Montedison, S.A.A

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF MONTEDISON S. , ET AL.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLA non OF SEe. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3580. Consent Order, May 1995--Modifing Order, Jan. , 1998 This order reopens the proceeding and modifies the 1995 consent order (119 FTC 676) by eliminating the prior approval provision and substituting a limited prior notice provision for certain acquisitions. ORDER REOPENIG AN MODIFYIG ORDER On August 11 , 1997, Montedison S. A ("Montedison ), Mantell V. ("Mantell" ), Shell Oil Company ("Shell"), Royal Dutch Petroleum Company, and The " Shell" Transport and Trading Company p.l.c. ("the petitioners ), fied a Petition To Reopen And Modify Order ("Petition ) in Docket No. C-3580 ("order ) pursuant to Section 5(b) of the Federal Trade Commission Act, 15 U.S. 45(b), and Section 2.51 of the Commission s Rules of Practice and Procedure, 16 CFR 2. , and consistent with the Statement of Federal Trade Commission Policy Concerning Prior Approval And Prior Notice Provisions ("Prior Approval Policy Statement" ! The Petition requests that the Commission reopen and modify the order to eliminate the prior approval provision set forth in paragraph Vll of the order. The Petition was placed on the public record for thirty days and one comment was received. The Commission has determined to reopen the order and to grant the Petition in part. The complaint in this matter alleged that the petitioners' formation of Mantell, a joint venture that merged the majority of Shell's and Montedison s worldwide polyolefins businesses, violated Section 5 of the Federal Trade Commission Act, as amended, 15 U.se. 45, and Section 7 ofthe Clayton Act, as amended, 15 U.S. e. 18, by lessening competition and tending to create a monopoly in, among other markets, the licensing of polypropylene technology, polypropylene technology and the licensing of polypropylene catalysts and catalyst technology "throughout the world.

60 Fed. Reg. 39 745-47 (Aug. 3, 1995); 4 Trade Reg. Rep. , (CCH) 13,241. Complaint ! II and V Modifying Order 125 F.T. The complaint alleged, among other things, that the formation of Montell would eliminate actual competition between Montedison and Shell in the relevant markets; substantially increase the level of concentration in the relevant markets; increase Montedison s and Shell' s ability to unilaterally exercise market power in the relevant markets; and reduce Montedison s and Shell' s incentives to license polypropylene technology or polypropylene catalysts to polypropylene resin manufacturers that compete with Montell.3 The order required Shell to divest the "Properties to Be Divested as defined in paragraph LQ of the order. On December 21 1995, the Commission approved Shell's application to divest the "Properties to Be Divested" to Union Carbide Corporation. Under the order, the petitioners are prohibited from acquiring without the prior approval ofthe Commission any stock or related assets of any concern engaged in certain enumerated activities The Commission, in its Prior Approval Policy Statement concluded that a general policy of requiring prior approval is no longer needed " citing the availability of the premerger notification and waiting period requirements of Section 7 A of the Clayton Act commonly referred to as the Hart-Scott-Rodino ("HSR") Act, 15 C. 18a, to protect the public interest in effective merger law enforcement.' The Commission announced that it will " henceforth rely on the HSR process as its principal means of learning about and reviewing mergers by companies as to which the Commission had previously found a reason to believe that the companies had engaged or attempted to engage in an illegal merger. " As a general matter Commission orders in such cases will not include prior approval or prior notification requirements. ,,7 !d. at'\V Order VII.

5 The covered activities arc:

The research and development.. or saJe or licensing to any person, ofPP Technology or Catalyst Technology anywhere in the world; 2. The research and development, sale, or manufacture for sale of PP Catalyst, Catalyst Support, or Catalyst Systems anywhere in the world; or 3. The manufacture or sale of Propylene Polymers in the United States or Canada Order VII. 6Pllor Approval. Pohey, tatement at 2. 1d.

