[Federal Register: February 17, 2004 (Volume 69, Number 31)]
[Notices]
[Page 7497-7506]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17fe04-108]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. DNH International Sarl, Dyno Nobel, Inc., El
Paso Corp., and Coastal Chem, Inc.; Competitive Impact Statement,
Proposed Final Judgment and Complaint
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b) through (h), that a
[[Page 7498]]
Complaint, proposed Final Judgment, Hold Separate Stipulation and
Order, and Competitive Impact Statement were filed with the United
States District Court for the District of Columbia in United States of
America v. DNH International Sarl, Dyno Nobel, Inc., El Paso Corp., and
Coastal Chem, Inc., Civil Action No. 1:03CV2486. On December 2, 2003,
the United States filed a Complaint alleging that the proposed
acquisition by DNH International Sarl subsidiary Dyno Nobel, Inc.
(``Dyno''), of two industrial grade ammonium nitrate (``IGAN'')
production plants owned by El Paso Corporation subsidiary Coastal Chem,
Inc. (``Coastal''), would violate Section 7 of the Clayton Act, 15
U.S.C. 18. The proposed Final Judgment, filed at the same time as the
Complaint, requires Dyno to divest its interest in a Vineyard, Utah,
IGAN production facility, or, in the alternative and at the direction
of the United States, its Battle Mountain, Nevada, IGAN production
facility just acquired from Coastal. A Competitive Impact Statement
filed by the United States describes the Complaint, the proposed Final
Judgment, and the remedies available to private litigants who may have
been injured by the alleged violations.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, in Suite 215 North, 325 7th Street, NW.,
Washington, DC 20530 (telephone: 202-514-2481), and at the Office of
the Clerk of the United States District Court for the District of
Columbia, 333 Constitution Avenue, NW., Washington, DC 20001. Copies of
these materials may be obtained upon request and payment of a copying
fee.
Public comment is invited within the statutory 60-day comment
period. 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, Suite 3000, 1401 H
Street, NW., Washington, DC 20530 (telephone: 202-307-0924).
Dorothy B. Fountain,
Deputy Director of Operations, Antitrust Division.
United States District Court for the District of Columbia
Case No. 1: 03CV02486; JUDGE: Gladys Kessler; DECK TYPE:
Antitrust; DATE STAMP: January 21, 2004
United States of America, Plaintiff, v. DNH International Sarl,
Dyno Nobel, Inc., El Paso Corp., and Coastal Chem, Inc.,
Defendants; Competitive Impact Statement
Plaintiff United States, pursuant to section 2(b) of the
Antitrust Procedures and Penalties Act (``APPA'' or ``Tunney Act''),
15 U.S.C. 16(b)-(h), files this Competitive Impact Statement
relating to the proposed Final Judgment submitted for entry in this
civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
On August 6, 2003, Defendant DNH International Sarl (``DNH''),
through its wholly owned subsidiary Defendant Dyno Nobel, Inc.
(``Dyno''), agreed to purchase certain assets of Defendant Coastal
Chem, Inc. (``Coastal''AAA), a subsidiary of Defendant El Paso
Corporation (``El Paso''). Theses assets include two industrial
grade ammonium nitrate (``IGAN'') plants, one located in Cheyenne,
Wyoming and the other in Battle Mountain, Nevada. Dyno currently
owns a 50 percent interest in Geneva Nitrogen LLC, which owns an
IGAN production facility in Vineyard, Utah (the ``Geneva
facility'').
On December 2, 2003, the United States filed a civil antitrust
lawsuit alleging that the proposed acquisition would violate Section
7 of the Clayton Act, as amended, 15 U.S.C. 18. The Complaint
alleges that Dyno's acquisition of Coastal's IGAN production
facilities would substantially lessen competition in the production
of IGAN for sale in Western North America. Coastal and one other
firm are the primary suppliers of IGAN consumed in Western North
America, accounting for over 80 percent of IGAN sales in that
region, while Dyno's interest in the Geneva facility makes it the
best located of the three fringe IGAN producers that supply the
region. The acquisition would combine Coastal's Cheyenne and Battle
Mountain facilities with Dyno's 50 percent interest in the Geneva
facility. Such a reduction in competition would result in consumers
of IGAN in the western United States paying higher prices for IGAN.
