[Federal Register: June 15, 2004 (Volume 69, Number 114)]
[Notices]
[Page 33406-33417]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15jn04-70]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Alcan, Inc., Alcan Aluminum Corp., Pechiney,
S.A., and Pechiney Rolled Products, LLC; Complaint, Proposed Final
Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Amended Final
Judgment, Amended Hold Separate Stipulation and Order, and Revised
Competitive Impact Statement have been filed with the United States
District Court for the District of Columbia in United States v. Alcan,
Inc., Alcan Aluminum Corp., Pechiney, S.A., and Pechiney Rolled
Products, LLC, No. 1:03 CV 02012 (GK).
On September 29, 2003, the United States filed a Complaint alleging
that Alcan's proposed acquisition of Pechiney would violate section 7
of the Clayton Act, 15 U.S.C. 18, by substantially lessening
competition in development, production, and sale of brazing sheet in
North America. Brazing sheet is an aluminum alloy used to make heat
exchangers (e.g., radiators, heaters, and air conditioners) for motor
vehicles. The initial proposed Final Judgment, filed along with the
Complaint, required the defendants to divest Pechiney's brazing sheet
business to a person acceptable to the United States within 120 days
after Alcan received notice from the responsible French regulatory
authority that its tender offer for Pechiney had been successful.
On May 26, 2004, the parties filed a proposed Amended Final
Judgment. The Amended Final Judgment requires the defendants to divest
either Pechiney's or Alcan's brazing sheet business to a person
acceptable to the United States within 180 days after the filing or
five days after the Court's entry of the Amended Final Judgment,
whichever is later. Copies of the Complaint, the proposed Amended Final
Judgment, Amended Hold Separate Stipulation and Order, and Revised
Competitive Impact Statement are available for inspection at the U.S.
Department of Justice, Antitrust Division, Suite 215 North, 325 7th
Street, NW., Washington, DC 20004 (telephone: (202) 514-2692), and at
the Clerk's Office of the U.S. Court for the District of Columbia, 333
Constitution Avenue, NW., Washington, DC 20001.
Public comment is invited within 60-days of the date of this
notice. Such comments and responses thereto will be published in the
Federal Register and filed with the Court. Comments should be directed
to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division,
U.S. Department of Justice, 1401 H Street, NW., Suite 3000, Washington,
DC 20530 (telephone: (202) 307-0924).
J. Robert Kramer, II,
Director of Operations, Antitrust Division.
United States of America, U.S. Department of Justice, Antitrust
Division, 1401 H Street, NW., Suite 3000, Washington, DC 20530,
Plaintiff, v. Alcan Inc., 1188 Sherbrooke Street West, Montreal,
Quebec, Canada, H3A 3G2; Alcan Aluminum Corp., 6060 Parkland Boulevard,
Cleveland, OH 44124-4185; Pechiney, S.A., 7, Place Du Chancelier
Adenauer, CEDEX 16-75218-Paris, France; and Pechiney Rolled Products,
LLC, Rural Route 2, Ravenswood, WV 26164-9802, Defendants
[Case No. 1:03CV02012]
Judge: Gladys Kessler
Deck Type: Antitrust
Date: September 29, 2003
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action to obtain equitable relief against defendants, and alleges as
follows:
1. In early July 2003, Alcan Inc. (``Alcan'') launched a $4.6
billion tender offer for Pechiney, S.A. (``Pechiney''), which was later
endorsed by Pechiney's board of directors. The United States seeks to
enjoin this proposed acquisition, which, if consummated, would result
in consumers paying higher prices for brazing sheet, an alumimun alloy
used in making heat exchangers for motor vehicles.
2. Alcan, through its United States subsidiary (Alcan Aluminum
Corp.), and Pechiney, through its United States subsidiary (Pechiney
Rolled Products, LLC), are, respectively, the second and fourth largest
producers of brazing sheet in North America. Brazing sheet consists of
a class of layered aluminum alloys, each of which has a unique ability
to form a uniform, durable, leak-proof bond with other aluminum
surfaces. Brazing sheet is widely used in fabricating the major
components of heat exchangers for motor vehicles, including engine
cooling (e.g., radiators and oil coolers) and climate control (e.g.,
heaters and air conditioners) systems. A combination of Alcan and
Pechiney would command over 40 percent of brazing sheet sales in North
America. The combined firm and one other competitor would account for
over 80 percent of all brazing sheet sold in North America.
3. The proposed acquisition, if consummated, would combine Alcan, a
low cost new entrant and price maverick, with Pechiney, a large
industry incumbent, compromising Alcan's incentive to quickly expand
its sales by reducing brazing sheet prices, and ending the intense
competitive rivalry that currently exists between Alcan and Pechiney in
developing, producing, and selling brazing sheet. This competition,
which will intensify in the next few years as Alcan completes
qualifying its brazing sheet with more customers, already has produced
significant improvements in brazing sheet quality, durability, and
reliability, and highly competitive prices and terms for this material.
By reducing the number of major North American producers of brazing
sheet from four to three, this acquisition would substantially increase
the likelihood that the combined firm will unilaterally increase, or
that it and the other major competitor will tacitly or explicitly
cooperate to increase, prices of brazing sheet to the detriment of
consumers.
4. Unless this proposed acquisition is blocked, Alcan's acquisition
of Pechiney will substantially lessen competition in
[[Page 33407]]
the development, production, and sale of brazing sheet and likely
result in an increase in prices and a reduction in quality and
innovation for brazing sheet in violation of section 7 of the Clayton
Act, as amended, 15 U.S.C. 18.
I. Jurisdiction and Venue
5. This Complaint is filed by the United States under section 15 of
the Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain
defendants from violating section 7 of the Clayton Act, 15 U.S.C. 18.
6. Alcan and Pechiney develop, produce, and sell brazing sheet in
the flow of interstate commerce. Alcan's and Pechiney's activities in
developing, producing, and selling brazing sheet substantially affect
interstate commerce. This Court has jurisdiction over the subject
matter of this action pursuant to section 12 of the Clayton Act, 15
U.S.C. 22, and 28 U.S.C. 1331, 1337(a) and 1345.
7. Alcan, Alcan Aluminum Corp., Pechiney, and Pechiney Rolled
Products LLP have consented to personal jurisdiction and venue in this
judicial district.
II. Defendants
8. Alcan is a Canadian corporation with its headquarters in
Montreal, Quebec. Alcan Aluminum, and Alcan Subsidiary, is a Delaware
corporation with its principal place of business in Cleveland, OH.
Alcan is one of the world's largest fully integrated aluminum
producers. Alcan mines ore from which primary aluminum is produced, and
produces a very wide range of rolled aluminum products, including
brazing sheet. In 2002, Alcan reported sales of about $12.5 billion.
Alcan projects that its sales of brazing sheet in North America was in
excess of $30 million in 2003.
9. Pechiney is a French corporation with its main office in Paris,
France. A subsidiary, Pechiney Rolled Products, is a Delaware
corporation with its principal place of business in Ravenswood, WV.
Pechiney is also a leading integrated aluminum producer that makes a
wide range of rolled aluminum products. In 2002, Pechiney reported
total sales of about $11.3 billion. Its United States operations
generate over $100 million in North American sales of brazing sheet.
III. The Proposed Transaction
10. In early July 2003, Alcan publicly announced a tender offer for
shares of Pechiney, a transaction now valued at over $4.6 billion. The
tender offer, recently endorsed by Pechiney's board of directors, is
expected to be completed on November 30, 2003, and soon after, Alcan is
expected to acquire a majority of the voting shares in Pechiney.
IV. Trade and Commerce
A. The Relevant Product Market
11. Brazing sheet comprises a class of custom-engineered aluminum
alloys, each of which is composed of a solid metal ``core'' clad on one
or both sides with an alloy whose melting temperature is lower than
that of the core material. When brazing sheet is baked at the
appropriate temperature, the cladding alloy will melt and form a
durable, uniform leak-proof bond between the core and any adjoining
aluminum surface, effectively welding the two materials together.