, MONTEDISON S. , ET AL. 133 131 Modifying Order Narrow prior approval or prior notification provisions may be necessary to protect the public interest in some circumstances. The Commission said in its Prior Approval Policy Statement that " narrow prior approval provision may be used where there is a credible risk that a company that engaged or attempted to engage in an anticompetitive merger would, but for the provision, attempt the same or approximately the same merger." The Commission also said that a narrow prior notification provision may be used where there is a credible risk that a company that engaged or attempted to engage in an anticompetitive merger would, but for an order, engage in an otherwise uileportable anticompetitive merger. The Commission in its Prior Approval Policy Statement announced its intention "to initiate a process for reviewing the retention or modification of these existing requirements" and invited respondents subject to such requirements "to submit a request to reopen the order. "g The Commission determined that when a petition is fied to reopen and modify an order pursuant to . . . (the Prior Approval Policy Statement), the Commission wil apply rebuttable presumption that the public interest requires reopening of the order and modification of the prior approval requirement consistent with the policy anounced" in the Statement. Consistent with the Commission s Prior Approval Policy Statement, the presumption is that the prior approval requirement in this order should be terminated. Nothing to overcome the presumption having been presented, the Commission has determined to reopen the proceedings and modify the order in Docket No. C-3580 to set aside the prior approval requirement.

The Commission also stated that it would continue to fashion remedies as needed in the public interest, including ordering narrow prior notification requirements in certain limited circumstances. Accordingly, a prior notification provision may be used where there is a credible risk that a company would, but for an order, engage in an anticompetitive acquisition that would not be subject to the premerger notification and waiting period requirements of the HSR Act. As explained in the Prior Approval Policy Statement, the need for a prior notification requirement will depend on circumstances such as the Id. at 3.

9 !d. at4.

10 Jd.

Modifying Order '25 F. structural characteristics of the relevant markets, the size and other characteristics of the market participants, and other relevant factors. Based on the record, the Commission has determined that the limited circumstances which the Prior Approval Policy Statement identifies as appropriate for retention of a narrow prior approval requirement, that is, a credible risk that, but for the prior approval provision, the petitioners would attempt the same or approximately the same merger, do not exist in this matter. Accordingly, pursuant to the Prior Approval Policy, the Commission has determined to delete the prior approval requirement of paragraph VII of the order. The Commission has also determined that the record in this case shows a credible risk that the petitioners could engage in future anticompetitive acquisitions covered by the order that would not be reportable under the HSR Act. The order contains a broad prohibition on acquiring any stock or related assets of any concern engaged in propylene polymers research and development, or licensing of propylene polymers research and development technology or catalyst technology anywhere in the world. " The petitioners could acquire the exclusive polypropylene or catalyst technology of one of the few firms competing with the respondents around the world that licenses such technology on a world-wide basis. Such an acquisition could foreclose the entry of the licensor into the relevant markets as a competitor of the respondents, but would not be reportable under the HSR Act if the acquired entity has not made substantial sales of the technology being acquired in the United States market. Even where the acquired technology has been used to construct a polypropylene plant in the United States, the revenue realized by the foreign firm for licensing its technology would not ordinarly be reportable under the HSR Act.

Given the non-reportable nature of these types of transactions there exists a credible risk that the petitioners could engage in uileportable anti competitive acquisitions supporting prior notice Order VII.

12 The acquisition of assets located outside the United States, to which no sales in or into the United States are attributable, is not subject to the requirements of the HSR Act In addition, the acquisition of assets located outside the United States, to which sales in or into the United States are attrbutable, is not subject to the requirements of the HSR Act unless, as a result of the acquisition, the acquiring person would ha1d assets of the acquired person to which such sales aggregating $25 million or more during the acquired person s most recent fiscal year were attributable. See 16 CFR 802. 50. MONTEDISON S. , ET AL. 135 '31 Modifying Order substitution for paragraphs VILAI and 2 and VILB. l and 2, the technology and licensing activities covered by the order. The record contains no evidence that there exists a credible risk that the petitioners could engage in future anticompetitive acquisitions of stock or assets of any concern engaged in the manufacture and sale (as opposed to research and development) of polypropylene in the United States or Canada that would not be '3 Even if such a transaction were to reportable under the HSR Act. occur, the purchase price likely would be far in excess of $15 million and, therefore, reportable under the HSR Act. There is no evidence in this record that any company engaged in the manufacture and sale of polypropylene in the United States or Canada could be acquired for less the $15 million, or that any competitively significant assets of companies described in paragraphs VI1.A3 and VII. 3 of the order have been offered for sale at a price below $15 million. Therefore the Commission has determined to delete paragraphs VII. 3 and VII.B.3 from the order consistent with its determination to delete the prior approval requirement and substitute a prior notice provision for the acquisitions described in paragraphs Vl1.AI and 2 and VILB. and 2 of the order.

