first round of documents, Commission staff request additional production. Petitioner shall be given 60 days notice before it is required to produce additional documents, and is obligated to produce such additional documents as the staff request on the same staggered production schedule, producing documents for any twelve months that post-date the 1987 document seizure, chosen by the staff, every 60 days. The Commission understands that this schedule resolves the objections to the CID by Center Art, except for the documents seized in the earlier postal investigation.

C. Petitioner asserts that certain documents that were illegally seized by postal authorities should not be produced pending resolution of the appeal of the litigation between postal authorities and Petitioner.

On April 15, 1987, postal inspectors led a team of thirty law enforcement officers in a search of six separate Center Art locations. During the search, virtually all of the business records of Center Art were seized. As already noted, the United States District Court for the District of Hawaii found the search warrants overbroad and ordered all of the documents, except those relating to prints attributed to Salvador Dali, suppressed. Motion for Return, at 688. In a subsequent ruling, the United States Court of Appeals for the Ninth Circuit upheld the District Court suppression order. 875 F.2d 747. The 1987 search of Center Art was part of an investigation that led to subsequent convictions that are now on appeal to the Ninth Circuit.” Because of the ongoing appeal, Petitioner argues that the CID should be quashed to the extent it calls for documents that were seized and subsequently ordered returned to Center Art (hereinafter “suppressed documents"). Because the illegal seizure covered virtually all of the business records of Center Art, Petitioner argues that it should produce no documents that pre-date the seizure. Petitioner does not contend that because the documents were illegally seized, the Commission can never obtain the documents in a civil investigation. Tr. p. 21. Rather Petitioner argues that because of the possibility that the suppressed documents, or information contained in the documents, may reach the postal authorities or government prosecutors prior to a Ninth Circuit decision on the pending appeal, Petitioner should not have to produce such documents until after that decision. Tr. pp. 18-19, 21-22. In addition, Petitioner alleges that the condition of the documents precludes any complete or systematic search of the files that were seized and later returned. Tr. p. 22. Pursuant to the court ruling that the documents were illegally seized, the documents were returned to > United States v. Wiseman, Center Art Galleries-Hawaii, Inc., and Mett, Nos. 90-10612, 90-10616, and 90-10617 (9th Cir.). The Commission understands that the appeal briefs have been filed, and oral argument is scheduled for July 20, 1992. RESPONSES TO PETITIONS TO QUASH 1351 Center Art. However, the documents were never re-integrated into Center Art's filing system. According to Petitioner, the documents are simply kept in boxes. Tr. p. 28. Additional documents from Center Art have been added to the boxes, and Petitioner now estimates there are 6.5 million documents in the boxes.° Pet. p. 10. Counsel for Petitioner sampled a few boxes and found that the information on the labels on the boxes may or may not reflect the contents of the box. Tr. p. 10.

Addressing the issue of the burden first, the staff have offered a procedure for the staff to examine a sample of the documents. As an alternative to producing all documents from 1986 and 1987 that are called for in the CID, the staff suggested a two-part procedure, in which Center Art would first produce a list of the information on the labels on the boxes in storage, recognizing that the labels may or may not be accurate. In the second part of the procedure, the staff propose to identify twenty to thirty boxes, and that the production from 1986 and early 1987 be limited to whatever relevant documents from those years are found in the chosen boxes.

At the oral presentation on the Petition, counsel for Petitioner estimated that it would take 15 to 20 days to simply inventory the labels on the boxes, and an additional 60 days to actually produce the documents from the boxes chosen by the staff, beyond the time required to produce the documents from the post-seizure period, 1987 to the present. Counsel for Petitioner made it clear that he was not agreeing to such a schedule because Petitioner still sought a ruling on quashing the CID with respect to the illegally seized documents. However, in the event of an adverse ruling on that issue, such a schedule would not impose an undue burden on Center Art. Tr. p. 35. The Commission denies Petitioner's request to quash the CID with respect to the suppressed documents. Several considerations justify this ruling. First, Petitioner has not shown that those documents bear on any issue in the pending criminal appeal. Second, Petitioner has shown no conceivable mechanism by which those ® Petitioner claims to have 315 boxes. Tr. p. 10. Experience with the production of large volumes of documents suggests that Petitioner's estimate probably errs on the high side. However, Petitioner's representations are sufficient to convince the Commission that Petitioner possesses a large number of documents. documents could somehow be used in a criminal case in which the trial is already over; in which, therefore, the record was closed long ago; and in which the appeal will be argued in only a few weeks. Third, any request for access by federal law enforcement authorities would have to be considered and ruled on by the Commission's General Counsel, under a grant of authority that establishes strict guidelines for release of agency records to coordinating agencies. See 15 U.S.C. 46(f), 57b-2(b)(6); 16 CFR 4.11(c). Petitioner establishes no basis for assuming that the General Counsel or the Commission's staff would participate, either intentionally or inadvertently, in any improper release of information. Neither does Petitioner establish any basis for the implicit assumption that government prosecutors or other federal law enforcement officials would improperly or illegally seek access to FTC records in knowing or negligent violation of an applicable federal court order, assuming that such an order existed. Absent such a showing, no limitation of the CID, nor any additional restriction on the staff's use of the information, 1s appropriate.