12. Brazing sheet is ideally suited for fabricating the major
components of heat exchange systems used in motor vehicles. Heat
exchangers include engine cooling systems such as radiators and oil
coolers and climate control systems such as heater cores and air
conditioning units (i.e., evaporator and condenser cores). By making
the basic components of heat exchangers with brazing sheet, a parts
maker can avoid the physically tedious and costly task of welding or
soldering individual components, many of which have unusually intricate
surfaces that form joints deep within the heat exchange unit. A parts
maker instead can loosely assemble the brazed components and bake the
assembly in a brazing oven. The surfaces of the components will melt,
converting the entire loose assembly into a solid, leak-proof heat
exchange unit.
13. Today, the major components of all heat exchangers used in
motor vehicles are made of brazing sheet. Less expensive, lighter, more
durable and formable than materials it replaced, brazing sheet enables
vehicle makers simultaneously to reduce vehicle cost, size, and weight;
improve gas mileage; and extend engine, climate control system, and
drive train life. In heat exchange applications, no other material
matches the combination of strength, light weight, durability,
formability, and corrosion resistance of brazing sheet. Because of its
unique attributes, brazing sheet is the preferred material for making
heat exchangers for motor vehicles.
14. A small but significant and nontransitory increase in prices
for brazing sheet would not cause parts makers to switch to other
materials for heat exchanger components in volumes sufficient to make
such a price increase unprofitable and unsustainable. Accordingly, the
development, production, and sale of brazing sheet is a line of
commerce and a relevant product market within the meaning of section 7
of the Clayton Act.
B. The Relevant Geographic Market
15. Alcan produces brazing sheet in an aluminum hot rolling mill in
Oswego, NY, and ``slits'' or cuts finished roll stock at a cold rolling
mill in Fairmont, WV. Pechiney makes brazing sheet in an aluminum hot
rolling mill in Ravenswood, WV. The only other large competitor
produces brazing sheet in a hot rolling mill in the United States. A
much smaller rival produces brazing sheet in hot rolling mills in
Canada and in Europe. Additional volumes of brazing sheet are exported
to the United States from Europe. Brazing sheet exports to North
America, however, account for less than eight percent of total sales.
The Canadian and foreign firms, moreover, operate at or near their full
production capacity.
16. Domestic parts makers prefer to purchase brazing sheet from
North American sources. Foreign brazing sheet typically costs much more
than, but does not outperform, brazing sheet produced in North America.
Reliance on overseas sources for brazing sheet can be especially risky
for domestic parts makers since foreign brazing sheet is more prone to
supply interruptions and delays than brazing sheet procured from local,
North American sources. Typically, when overseas demand has surged,
foreign producers of brazing sheet have cut shipments to North American
customers, resulting in production bottlenecks that have jeopardized
North American parts makers' relationships with their customers.
17. For these reasons, North American parts makers generally
restrict purchases of foreign brazing sheet imports to unique
circumstances, e.g., as an interim measure until one or more domestic
producers have been qualified to make brazing sheet for use in an auto
maker's vehicle, or for low volume heat exchanger parts for which a
foreign auto maker has designed a single foreign supplier as the only
qualified source for that brazing sheet material.
18. A small but significant and nontransitory increase in prices
for brazing sheet in North America would cause parts makers to buy so
much brazing sheet from sources outside North America that such a price
increase would be unprofitable and unsustainable. Accordingly, North
America is a relevant geographic market within the meaning of section 7
of the Clayton Act.
[[Page 33408]]
C. Anticompetitive Effects
19. There are only four significant competitors in the sale of
brazing sheet in North America. Pechiney is the second largest producer
with over 30 percent of sales; Alcan is the fourth largest with over 10
percent of sales. After the proposed acquisition, the combined firm and
the largest U.S. producer of brazing sheet would command over 80
percent of all brazing sheet sales. Total North American sales of
brazing sheet exceed $360 million annually.
20. The brazing sheet market would become substantially more
concentrated if Alcan acquires Pechiney. Using a measure of market
concentration called the Herfindahl-Hirschman Index (``HHI'') (defined
and explained in Appendix A), the post-acquisition HHI would increase
by at least 600 points, resulting in a post-merger HHI of about 3600,
well in excess of levels that ordinarily would raise significant
antitrust concerns.
21. The proposed transaction would combine Alcan with Pechiney, and
remove a low cost, aggressive, and disruptive competitor in the North
American brazing sheet market. Before the announced acquisition, Alcan
recently had undertaken to significantly increase its sales of brazing
sheet in North America. In 2001, Alcan moved its brazing sheet
operations from England to Oswego, NY, then developed new, highly
proprietary aluminum rolling technology that would make a low cost
producer of brazing sheet in North America. Alcan also recently has
completed qualifying to provide brazing sheet to several major domestic
parts makers.
22. The proposed transaction will make it more likely that the few
remaining brazing sheet producers will engage in anticompetitive
coordination to increase prices, reduce quality and innovation, and
decrease production of brazing sheet. After the acquisition, the
combined firm and its largest North American rival would share market
leadership and a common incentive to pursue strategies that emphasize
accommodation and do not risk provocation. The acquisition also would
substantially increase the likelihood that the combined firm will
unilaterally increase prices of brazing sheet to the detriment of
customers for whom Pechiney and Alcan are the only firms now qualified
to provide brazing sheet for those customers' requirements. The other
competitors in brazing sheet sales in North America do not have the
incentive or ability, individually or collectively, to effectively
constrain a unilateral or cooperative exercise of market power after
the acquisition.
23. Purchasers of brazing sheet have benefited from competition
between Alcan and Pechiney through lower prices and improved products.
Alcan's acquisition of Pechiney would eliminate substantial competition
and lead to an increase in prices and reduction in innovation and
quality of brazing sheet.
24. The proposed transaction, if consummated, would eliminate a
significant competitor and facilitate unilateral or coordinated
increases in prices, or a reduction in levels of quality and
innovation, for brazing sheet.
D. Entry Unlikely To Deter a Post Acquisition Exercise of Market Power
25. Successful entry into the brazing sheet market would not be
timely, likely or sufficient to deter any unilateral or coordinated
exercise of market power as a result of the transaction.
26. Significant barriers prevent de novo or lateral entry into the
development, production, and sale of brazing sheet in North America. To
produce this material, not only must a firm possess an aluminum hot
rolling mill (which costs at least $80 million to construct), but also
the technology and expertise to create custom-engineered aluminum
alloys that perform well in the demanding operating conditions
prevalent in the small heat exchangers used in motor vehicles. Even
firms with the physical and technological assets to produce brazing
sheet must, in order to have a significant impact, ``qualify'' with
customers, i.e., demonstrate that it would be a reliable producer of
consistently high quality brazing sheet material. Qualification can be
acquired only after the new firm has made a substantial investment in
expensive alloy technology, successfully completed a series of time-
consuming tests of its materials and components, and acquired actual
experience producing brazing sheet that meets the exacting
specifications of risk-averse parts makers. It took Alcan over two
years from when it moved its brazing sheet operations to Oswego, New
York to qualify with enough customers to make a significant sales
impact.
V. Violations Alleged
27. The effect of Alcan's proposed acquisition of Pechiney may be
to substantially lessen competition and tend to create a monopoly in
interstate trade and commerce in violation of Section 7 of the Clayton
Act.
28. The transaction will likely have the following anticompetitive
effects, among others:
a. Competition generally in the development, production, and sale
of brazing sheet in North America would be substantially lessened;
b. Actual and potential competition between Alcan and Pechiney in
the development, production, and sale of brazing sheet in North America
would be eliminated; and
c. Prices for brazing sheet sold in North America would likely
increase and the levels of quality and innovation would likely decline.
29. Unless prevented, the acquisition of Pechiney by Alcan would
violate section 7 of the Clayton Act, as amended, 15 U.S.C. 18.
VI. Requested Relief
30. Plaintiff requests:
a. That the proposed acquisition of Pechiney by Alcan be adjudged
and decreed to be unlawful and in violation of section 7 of the Clayton
Act, as amended, 15 U.S.C. 18;
b. That defendants and all persons acting on their behalf be
permanently enjoined and restrained from carrying out any contract,
agreement, understanding or plan, the effect of which would be to
combine Pechiney with the operations of Alcan;
c. That plaintiff recover the costs of this action; and
d. That plaintiff received such other and further relief as the
case requires and this Court may deem proper.