Accordingly, the prayer for relief in the Complaint seeks (1) a
judgment that the proposed acquisition would violate section 7 of
the Clayton Act and (2) a permananet injunction that would foreclose
DNH or any of its subsidiaries from purchasing Coastal's Cheyenne
and Battle Mountain IGAN production facilities.
At the same time the Complaint was filed, the United States
filed a proposed settlement that would permit Dyno to complete its
acquisition of the two Coastal IGAN production facilities but
require Dyno to divest its interest in Geneva Nitrogen LLC in such a
way as to preserve competition in the Western North American IGAN
market. The settlement consists of a Hold Separate Stipulation and
Order and a proposed Final Judgment.
According to the terms of the settlement, Dyno must divest its
interest in Geneva Nitrogen LLC to a person acceptable to the United
States, in its sole discretion, within ninety (90) calendar days
after the filing of the Complaint in this matter, or within five (5)
days after notice of entry of the Final Judgment, whichever is
later. The United States, in its sole discretion, may extend the
time period for divestiture by an additional period of time, not to
exceed sixty (60) calendar days. If Dyno does not complete the
divestiture within the prescribed time period, then the United
States may nominate, and the Court will appoint, a trustee who will
have sole authority to divest Dyno's interest in Geneva Nitrogen
LLC. If the trustee is unable to divest Dyno's interest in Geneva
Nitrogen LLC in a timely manner, it shall, as directed by the United
States in its sole discretion, divest the Battle Mountain facility
that Dyno is acquiring from Coastal.
The parties have stipulated that the proposed Final Judgment may
be entered by the Court after compliance with the Tunney Act. Entry
of the proposed Final Judgment would terminate this action, except
that the Court would retain jurisdiction to construe, modify, or
enforce the provisions of the 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
DNH, a Luxembourg corporation headquartered in Oslo, Norway, is
one of the world's largest explosives producers. DNH reported sales
in 2002 of approximately $630 million. Its Dyno subsidiary is a
Delaware corporation operating out of Salt Lake City, Utah. Dyno,
which reported 2002 sales of roughly $336 million, is one of the two
largest producers of explosives in North America.
El Paso, a Delaware corporation headquartered in Houston, Texas,
reported 2002 sales of approximately $12 billion. El Paso is the
leading provider of natural gas services and the largest pipeline
company in North America. Its Coastal subsidiary, which also is
incorporated in Delaware and located in Houston, is one of the two
largest IGAN producers in Western North America, reporting 2002
sales of roughly $146 million.
On August 6, 2003, Dyno agreed to purchase Coastal's IGAN
production facilities in Battle Mountain, Nevada and Cheyenne,
Wyoming. The acquisition would combine the two Coastal facilities
with Dyno's 50 percent interest in the Geneva facility, which is the
best located of the three fringe IGAN facilities that supply Western
North America.
B. The Effects of the Transaction on Competition in the IGAN Market
1. The Relevant Market Is the Production of IGAN for Sale in Western
North America
The Complaint alleges that the production and sale of IGAN
constitutes a relevant product market within the meaning of section
7 of the Clayton Act. IGAN, which is in the form of low-density,
porous prills (or granules), is an essential ingredient used in the
production of blasting agents, one of two types of explosives used
in the mining and construction industries. Blasting agents accounted
for nearly all of the explosives sold in North America last year.
They are used principally to mine coal, rock and other nonmetals,
and metals such as gold and copper. The purchase of blasting agents
constitutes a relatively small portion of the total costs of the
mining or other industrial
[[Page 7499]]
operations in which the blasting agents are used.