Based on the information presented, the Commission modifies the CID with respect to the suppressed documents in the following manner. Within 70 days from the date of this letter,’ the Petitioner shall produce to the Commission staff a list of the boxes of documents held in storage, including in the list, whatever descriptive information is on the outside of the boxes. The staff shall then identify to Center Art no more than 30 of the boxes, and within 60 days of the date staff informs Center Art of their selection, Center Art shall produce all documents contained in those boxes that are responsive to the CID.

Petitioner shall be obligated to produce additional documents from these storage boxes if, after receiving the first round of documents, Commission staff request additional production. Petitioner shall be given 60 days notice before it is required to produce additional documents and is obligated to produce such additional documents as the staff request on the same staggered ’ This date is 10 days after the date for production of the documents from the general chronological files discussed in Part II above. RESPONSES TO PETITIONS TO QUASH 1353 production schedule, producing documents from up to thirty boxes, chosen by the staff, every 60 days.

IV. Conclusion For the foregoing reasons, the Petition to Limit or Quash the Civil Investigative Demand for Documentary Material filed by Center Art Galleries-Hawaii, Inc. is granted in part and denied in part. Petitioner is directed to comply with the Civil Investigative Demand according to the staggered schedule set forth above. Pursuant to Rule 2.7(f), within three days after service of this ruling, Petitioner may file with the Secretary of the Commission a request that the full Commission review the ruling. Commission Rule of Practice 4.4(b) provides that a document shall be deemed filed when it is received by the Office of the Secretary. See 16 CFR 4.4(b). The timely filing of such a request shall not stay the return date of this ruling, unless the Commission otherwise directs. LIS F.T.C.

Re: Request of Center Art Galleries-Hawaii, Inc. for Review of Ruling by Full Commission on the Petition to Limit and/or Quash CID, File No. 872-3209. July 30, 1992 Dear Mr. Bain:

The Commission has considered: (a) the Petition on behalf of Center Art Galleries-Hawaii, Inc. ("Petitioner" or Centers 1 5 1 2 8 1850 1158 100 42 86.682480 Art) to Limit and/or Quash Civil Investigative Demand; (b) the transcript of the hearing thereon; (c) the CID specifications at issue; (d) the June 22, 1992 letter ruling by Commissioner Owen granting in part, and denying in part, the Petition; and (e) your request for full Commission review of that ruling, including the documentary attachments ("Request for Commission Review").

In requesting full Commission review, Center Art focuses its appeal on the ruling that Petitioner must produce some of the documents that were ruled to have been illegally seized during a criminal investigation of Center Art. Request for Commission Review at 4.' In its Request, for the first time, Center Art specifically asks the Commission to delay any production requirement with respect to the suppressed documents pending the outcome of a possible retrial that might result from the pending appeal of its criminal conviction.? Presenting new material in its Request for Commission Review, Center Art further argues that certain alleged past misconduct by federal criminal investigators or prosecutors demonstrates that suppressed documents, once in the Commission's possession, will be obtained unlawfully by such prosecutors, even in violation of a court order. The Commission denies Petitioner's Request to delay production and, in all other respects, adopts Commissioner Owen's letter ruling.