Dated: September 29, 2003.
Respectfully submitted,
For Plaintiff United States of America
R. Hewitt Pate, Assistant Attorney General, DC Bar 473598.
Deborah P. Majoras, Deputy Assistant Attorney General, DC Bar
474239.
J. Robert Kramer II, Director of Operations & Civil Enforcement, PA
Bar 23963.
Maribeth Petrizzi, Chief, Litigation II Section, DC Bar
435204.
Anthony E. Harris, IL Bar 1133713.
Joseph M. Miller, DC Bar 439965.
Carolyn L. Davis.
John B. Arnett, Sr., DC Bar 439122.
Trial Attorneys, U.S. Department of Justice, Antitrust Division,
Litigation II Section, 1401 H Street, NW., Suite 3000, Washington,
DC 20530, Telephone: (202) 307-6583.
Appendix A-- Herfindahl-Hirschman Index Calculations
``HHI'' means the Herfindahl-Hirschman Index, a commonly
accepted measure of market concentration. It is calculated by
squaring the market share of each firm competing in the market and
then summing the resulting numbers. For example, for a market
consisting of four firms with shares of thirty, thirty, twenty, and
twenty percent, the HHI is 2600 (30\2\ + 30\2\ + 20\2\ + 20\2\ =
2600). The HHI takes into account the relative size and distribution
of the firms in a market and
[[Page 33409]]
approaches zero when a market consists of a large number of firms of
relatively equal size. The HHI increases both as the number of firms
in the market decreases and as the disparity in size between those
firms increases.
Markets in which the HHI is between 1000 and 1800 points are
considered to be moderately concentrated, and those in which the HHI
is in excess of 1800 points are considered to be highly
concentrated. Transactions that increase the HHI by more than 100
points in highly concentrated markets presumptively raise antitrust
concerns under the Horizontal Merger Guidelines issued by the U.S.
Department of Justice and the Federal Trade Commission. See Merger
Guidelines Sec. 1.51.
Amended Final Judgment
Whereas, plaintiff, United States of America, filed its Complaint
on September 29, 2003, and plaintiff and defendants, Alcan Inc., Alcan
Aluminum Corp., Pechiney, S.A., and Pechiney Rolled Products, LLC, by
their respective attorney, have consented to the entry of this Amended
Final Judgment without trial or adjudication of any issue of fact or
law, and without this Amended Final Judgment constituting any evidence
against or admission by any party regarding any issue of fact or law;
And whereas, defendants agree to be bound by the provisions of this
Amended Final Judgment pending its approval by the Court;
And whereas, the essence of this Amended Final Judgment is the
prompt and certain divestiture of certain rights or assets by the
defendants to assure that competition is not substantially lessened;
And whereas, plaintiff requires defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And whereas, defendants have represented to the United States that
the divestiture required below can and will be made and that defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, Adjudged and Decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18.
II. Definitions
As used in this Amended Final Judgment:
A. ``Acquirer'' means the entity or entities to whom defendants
divest Alcan's or Pechiney's Brazing Sheet Business.
B. ``Alcan'' means defendant Alcan Inc., a Canadian corporation
with its headquarters in Montreal, Canada, its successors and assigns,
and its subsidiaries (including defendant Alcan Aluminum Corp.),
divisions, groups, affiliates, partnerships, joint ventures, and their
directors, officers, managers, agents, and employees.
C. ``Pechiney'' means Pechiney, S.A., a French corporation with its
headquarters in Paris, France, and its successors and assigns, its
subsidiaries, divisions (including Pechiney Rolled Products, LLC),
groups, affiliates, partnerships, joint ventures, and their directors,
officers, managers, agents, and employees.
D. ``Brazing sheet'' means a layered aluminum alloy that consists
of a core clad on one or both sides with an aluminum alloy whose
melting temperature is lower than that of the core material. Brazing
sheet is used primarily in making components of heat exchange systems
(e.g., radiators, oil coolers, and air conditioning units) for motor
vehicles.
E. ``Pechiney's Brazing Sheet Business'' means all assets,
interests, and rights in Pechiney Rolled Products, LLC's aluminum
products rolling mill located in or near Ravenswood, West Virginia
26164 (``Ravenswood Facility''), including:
1. All tangible assets of the Ravenswood Facility and the real
property on which the Ravenswood Facility is situated; any facilities,
wherever located, used for research, development, and engineering
support for the Ravenswood Facility (``the Ravenswood Engineering
Facilities''), and any real property associated with those facilities;
manufacturing and sales assets relating to the Ravenswood Facility and
to the Ravenswood Engineering Facilities, including capital equipment,
vehicles, supplies, personal property, inventory, office furniture,
fixed assets and fixtures, materials, on- or off-site warehouses or
storage facilities, and other tangible property or improvements; all
licenses, permits and authorizations issued by any governmental
organization relating to the Ravenswood Facility and to the Ravenswood
Engineering Facilities; all contracts, agreements, leases, commitments,
and understandings pertaining to the operations of the Ravenswood
Facility and to the Ravenswood Engineering Facilities; supply
agreements; all customer lists, accounts, and credit records; and other
records maintained by Pechiney Rolled Products, LLC in connection with
the operations of the Ranvenswood Facility and of the Ravenswood
Engineering Facilities;
2. All intangible assets, including but not limited to all patents,
licenses and sublicenses, intellectual property, trademarks, trade
names, service marks, service names (except to the extent such
trademarks, trade names, service marks, or service names contain the
trademark or names ``Pechiney'' or any variation thereof), technical
information, know-how, trade secrets, drawings, blueprints, designs,
design protocols, specifications for materials, specifications for
parts and devices, safety procedures for the handling of materials and
substances, quality assurance and control procedures, design tools and
simulation capability, and all manuals and technical information
Pechiney Rolled Products, LLC provides to its employees, customers,
suppliers, agents or licensees in connection with the operations of the
Ravenswood Facility; provided, however, that defendants may, if
approved by the United States in its sole discretion, require the
Acquirer to license defendants to make, have made, use, or sell outside
of North America any Pechiney product or process made by or used in
connection with the Ravenswood Facility; and
3. All research data concerning historic and current research and
development efforts relating to the operations of the Ravenswood
Facility and of the Ravenswood Engineering Facilities, including
designs of experiments, and the results of unsuccessful designs and
experiments.
F. ``Alcan's Brazing Sheet Business'' means all assets, interest,
and rights in Alcan Aluminum Corp.'s aluminum smelting facility and
rolling mill located in or near Oswego, New York 13126 (``Oswego
Facility''), including:
1. All tangible assets of the Oswego Facility and the real property
on which the Oswego Facility is situated; any facilities, wherever
located, used for research, development, and engineering support for
the Oswego Facility (``the Oswego Engineering Facilities''), and any
real property associated with those facilities; manufacturing and sales
assets relating to the Oswego Facility and to the Oswego Engineering
Facilities (such as Alcan's aluminum cold rolling, cutting, and
slitting facility in Fairmont, West Virginia 26554), including capital
equipment, vehicles, supplies, personal property, inventory, office
furniture,
[[Page 33410]]
fixed assets and fixtures, materials, on- or off-site warehouses or
storage facilities, and other tangible property or improvements; all
licenses, permits and authorizations issued by any governmental
organization relating to the Oswego Facility and to the Oswego
Engineering Facilities; all contracts, agreements, leases, commitments,
and understandings pertaining to the operations of the Oswego Facility
and to the Oswego Engineering Facilities; supply agreements; all
customer lists, accounts, and credit records; and other records
maintained by Alcan in connection with the operations of the Oswego
Facility and of the Oswego Engineering Facilities;
2. All intangible assets, including but not limited to all patents,
licenses and sublicenses, intellectual property, trademaks, trade
names, service marks, service names (except to the extent such
trademarks, trade names, service marks, or service names contain the
trademark or names ``Alcan'' or any variation thereof), technical
information, know-how, trade secrets, drawings, blueprints, designs,
design protocols, specifications for materials, specifications for
parts and devices, safety procedures for the handling of materials and
substances, quality assurance and control procedures, design tools and
simulation capability, and all manuals and technical information Alcan
provides to its employees, customers, suppliers, agents or licensees in
connection with the operations of the Oswego Facility; provided,
however, that defendants may, if approved by the United States in its
sole discretion, require the Acquirer to license defendants to make,
have made, use, or sell outside of North America any Alcan product or
process made by or used in connection with the Oswego Facility; and
3. All research data concerning historic and current research and
development efforts relating to the operations of the Oswego Facility
and of the Oswego Engineering Facilities, including designs of
experiments, and the results of unsuccessful designs and experiments.