Although the Petition does not explicitly seek such modification the Commission may reopen the order and substitute a prior notice provision for the prior approval provision because the petitioners seek relief from the prior approval provision under the Prior Approval Policy Statement. In the Prior Approval Policy Statement, the Commission stated that although "a general policy of requiring prior approval is no longer needed, . . . the Commission reserves its equitable power to fashion remedies needed to protect the public interest " including ordering narrow prior notification requirements in certain limited circumstances. 14 Because the petitioners seek reopening of the order pursuant to the Prior Approval Policy Statement, they have invoked the Commission s authority to modify the order consistent with the Statement. Setting aside the prior approval requirement and modifying the order by substituting the lesser obligation of filing prior notification for acquisitions not otherwise reportable under the HSR Act is consistent with the Prior Approval Policy Statement.

Order VILA.3 and VILBJ.

14 Pnor Approval Pohey Statement at 2.

Modifying Order '25 FTC. Accordingly, pursuant to the Prior Approval Policy Statement, the Commission has determined to reopen the proceeding in Docket No. 3580 and modify the order to delete the prior approval requirement of paragraph VII and to substitute a prior notification requirement for paragraphs VILAI and 2 and VILB. l and 2. The Commission has 3 of thealso determined to delete paragraphs VILA3 and VII. order.

Accordingly, It is ordered That this matter be, and it hereby is reopened; and It is further ordered That paragraph VII of the order in Docket No. C-3580, issued on May 25 , 1995 , be, and it hereby is, modified as of the effective date of this order, to read as follows: It is further ordered That for ten (10) years from the date this order becomes final, Shell, Montedison and Montell shall not without providing advance written notification to the Commission directly or indirectly, through subsidiares, parerships, or otherwise: A Acquire any stock, share capital, equity, or other interest in any concern, corporate or non-corporate, other than the acquisition by Shell or Montedison of additional shares of Mont ell, engaged in at the time of such acquisition, or within two (2) years preceding such acquisition engaged in 1. The research and development (other than only implemcntation of technology licensed from others), or sale or licensing to any person, ofPP Technology or Catalyst Technology anywherc in the world; or 2. The research and development, sale, or manufacture for sale of PP Catalyst, Catalyst Support, or Catalyst Systems anywhere in the world.

B. Acquire any assets used for or previously used for (and still suitable for use for), 1. The research and development (other than only implementation of technology licensed from others), or sale or licensing to any person, ofPP Technology or Catalyst Technology anywhere in the world; or MONTEDISON S. , ET AL. 137 131 Modifying Order 2. The research and development, sale, or manufacture for sale of PP Catalyst, Catalyst Support, or Catalyst Systems anywhere in the world.

Provided, however, these prohibitions shall not relate to the construction of new facilities or the acquisition of new or used equipment in the ordinar course of business from a person other than the persons referred to in paragraph VILA of this order. Provided further, that this paragraph VII of this order shall not apply to the acquisition of Technipol by Montell following completion of the divestiture of the Properties to Be Divested and expiration of the attached Hold Separate Agreement.

Notification required under this provision shall be given on the Notification and Report Form set forth in the Appendix to Part S03 Federal Regulations as amendedof Title 16 of the Code of (hereinafter referred to as "the Notification ), and shall be prepared and transmitted in accordance with the requirements of that part except that no filing fee wi1 be required for any such notification notification shall be filed with the Secretary of the Commission notification need not be made to the United States Department of Justice, and notification is required only of respondents and not of any other party to the transaction. Respondents shall provide the Notification to the Commission at least thirty days prior consummating the transaction (hereinafter referred to as the "first waiting period" ). If, within the first waiting period, representatives of the Commission make a written request for additional information or documentary material (within the meaning of 16 CFR S03.20), respondents shall not consummate the transaction until twenty days after submitting such additional information or documentar material. Early termination of the waiting periods in this paragraph may be requested and, where appropriate, granted by letter from the Bureau of Competition. Provided, however, that prior notification shall not be required by this paragraph for a transaction for which notification is required to be made, and has been made, pursuant to Section 7 A of the Clayton Act, 15 U. e. 18a.

Commissioner Thompson and Commissioner Swindle not participating.

Complaint '25 F.