' See In re Motion for Return of Property Pursuant to Rule 41, Federal Rules of Criminal Procedure, 681 F. Supp. 677 (D. Haw. 1988), aff'd, Center Art Galleries-Hawaii. Inc. v. United States, 875 F.2d 747 (9th Cir. 1989) [hereinafter In5 1 7 1 4 2 736 2707 31 21 96.922646 re5 1 7 1 4 3 779 2698 118 29 96.719368 Motions 1 7 1 4 4 903 2696 56 38 95.438301 for5 1 7 1 4 5 968 2696 110 29 96.450005 Returns 1 7 1 4 6 1092 2694 37 38 96.777809 of5 1 7 1 4 7 1134 2692 184 39 75.030235 Property). 2 United States v. Wiseman, Center Art Galleries-Hawaii, and Mett, Nos. 90-10612, 90-10616, and 90-10617 (9th Cir.). RESPONSES TO PETITIONS TO QUASH 1355 The Commission finds that these arguments do not differ substantively from Petitioner's previous argument that the seized documents should not be produced pending resolution of the criminal appeal. As stated in the letter ruling on Center Art's Petition, requests for access by federal law enforcement authorities must be considered and ruled upon by the Commission's General Counsel, and in certain instances, the Commission, under a grant of authority that establishes Strict guidelines for release of agency records to coordinating agencies. > The Commission finds that the appropriate remedy for any improper conduct by government prosecutors hypothesized by Petitioner is not to impede the Commission's independent investigation of Petitioner; but rather for Petitioner to apply to the court with jurisdiction over the criminal case for appropriate relief and, thereafter, to seek sanctions for any violation of that court's order that might have occurred. Accordingly, the Commission denies Petitioner's request to delay production. In all other respects, the Commission has determined that the Request for Commission Review raises no new issues.* The Commission therefore concurs with, and hereby adopts, that ruling. Under Rule 2.7(f), the timely filing of a request for full Commission review shall not stay the return date specified in the ruling, unless otherwise specified by the Commission. The Commission notes that Petitioner may implicitly seek a stay of the dates for compliance with the CID specified in the ruling.» The Commission denies that request. The return dates remain as specified in Commissioner Owen's letter ruling.

> See 15 U.S.C. 46(f), 57b-2(b)(6); 16 CFR 4.11(c). Center Art further contends that the letter ruling is5 1 6 1 1 10 1507 2334 91 31 96.982071 based5 1 6 1 1 11 1613 2345 80 29 96.841965 upon5 1 6 1 1 12 1707 2336 144 30 96.702354 incorrect4 1 6 1 2 0 513 2375 1337 41 -1 5 1 6 1 2 1 513 2375 101 35 95.293633 facts, referring to the statement that the district court ordered5 1 6 1 2 11 1681 2386 39 29 96.859337 all5 1 6 1 2 12 1745 2386 36 29 96.874962 of5 1 6 1 2 13 1802 2387 48 29 96.891479 thea 1 6 1 3 0 512 2424 1336 53 -1 5 1 6 1 3 1 512 2424 184 35 96.446007 documents,5 1 6 1 3 2 709 2432 105 32 96.804337 excepts 1 6 1 3 3 825 2427 83 29 96.248207 those5 1 6 1 3 4 920 2428 121 38 96.248207 relating5 1 6 1 3 5 1054 2434 29 24 96.393707 to5 1 6 1 3 6 1094 2429 90 37 96.393707 prints5 1 6 1 3 7 1196 2430 153 30 96.455666 attributed5 1 6 1 3 8 1361 2437 29 23 96.998596 to5 1 6 1 3 9 1403 2431 142 30 96.901100 Salvador5 1 6 1 3 10 1555 2433 78 34 92.678360 Dali,5 1 6 1 3 11 1646 2431 202 46 83.465469 suppressed. Request for Commission Review at 6. Center Art correctly notes that the district court ordered all seized evidence returned, except the Dali prints and other works of arts. In re Motion for Return of Property, 681 F. Supp. 617, 687-88. We find that this incidental misstatement of fact concerning the district court's ruling has no bearing on the ultimate conclusions stated in the letter ruling. > See Request for Commission Review at 6, 12 (requesting that the CID be2 1 8 0 0 0 508 2790 1156 46 -1 3 1 8 1 0 0 508 2790 1156 46 -1 4 1 8 1 1 0 508 2790 1156 46 -1 5 1 8 1 1 1 508 2790 69 29 96.834763 held5 1 8 1 1 2 590 2790 29 29 96.928558 in5 1 8 1 1 3 632 2791 152 38 96.836967 abeyance5 1 8 1 1 4 796 2792 130 38 96.851151 pending5 1 8 1 1 5 940 2797 139 25 96.254051 outcomes 1 8 1 1 6 1092 2794 35 29 96.896011 of5 1 8 1 1 7 1138 2794 121 36 96.694847 [Centers 1 8 1 1 8 1270 2796 88 35 81.233368 Art's]5 1 8 1 1 9 1372 2796 134 30 96.515823 criminal5 1 8 1 1 10 1519 2798 145 38 94.014069 appeal).