III Applicability
A. This Amended Final Judgment applies to Alcan and Pechiney, as
defined above, and all other persons in active concert or participation
with any of them who receive actual notice of this Amended Final
Judgment by personal service or otherwise.
B. Defendants shall require, as a condition of the sale or other
disposition of all or substantially all of their assets or of lesser
business units that include Alcan's or Pechiney's Brazing Sheet
Business, that the purchaser agrees to be bound by the provisions of
this Amended Final Judgment, provided, however, that defendants need
not obtain such an agreement from the Acquirer.
IV. Divestiture
A. Defendants are ordered and directed, within one hundred eighty
(180) calendar days after the date of filing of this Amended Final
Judgment, or five (5) days after notice of the entry of this Amended
Final Judgment by the Court, whichever is later, to divest Alcan's or
Pechiney's Brazing Sheet Business in a manner consistent with this
Amended Final Judgment to an Acquirer acceptable to the United States
in its sole discretion. The United States, in its sole discretion, may
agree to one or more extensions of this time period, not to exceed in
total sixty (60) calendar days, and shall notify the Court in each such
circumstance. Defendants agree to use their best efforts to divest
Alcan's or Pechiney's Brazing Sheet Business as expeditiously as
possible.
B. In accomplishing the divestiture ordered by this Amended Final
Judgment, defendants promptly shall make known, by usual and customary
means, the availability of Alcan's or Pechiney's Brazing Sheet
Business, whichever is then available for sale. Defendants shall inform
any person making inquiry regarding a possible purchase of Alcan's
Pechiney's Brazing Sheet Business that either will be divested pursuant
to this Amended Final Judgment and provide that person with a copy of
this Amended Final Judgment. Defendants shall offer to furnish to all
prospective Acquires, subject to customary confidentiality assurances,
all information and documents relating to Alcan's or Pechiney's Brazing
Sheet Business, whichever is then available for sale, customarily
provided in a due diligence process except such information or
documents subject to the attorney-client or work-product privilege.
Defendants shall make available such information to the United States
at the same time such information is made available to any other
person.
C. Defendants shall provide prospective Acquirers of Alcan's or
Pechiney's Brazing Sheet Business and the United States information
relating to the personnel involved in the production, operation,
development, and sale of Alcan's or Pechiney's Brazing Sheet Business
(whichever is then available for sale) to enable the Acquirer to make
offers of employment. Defendants will not interfere with any
negotiations by the Acquirer to employ any of the defendants' employees
whose responsibilities includes the production, operation, development,
or sale of the products of Alcan's or Pechiney's Brazing Sheet
Business.
D. Defendants shall permit prospective Acquirers of Alcan's or
Pechiney's Brazing Sheet Business to have reasonable access to
personnel and to make inspections of the physical facilities of Alcan's
or Pechiney's Brazing Sheet Business (whichever is then available for
sale); access to any and all environmental, zoning, and other permit
document and information; and access to any and all financial,
operational, or other documents and information customarily provided as
part of a due diligence process.
E. Defendants shall warrant to the Acquirer of Alcan's or
Pechiney's Brazing Sheet Business that each asset that was operational
as of the date of filing of the Complaint in this matter will be
operational on the date of divestiture.
F. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of Alcan's or Pechiney's
Brazing Sheet Business.
G. Defendants shall not take any action, direct or indirect, that
would prevent or discourage in any way any dealer from distributing the
products of Alcan's or Pechiney's Brazing Sheet Business for a period
of two years after such divestiture. Nothing in this provision,
however, shall prevent defendants from promoting and selling in the
ordinary course of business products that compete with those of Alcan's
or Pechiney's Brazing Sheet Business.
H. Defendants shall warrant to the Acquirer of Alcan's or
Pechiney's Brazing Sheet Business that there are not material defects
in the environmental, zoning, or other permits pertaining to the
operation of Alcan's or Pechiney's Brazing Sheet Business, and that
following the sale of Alcan's or Pechiney's Brazing Sheet Business,
defendants will not undertake, directly or indirectly, any challenges
to the environmental, zoning, or other permits relating to the
operation of Alcan's or Pechiney's Brazing Sheet Business.
I. Nothing in this Amended Final Judgment shall be construed to
require the Acquirer as a condition of any license granted by or to
defendants pursuant Sections II(E) and IV (or Sections II(F) and IV) to
extend to defendants the right to use the Acquirer's improvements to
any of Alcan's or Pechiney's Brazing Sheet Business.
[[Page 33411]]
J. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by trustee appointed pursuant to
Section V, of this Amended Final Judgment, shall include the entire
Alcan's or Pechiney's Brazing Sheet Business, and shall be accomplished
in such a way as to satisfy the United States, in its sole discretion,
that Alcan's or Pechiney's Brazing Sheet Business can and will be used
by the Acquirer as part of a viable, ongoing business, engaged in
developing, manufacturing, and selling brazing sheet in North America.
Divestiture of Alcan's or Pechiney's Brazing Sheet Business may be made
to an Acquirer, provided that it is demonstrated to the sole
satisfaction of the United States that the divested brazing sheet
business will remain viable and that divestiture of such assets will
remedy the competitive harm alleged in the Complaint. The divestiture,
whether pursuant to Section IV or Section V of this Amended Final
Judgment,
1. Shall be made to an Acquirer that, in the United State's sole
judgment, has the managerial, operational, and financial capability to
compete effectively in the development, manufacture, and sale of
brazing sheet in North America; and
2. Shall be accomplished so as to satisfy the United States, in its
sole discretion, that none of the terms of any agreement between an
Acquirer and defendants give defendants the ability unreasonably to
raise the Acquirer's costs, to lower the Acquirer's efficiency, or
otherwise to interfere in the ability of the Acquirer to compete
effectively.
V. Appointment of Trustee To Effect Divestiture
A. If defendants have not divested Alcan's or Pechiney's Brazing
Sheet Business within the time period specified in Section IV(A),
defendants shall notify the United States of that fact in writing. Upon
application of the United States, the Court shall appoint a trustee
selected by the United States and approved by the Court to effect the
divestiture of Pechiney's Brazing Sheet Business.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell Pechiney's Brazing Sheet Business.
The trustee shall have the power and authority to accomplish the
divestiture to an Acquirer acceptable to the United States at such
price and on such terms as are then obtainable upon reasonable effort
by the trustee, subject to the provisions of Sections IV, V, and VI of
this Amended Final Judgment, and shall have such other powers as this
Court deems appropriate. Subject to Section V(D) of this Amended Final
Judgment, the trustee may hire at the cost and expense of defendants
any investment bankers, attorneys, or other agents, who shall be solely
accountable to the trustee, reasonably necessary in the trustee's
judgment to assist in the divestiture.
C. Defendants shall not object to a sale by the trustee on any
ground other than the trustee's malfeasance. Any such objections by
defendants must be conveyed in writing to the United States and the
trustee within ten (10) calendar days after the trustee has provided
the notice required under Section VI.
D. The trustee shall serve at the cost and expense of defendants,
on such terms and conditions as plaintiff approves, and shall account
for all monies derived from the sale of Pechiney's Brazing Sheet
Business and all costs and expenses so incurred. After approval by the
Court of the trustee's accounting, including fees for its services and
those of any professionals and agents retained by the trustee, all
remaining money shall be paid to defendants and the trust shall then be
terminated. The compensation of the trustee and any professionals and
agents retained by the trustee shall be reasonable in light of the
value of Pechiney's Brazing Sheet Business and based on a fee
arrangement providing the trustee with an incentive based on the price
and terms of the divestiture and the speed with which it is
accomplished, but timeliness is paramount.
E. Defendant shall use their best efforts to assist the trustee in
accomplishing the required divestiture. The trustee and any
consultants, accounts, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of the business to be divested, and defendants
shall develop financial and other information relevant to such business
as the trustee may reasonably request, subject to customary
confidentiality protection for trade secret or other confidential
research, development, or commercial information. Defendants shall take
no action to interfere with or to impede the trustee's accomplishment
of the divestiture.
F. After its appointment, the trustee shall file monthly reports
with the United States and the Court setting for the the trustee's
efforts to accomplish the divestiture ordered under this Amended Final
Judgment. To the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring, any interest in Pechiney's Brazing Sheet
Business and shall describe in detail each contact with any such
person. The trustee shall maintain full records of all efforts made to
divest Pechiney's Brazing Sheet Business.
G. If the trustee has not accomplished such divestiture within six
months after its appointment, the trustee shall promptly file with the
Court a report setting forth (1) the trustee's efforts to accomplish
the required divestiture; (2) the reasons, in the trustee's judgment,
why the required divestiture has not been accomplished; and (3) the
trustee's recommendations. To the extent such reports contain
information that the trustee deems confidential, such reports shall not
be filed in the public docket of the Court. The trustee shall at the
same time furnish such report to the plaintiff who shall have the right
to make additional recommendations consistent with the purpose of the
trust. The Court thereafter shall enter such orders as it shall deem
appropriate to carry out the purpose of the Amended Final Judgment,
which may, if necessary, include, without limitation, extending the
trust and the term of the trustee's appointment by a period requested
by the United States.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, defendants or the trustee, whichever is then
responsible for effecting the divestiture required herein, shall notify
the United States of any proposed divestiture required by Section IV or
V of this Amended Final Judgment. If the trustee is responsible, it
shall similarly notify defendants. The notice shall set forth the
details of the proposed divestiture and list the name, address, and
telephone number of each person not previously identified who offered
or expressed an interest in or desire to acquire any ownership interest
in Alcan's or Pechiney's Brazing Sheet Business, together with full
details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from defendants,
the proposed Acquirer, any other third party, or the trustee if
applicable additional information concerning the proposed divestiture,
the proposed Acquirer, and any other potential Acquirer. Defendants and
the
[[Page 33412]]
trustee shall furnish any additional information requested within
fifteen (15) calendar days of the receipt of the request, unless the
parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after the United States has been
provided the additional information requested from defendants, the
proposed acquirer, any third party, and the trustee, whichever is
later, the United States shall provide written notice to defendants and
the trustee, if there is one, stating whether or not it objects to the
proposed divestiture. If the United States provides written notice that
it does not object, the divestiture may be consummated, subject only to
defendants' limited right to object to the sale under Section V(C) of
this Amended Final Judgment. Absent written notice that the United
States does not object to the proposed Acquirer or upon objection by
the United States, a divestiture proposed under Section IV or Section V
shall not be consummated. Upon objection by defendants under Section
V(C), a divestiture proposed under Section V shall not be consummated
unless approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any purchase made
pursuant to Section IV or V of this amended Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Amended Final Judgment has
been accomplished defendants shall take all steps necessary to comply
with the Amended Hold Separate Stipulation and Order entered by this
Court. Defendants shall take no action that would jeopardize the
divestiture order by this Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV or V, defendants
shall deliver to the United States an affidavit as to the fact and
manner of its compliance with Section IV or V of this Amended Final
Judgment. Each such affidavit shall include the name, address, and
telephone number of each person who, during the preceding thirty days,
made an offer to acquire, expressed an interest in acquiring, entered
into negotiations to acquire, or was contacted or made an inquiry about
acquiring, any interest in Alcan's or Pechiney's Brazing Sheet
Business, and shall describe in detail each contact with any such
person during that period. Each such affidavit shall also include a
description of the efforts defendants have taken to solicit buyers for
Alcan's or Pechiney's Brazing Sheet Business, and to provide required
information to any prospective Acquirer, including the limitations, if
any, on such information. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
information provided by defendants, including limitations on the
information, shall be made within fourteen (14) days of receipt of such
affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions defendants
have taken and all steps defendants have implemented on an ongoing
basis to comply with Section IX of this Amended Final Judgment.
Defendants shall deliver to the United States an affidavit describing
any changes to the efforts and actions outlined in defendants' earlier
affidavits filed pursuant to this section within fifteen (15) calendar
days after the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve Alcan's or Pechiney's Brazing Sheet Business and to divest
Alcan's or Pechiney's Brazing Sheet Business until one year after such
divestiture has been completed.
X. Compliance Inspection
A. For purposes of determining or securing compliance with this
Amended Final Judgment, or of determining whether the Amended Final
Judgment should be modified or vacated, and subject to any legally
recognized privilege, from time to time duly authorized representatives
of the United States Department of Justice, including consultants and
other persons retained by the United States, shall, upon written
request of a duly authorized representative of the Assistant Attorney
General in charge of the Antitrust Division, and on reasonable notice
to defendants, be permitted:
1. Access during defendants' office hours to inspect and copy, or
at plaintiffs option, to require defendants to provide copies of, all
books, ledgers, accounts, records and documents in the possession,
custody, or control of defendants, relating to any matters contained in
this Amended Final Judgment; and
2. To interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by defendants.
B. Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports, under oath if requested,
relating to any of the matters contained in this Amended Final Judgment
as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Amended Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by
defendants to the United States, defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and defendants mark each pertinent page of
such material, ``Subject to claim of protection under Rule 26(c)(7) of
the Federal Rules of Civil Procedure,'' then the United States shall
give defendants ten (10) calendar days notice prior to divulging such
material in any legal proceeding (other than a grand jury proceeding).
XI. No Reacquisition
Defendants may not reacquire any part of Alcan's or Pechiney's
Brazing Sheet Business, whichever is divested, during the term of this
Amended Final Judgment.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Amended
Final Judgment to apply to this Court at any time for further orders
and directions as may be necessary or appropriate to carry out or
construe this Amended Final Judgment, to modify any of its provisions,
to enforce compliance, and to punish violations of its provision.
XIII. Expiration of Amended Final Judgment
Unless this Court grants an extension, this Amended Final Judgment
shall expire ten years from the date of its entry.
[[Page 33413]]
XIV. Public Interest Determination
Entry of this Amended Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge
Revised Competitive Impact Statement
The United States, pursuant to section 2(b) of the Antitrust
Procedures and Penalties Act (``Tunney Act''), 15 U.S.C. 16(b)-(h),
files this Revised Competitive Impact Statement relating to the
proposed Amended Final Judgment submitted for entry in this civil
antitrust proceeding.
I. Nature and Purpose of This Proceeding
A. The Compliant and the Initial Proposed Final Judgment
In early July 2003, Alcan Inc. (``Alcan'') publicly announced that
it would soon begin a tender offer for shares of Pechiney, S.A.
(``Pechiney''), a transaction formally endorsed by Pechiney's board of
directors on August 30, 2003. On September 29, 2003, the United States
filed a civil antitrust suit alleging that Alcan's proposed acquisition
of Pechiney would violate section 7 of the Clayton Act, 15 U.S.C. 18.
The Compliant alleged that a combination of Alcan and Pechiney would
substantially lessen competition in the development, production, and
sale of brazing sheet in North America. Pechiney and Alcan are,
respectively, the second and fourth largest competitors in the sale of
brazing sheet in North America. The acquisition would result in a
single firm--Alcan--with a market share of over 40 percent, and the
industry's two largest firms having a combined share of over 80
percent, of North American sales of brazing sheet. The Compliant
alleged that the attendant reduction in competition in that highly
concentrated market would lead to an increase in brazing sheet prices
and a reduction in product quality and innovation to the detriment of
North American consumers. Accordingly, the prayer for relief in the
Compliant sought: (1) A judgment that the proposed acquisition would
violate section 7 of the Clayton Act, and (2) a permanent injunction
that would prevent Alcan from acquiring control of, or otherwise
combining its assets with, Pechiney.
At the same time the Compliant was filed, the United States filed a
proposed settlement that would allow Alcan to acquire Pechiney, but
require defendants to divest Pechiney's entire North American brazing
sheet business in such a way as to preserve competition in North
America. According to the terms of the settlement, defendants were
required to divest Pechiney's brazing sheet business\1\ to a person
acceptable to the United States, in its sole discretion, within 120
calendar days after Alcan receives preliminary notification from the
responsible French stock market regulatory agency that Alcan's tender
offer for shares of Pechiney has been successful, or within five (5)
days after notice of entry of the Final Judgment, whichever was later.
The United States, in its sole discretion, could extend the time period
for the divesture one or more times, not to exceed a total of 60 days
past the initial divestiture deadline. If defendants did not complete
the ordered divestiture within the prescribed time period, then the
United States could nominate, and the Court would appoint, a trustee
with sole authority to divest Pechiney's brazing sheet business.
---------------------------------------------------------------------------
\1\ Pechiney's brazing sheet business, as defined in section
II(E) of the proposed Final Judgment (and Amended Final Judgment),
includes all tangible and intangible assets of Pechiney's
Ravenswood, West Virginia, aluminum rolling mill and the engineering
facilities, wherever located, that provide research and development
support for any product produced at the Ravenswood plant.
---------------------------------------------------------------------------
In accordance with the Tunney Act, the United States published the
proposed settlement, the public comments, and the government's
responses in the Federal Register. See 68 FR 70287 (Dec. 17, 2003) and
69 FR 18930 (April 6, 2004).
B. The Amended Final Judgment
In early March 2004, defendants indicated that, for many reasons,
their divestiture of Pechiney's brazing sheet business would take
significantly more time than they had initially anticipated. They also
disclosed that they were seriously considering a major corporate
reorganization, which would likely result in a sale or spin off of many
of defendants' aluminum rolling operations--including Alcan's own
brazing sheet business \2\--to a separate, independent, and viable new
entity.\3\ Defendants asked, and the United States later agreed, to
amend the pending Final Judgment in such a way as to accommodate this
business development, without compromising its paramount objective of
vigorous competition in the sale of brazing sheet in North America.\4\
---------------------------------------------------------------------------
\2\ Alcan's brazing sheet business consists of two aluminum
rolling mills, which are located in Oswego, New York, and Fairmount,
West Virginia. See Amended Final Judgment, Sec. II (F).
\3\ The government understands that the reorganization was
driven by business reasons unrelated to the ordered divestiture of
Pechiney's brazing sheet business. To alleviate the European
Community's competitive concerns about Alcan's acquisition of
Pechiney, defendants previously had agreed, inter alia, to divest
their interests in a massive aluminum smelter and aluminum hot
rolling mill complex in Europe. Also, before acquiring Pechiney,
Alcan had considered selling or otherwise disposing of its aluminum
manufacturing facilities that make relatively low margin products
(e.g., can stock), and focusing instead on production of higher
margin products such as packaging materials and specialty metals.
The United States understands that defendants believe they can meet
both objectives by combining the European assets that the EC had
ordered divested with Alcan's own Aluminum Rolled Products Division
to create a new stand-alone firm, which would then be sold to an
interested purchaser or spun off to defendants' own stockholders, in
a transaction that would satisfy the divestiture requirements of the
Amended Final Judgment.
\4\ On April 22, the parties notified the Court that they were
seriously considering amending the initial settlement, and they
asked the Court to refrain hearing or ruling on the proposed
Judgment and a pending motion to intervene until after June 1, 2004.
The Court subsequently entered a stipulated order to that effect on
April 26, 2004.
---------------------------------------------------------------------------
The new settlement consists of an Amended Final Judgment and an
Amended Hold Separate Stipulation and Order. The Amended Final Judgment
would preserve competition in the sale of brazing sheet in North
America by requiring defendants to divest either Alcan's or Penchiney's
brazing sheet business to a person acceptable to the United States, in
its sole discretion, within 180 calendar days after filing of the
proposed Amended Final Judgment, or the Court's entry of the Amended
Final Judgment, which is later. Because the Amended Final Judgment
permits a divestiture option that the parties did not mention or
contemplate in the initial settlement, interested persons should be
provided notice of, and an opportunity to comment upon, the Amended
Final Judgment. Accordingly, the parties have stipulated that the
proposed Amended Final Judgment may be entered by the Court after
compliance with the Tunney Act. Entry of the proposed Amended Final
Judgment would terminate this action, except that the Court would
retain jurisdiction to construe, modify, or enforce the provisions of
the proposed Amended Final Judgment and to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violations of
the Antitrust Laws
A. The Defendants and the Proposed Transaction
Alcan is a Canadian corporation based in Montreal, Quebec. One of
the world's largest fully integrated aluminum
[[Page 33414]]
producers, Alcan produces primary aluminum ingot and a wide range of
rolled aluminum products, including brazing sheet. Its annual revenues
exceed $12.5 billion, including over $30 million in North American
sales of brazing sheet. This business operation is managed by a
domestic subsidiary of Alcan, Alcan Aluminum Corporation.
Pechiney is a French corporation based in Paris, France. Pechiney
is also a major fully integrated aluminum producer, with annual
revenues exceeding $11.3 billion. Its U.S. subsidiary, Pechiney Rolled
Products, LLC, produces a wide variety of rolled aluminum products
(including brazing sheet) in an aluminum rolling mill in Ravenswood,
West Virginia. Pechiney's total North American sales of brazing sheet
exceed $100 million annually.
Alcan launched a tender offer for shares of Pechiney, a transaction
valued at over $4.6 billion. The tender offer, publicly announced in
early July 2003 and approved in August by Pechiney's board of
directors, was expected to be completed in early December 2003. At the
time of the tender offer, Alcan's acquisition of Pechiney would have
combined, respectively, the fourth and second largest competitors in
the sale of brazing sheet in North America, and substantially lessened
competition in this already highly concentrated market.
The acquisition would have combined Alcan, a low-cost new entrant
and pricing maverick, with Pechiney, a large industry incumbent. The
deal would have eliminated Alcan's incentive to expand its sales
quickly by reducing its brazing sheet prices and increase its sales at
the expense of larger rivals such as Pechiney, and end the current
intense competitive rivalry in developing, producing, and selling
brazing sheet in North America. This competition, which promised to
intensify in the next few years as Alcan completed qualifying its
brazing sheet for more applications with other North American
customers, had already produced significant improvements in brazing
sheet quality, durability, and reliability, and highly competitive
prices and contractual terms for this material. The transaction would
have reduced the number of significant competitors in the sale of
brazing sheet in North America from four to three, and substantially
increased the prospect of future tacit or explicit post-merger
coordination between these firms to increase prices of brazing sheet to
the detriment of consumers. Other North American competitors in the
sale of brazing sheet had neither the production capacity nor
competitive incentive, individually or collectively, to discipline a
small but significant post-merger unilateral or cooperative price
increase in brazing sheet.
B. The Effects of the Transaction on Competition in the Sale of Brazing
Sheet
1. Relevant market: the sale of brazing sheet in North America.
The Complaint alleges that development, production, and sale of
brazing sheet is a relevant product market within the meaning of
section 7 of the Clayton Act. Brazing sheet describes a class of
custom-engineered aluminum alloys made of a solid metal core clad on
one or both sides with an alloy whose melting temperature is lower than
that of the core material. When heated to the appropriate temperature,
the cladding alloy melts and forms a durable, uniform leak-proof bond
between the core and any adjoining aluminum surface, effectively
welding the two materials together. Brazing sheet is ideally suited,
and virtually all of it is used, for fabricating the major components
of heat exchange systems for motor vehicles. These heat exchangers
include engine cooling systems, such as radiators and oil coolers, and
climate control systems, such as heater cores and air conditioning
units (i.e., evaporator and condenser cores).
By constructing the basic components of motor vehicle heat
exchangers with brazing sheet, a parts maker can avoid the tedious and
costly task of welding and soldering individual components, many of
which have unusually intricate surfaces that form joints deep within
the heat exchange unit. A parts maker can instead loosely assemble
brazed components and bake the entire assembly in a brazing oven. The
surfaces of the components will melt, converting the assembly into a
solid, leak-proof heat exchange unit.
The major components of all heat exchangers used in motor vehicles
are made of brazing sheet, a material that enables vehicle makers
simultaneously to reduce vehicle cost, size, and weight; improve gas
mileage; and extend engine, climate control system, and drive train
life. In heat exchange applications, no other material can match the
combination of low cost, strength, light weight, durability,
formability, and corrosion resistance provided by brazing sheet.
A small but significant and nontransitory increase in prices for
brazing sheet would be profitable and sustainable because it would not
cause parts makers to begin using significant amounts of other
materials to make heat exchangers for motor vehicles. The development,
production, and sale of brazing sheet is a line of commerce and a
relevant product market within the meaning of section 7 of the Clayton
Act.\5\
---------------------------------------------------------------------------
\5\ Brazing sheet is designed for and sold to motor vehicle
parts makers (and others) on an application-specific basis. Thus, it
may be possible to delineate relevant markets smaller than the ``all
brazing sheet'' market alleged in the Complaint. A producer of
brazing sheet for use in one type of heat exchange component,
however, generally has the ability to make and market brazing sheet
suitable for use in producing the other types of components for heat
exchange units. According to the Merger Guidelines, if such
production substitutability is ``nearly universal'' among the firms
that make and sell brazing sheet, then it is appropriate, as a
matter of convenience, to describe the relevant product markets as
``all brazing sheet.'' See Horizontal Merger Guidelines, n. 14 (1997
rev.)
---------------------------------------------------------------------------
The Complaint alleges that the sale of brazing sheet in North
America is a relevant geographic market within the meaning of section 7
of the Clayton Act. Over ninety percent of brazing sheet sold in North
America is produced by firms located in either the United States or
Canada. Some customers import brazing sheet into North America from
overseas sources. Foreign brazing sheet, however, is significantly more
expensive and more prone to unpredictable and costly delivery delays
than brazing sheet produced in North America. North American customers
are reluctant to rely on it for general production requirements. A
small but significant and nontransitory increase in prices of brazing
sheet sold in North America would be profitable and sustainable because
it would not be undermined by increased customer imports of brazing
sheet from overseas sources. North America is a relevant geographic
market in which to assess the competitive effects of Alcan's proposed
acquisition of Pechiney on sales of brazing sheet.
2. Anticompetitive effects of the acquisition.
The Complaint alleges that in this highly concentrated market for
brazing sheet, a combination of Alcan and Pechiney likely would: (i)
Substantially lessen competition in the development, production, and
sale of brazing sheet in North America; (ii) eliminate actual and
potential competition between Alcan's and Pechiney's brazing sheet
businesses; and (iii) increase prices and reduce current levels of
quality and innovation for brazing sheet in North America.
Specifically, the Complaint alleges that Pechiney and Alcan are,
respectively, the second and fourth largest producers of brazing sheet
in North America. The combined firm and one other producer command over
80 percent of brazing sheet sales in North America. Two smaller firms
also sell
[[Page 33415]]
brazing sheet in North America. However, these small firms do not have
sufficient excess production capacity or capability to attract
significant sales away from the larger market incumbents, and thereby
effectively constrain a post-merger exercise of market power by those
firms.
Alcan's acquisition of Pechiney is likely to diminish competition
substantially. First, the remaining competitors would be more likely to
successfully engage in tacit or explicit coordinated pricing to the
detriment of consumers, because they would not need to worry about the
loss of sales to Alcan, currently a small, ``hungry,'' low-cost new
entrant. Second, Alcan could unilaterally increase its prices for
brazing sheet for which it and Pechiney are the only qualified
suppliers.
New entry into the development, production, and sale of brazing
sheet in North America is difficult. To produce brazing sheet, a firm
must have an aluminum hot rolling mill (which costs at least $80
million and takes at least three years to construct). Even after
acquiring an aluminum hot rolling mill, a new firm can begin selling
brazing sheet to customers only after it had made an additional
substantial investment in developing and mastering alloy-making
technology, successfully ``qualified'' its products with prospective
customers by completing a series of time-consuming tests of brazing
sheet materials and sample heat exchange components, and finally,
acquired some actual experience producing brazing sheet that meets the
exacting specifications of risk-averse parts makers.\6\ Those so-called
``sunk'' entry costs \7\ are very large relative to the size of the
North American market for brazing sheet, and there is a very high risk
that a new entrant may not receive any profits from its entry. In these
circumstances, it is unlikely that, after a combination of Alcan and
Pechiney, new entry into the brazing sheet market in North America
would occur so rapidly and be of such magnitude that it would
effectively constrain a cooperative or unilateral post-merger exercise
of market power by incumbent products of brazing sheet.
---------------------------------------------------------------------------
\6 \ It took Alcan over two years from when it moved its brazing
sheet operations to Oswego, New York, to qualify with enough
customers to make a significant sales impact.
\7\ The term ``sunk costs'' as used in this context includes the
costs of acquiring tangible and intangible assets that cannot be
recovered through the redeployment of these assets outside the
relevant market, i.e., costs that were uniquely incurred to enter
the production and sale of brazing sheet in North America and cannot
be recovered upon exit from that industry.
---------------------------------------------------------------------------
III. Explanation of the Proposed Amended Final Judgment
The proposed Amended Final Judgment will preserve competition in
the sale of brazing sheet in North America by requiring defendants to
sell either Alcan's or Pechiney's brazing sheet business to an acquirer
acceptable to the United States within 180 calendar days after the
filing of the Amended Final Judgment or within five (5) days after
notice of entry of the Amended Final Judgment, whichever is later. The
United States may extend this time period for divestiture one or more
times, for a total time not to exceed 60 days. Defendants must use
their best efforts to divest either Alcan's or Pechiney's brazing sheet
business as expeditiously as possible, and until the ordered
divestiture takes place, defendants must cooperate with any prospective
purchasers of whichever business is then available for sale.
If defendants do not accomplish the ordered divestiture within the
prescribed time period, the United States will nominate, and the Court
will appoint, a trustee to assume sole power and authority to divest
Pechiney's brazing sheet business. Defendants must cooperate fully with
the trustee's efforts to divest Pechiney's brazing sheet business to an
acquirer acceptable to the United States and periodically report to the
United States on their divestiture efforts.
If a trustee is appointed, defendants will pay all costs and
expenses of the trustee. The trustee's commission will be structured so
as to provide an incentive for the trustee based on the price obtained
and the speed with which the divestiture is completed. After his or her
appointment becomes effective, the trustee will file monthly reports
with the parties and the Court, setting forth the trustee's efforts to
accomplish the divestiture. At the end of six months, if the
divestiture has not been accomplished, the trustee and the parties will
make recommendations to the Court, which shall enter such orders as
appropriate to carry out the purpose of the trust, including, without
limitation, extending the trust and the term of the trustee's
appointment.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Amended Final Judgment will
neither impair nor assist the bringing of any private antitrust damage
action. Under the provisions of section 5(a) of the Clayton Act, 15
U.S.C. 16(a), the proposed Amended Final Judgment has no prima facie
effect in any subsequent private lawsuit that may be brought against
defendants.
V. Procedures Available for Modification of the Proposed Amended Final
Judgment
The parties have stipulated that the proposed Amended Final
Judgment may be entered by the Court after compliance with the
provisions of the Tunney Act, provided that the United States has not
withdrawn its consent. The Tunney Act conditions entry of the decree
upon the Court's determination that the proposed Amended Final Judgment
is in the public interest.
The Tunney Act provides a period of at least 60 days preceding the
effective date of the proposed Amended Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Amended Final Judgment. Any person who wishes to comment
should do so within 60 days of the date of publication of this
Competitive Impact Statement in the Federal Register. The United States
will evaluate and respond to the comments. All comments will be given
due consideration by the Department of Justice, which remains free to
withdraw its consent to the proposed Amended Final Judgment at any time
prior to entry. The comments and the response of the United States will
be filed with the Court and published in the Federal Register. Written
comments should be submitted to: Maribeth Petrizzi, Esquire, Chief,
Litigation II Section, Antitrust Division, United States Department of
Justice, 1401 H Street, NW., Suite 3000, Washington, DC 20530.
The proposed Amended Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Amended Final Judgment.
VI. Alternatives to the Proposed Settlement
A. Alternatives to the Initial Proposed Final Judgment
Before filing its Complaint, the United States considered, as an
alternative to the initial proposed Final Judgment, pursuing a full
trial on the merits, seeking preliminary and permanent injunctions
against Alcan's acquisition
[[Page 33416]]
of Pechiney. However, the United States was satisfied that the
divestiture of Pechiney's brazing sheet business, as proposed in the
initial Final Judgment, would preserve and ensure continued competition
in the relevant market, and hence, prevent Alcan's acquisition of
Pechiney from having any adverse competitive effects.
B. Alternatives to the Amended Final Judgment
The Amended Final Judgment, which would permit defendants to divest
either Alcan's or Pechiney's brazing sheet business, provides a remedy
that is more flexible, but no less protective of continued competition,
than the relief proposed in the initial Final Judgment. However, in
addition to permitting defendants to sell the Alcan brazing sheet
business, the Amended Final Judgment may permit defendants a few more
months to accomplish the ordered divestiture.\8\ Before agreeing to
file an amended settlement, the United States seriously considered
whether defendants--or for that matter, a Court-appointed trustee--
could complete a divestiture of Pechiney's brazing sheet business more
quickly than the divestiture deadline established in the Amended Final
Judgment. The government concluded that there was a high probability
that defendants would divest Alcan's brazing sheet business, as part of
their overall corporate reorganization, before they (or a Court-
appointed trustee) could sell Pechiney's brazing sheet business. For
that reason, the government was willing to amend the original
settlement to allow defendants the option to divest Alcan's brazing
sheet business. The United States, however, is firmly committed to
seeking the appointment of a trustee to divest Pechiney's brazing sheet
business if defendants fail to complete the ordered divestiture by the
deadline set forth in the Amended Final Judgment. See Amended Final
Judgment Sec. IV.
---------------------------------------------------------------------------
\8\ As noted above, the initial Final Judgment required
defendants to divest Pechiney's brazing sheet business within 120
days after Alcan receives notice that its tender offer for Pechiney
was successful, or five days after entry of the Final Judgment,
whichever is later. If the Court had entered that decree in late
April or early May, defendants would have been required to complete
their divestiture of Pechiney's brazing sheet business no later than
early July 2004, assuming the government would have granted
defendants a full 60-day extension of time to complete the ordered
divestiture, as permitted under the initial Final Judgment. (The
United States had already notified the Court that it had extended
the divestiture deadline by an additional 30 days under that
decree.)
In contrast, the Amended Final Judgment would require defendants
to divest either Alcan's or Pechiney's brazing sheet business within
180 days after May 18th, or five days after entry of the decree,
presumably in late October or early November 2004, a deadline that
the United States may also, in its discretion, extend by an
additional 60 days. At the earliest, the ordered divestiture under
the Amended Final Judgment would occur several months later than the
divestiture that had been ordered in the initial Final Judgment. The
government concluded that, under the circumstances, such an
extension of time for defendants to complete their divestiture under
the Amended Final Judgment would not unreasonably delay the
introduction of a viable new competitor into the North American
market for sale of brazing sheet.
---------------------------------------------------------------------------
VII. Standard of Review Under the Tunney Act for the Proposed Amended
Final Judgment
The Tunney Act requires that proposed consent judgments in
antitrust cases brought by the United States be subject to a sixty-day
comment period, after which the Court shall determine whether entry of
the proposed Amended Final Judgment ``is in the public interest.'' In
making that determination, the Court may consider:
(1) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, and any other
considerations bearing upon the adequacy of such judgment;
(2) The impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. 16(e). As the United States Court of Appeals for the District
of Columbia Circuit held, the Tunney Act permits a court to consider,
among other things, the relationship between the remedy secured and the
specific allegations set forth in the government's complaint, whether
the decree is sufficiently clear, whether enforcement mechanisms are
sufficient, and whether the decree may positively harm third parties.
See United States v. Microsoft, 56 F.3d 1448, 1458-62 (D.C. Cir. 1995).
In conducting this inquiry, ``[t]he court is nowhere compelled to
go to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly settlement
through the consent decree process.'' 119 Cong. Rec. 24,598 (1973)
(statement of Senator Tunney).\9\ Rather:
---------------------------------------------------------------------------
\9\ See United States v. Gillette Co., 406 F. Supp. 713, 715-16
(D. Mass. 1975) (recognizing it was not the court's duty to settle;
rather, the court must only answer ``whether the settlement achieved
[was] within the reaches of the public interest''). A ``public
interest'' determination can be made properly on the basis of the
Competitive Impact Statement and Response to Comments filed pursuant
to the Tunney Act. Although the Tunney Act authorizes the use of
additional procedures, 15 U.S.C. Sec. 16(f), those procedures are
discretionary. A court need not invoke any of them unless it
believes that the comments have raised significant issues and that
further proceedings would aid the court in resolving those issues.
See H.R. Rep. No. 93-1463, 93rd Cong., 2d Sess. 8-9 (1974),
reprinted in 1974 U.S.C.C.N. 6535, 6538.
[a]bsent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
---------------------------------------------------------------------------
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH)
]61,508, at 71,980 (W.D. Mo. May 17, 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in a unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d
at 1460-62. Case law requires that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\10\
---------------------------------------------------------------------------
\10\ Cf. BNS, 858 F.2d at 463 (holding that the court's
``ultimate authority under the [Tunney Act] is limited to approving
or disapproving the consent decree''); Gillette, 406 F. Supp. at 716
(noting that, in this way, the court is constrained to ``look at the
overall picture not hypercritically, nor with a microscope, but with
an artist's reducing glass''). See generally Microsoft, 56 F.3d at
1461 (discussing whether ``the remedies [obtained in the decree are]
so inconsonant with the allegations charged as to fall outside of
the `reaches of the public interest' '').
---------------------------------------------------------------------------
The proposed Amended Final Judgment, therefore, should not be
reviewed under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court
[[Page 33417]]
would impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' '' United
States v. Am. Telephone & Telegraph Co., 552 F. Supp. 131, 151 (D.D.C.
1982) (citations omitted) (quoting Gillette, 406 F. Supp. at 716),
aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see
also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D.
Ky. 1985) (approving the consent decree even though the court would
have imposed a greater remedy).
Moreover, the Court's role under the Tunney Act is limited to
reviewing the remedy in relationship to the violations that the United
States has alleged in its Complaint, and does not authorize the Court
to ``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States might have but did
not pursue. Id. at 1459-60.
III. Determinative Documents
There are no determinative materials or documents within the
meaning of the Tunney Act that were considered by the United States in
formulating the proposed Amended Final Judgment.
Dated: May 26, 2004.
Respectfully submitted,
Anthony E. Harris, Illinois Bar No. 1133713,
U.S. Department of Justice, Antitrust Division, Litigation II
Section, 1401 H Street, NW., Suite 3000, Washington, DC 20530,
Telephone: (202) 307-6583.
Attorney for the United States
Certificate of Service
I, Anthony E. Harris, hereby certify that on May 26, 2004, I caused
the foregoing notice of Filing of Amended Final Judgment and Amended
Hold Separate Stipulation and Order, Amended Final Judgment, Amended
Hold Separate Stipulation and Order, and Revised Competitive Impact
Statement to be served on defendants by sending a facsimile and by
mailing a copy first-class, postage prepaid, to duly authorized legal
representatives of those parties, as follows:
Counsel for Defendants Alcan Inc., Alcan Aluminum Corp., Pechiney,
S.A., and Pechiney Rolled Products, LLC
D. Stuart Meiklejohn, Esquire, Michael B. Miller, Esquire, Sullivan
& Cromwell, 125 Broad Street, New York, NY 10004-2498.
Peter B. Gronvall, Esquire, Sullivan & Cromwell, 1701 Pennsylvania
Avenue, NW., Suite 800, Washington, DC 20006.
Anthony E. Harris, Esquire, Illinois Bar 1133713, U.S.
Department of Justice, Antitrust Division, 1401 H Street, NW., Suite
3000, Washington, DC 20530, Telephone: (202) 307-6583.
[FR Doc. 04-13343 Filed 6-14-04; 8:45 am]
BILLING CODE 4410-11-M