The other type of explosive commonly used in the mining and
construction industries, high explosives, includes products such as
dynamite. High explosives are much more expensive than blasting
agents and are far more sensitive to detonation; high explosives can
be detonated with only a blasting cap, while blasting agents are
detonated using high explosives.
Virtually all blasting agents used in North America contain
ammonium nitrate in the form of IGAN, and essentially all IGAN sold
in North America is used to make blasting agents. The most widely
used blasting agent is known as ANFO, which is made by soaking IGAN
in fuel oil (Ammonium Nitrate plus Fuel Oil). Although ammonium
nitrate is also available in an agricultural grade, which is in the
form of high-density prills, only the more porous, lower density
IGAN prills are used to make ANFO. The greater porosity of the IGAN
prill allows for significantly better absorption of the fuel oil and
makes an explosive with a much higher sensitivity to detonation.
IGAN is also used to make explosive slurries, gels, and emulsions,
which can be used as blasting agents either alone or in combination
with ANFO.
A small but significant increase in the price of IGAN would not
cause consumers of IGAN to use sufficiently less IGAN so as to make
such a price increase unprofitable. Accordingly, the production and
sale of IGAN is a line of commerce and a relevant product market
within the meaning of section 7 of the Clayton Act.
The Complaint further alleges that ``Western North America''
constitutes a relevant geographic market in which IGAN is sold. The
Complaint defines Western North America as the eleven contiguous
western-most states in the United States and the Canadian provinces
of British Columbia, Alberta, and Saskatchewan.
IGAN typically is shipped to customers in bulk either by rail or
by truck. Freight costs are a significant component of the total
delivered price of IGAN and limit the geographic area that an IGAN
production facility profitably can serve. The physical
characteristics of the product impose additional limitations on the
geographic reach of an IGAN production facility. IGAN degrades over
time as moisture in the air causes it to ``cake,'' rendering it much
less economical to use as an ingredient to make blasting agents.
Also, the more IGAN is handled between production and use, the more
the IGAN prills break down into unusable fine particles.
IGAN produced at Coastal's Battle Mountain, Nevada and Cheyenne,
Wyoming facilities is regularly sold within Western North America.
IGAN produced at the Geneva facility, in which Dyno has a 50 percent
interest, is also regularly supplied into Western North America.
Only three other firms own facilities that regularly produce IGAN
for sale in Western North Americas. One of those three firms is
Oricas Limited (``Orica''), which owns the remaining 50 percent
interest in the Geneva facility and also owns an IGAN facility
located in Alberta, Canada. The other two facilities are located in
Benson, Arizona and Manitoba, Canada.
No other firm owns an IGAN production facility from which it
supplies IGAN on a regular basis to Western North America. Apart
from the facilities referenced above, the IGAN facilities closest to
Western North American customers are located along the Mississippi
River. The additional transportation costs associated with supplying
IGAN to Western North America from these facilities, coupled with
the increased risk of degradation of the IGAN due to prolonged
shipping and handling of the product, significantly limit the
ability of these distant facilities to supply Western North America.
A small but significant increase in the price of IGAN produced for
sale in Western North America would not cause consumers of IGAN in
Western North America to purchase sufficient amounts of IGAN
produced at facilities that do not already regularly supply Western
North America such that a price increase would be unprofitable.
Accordingly, western North America is a relevant geographic market,
within the meaning of section 7 of the Clayton Act, in which to
assess the competitive effects of the proposed acquisition.
2. The Proposed Acquisition Would Result in Anticompetitive Effects
The Complaint alleges that Dyno's acquisition of Coastal's
Battle Mountain and Cheyenne IGAN production facilities likely will
substantially lessen competition in the production of IGAN for sale
in Western North America, eliminate actual and potential competition
between Dyno and Coastal in the production of IGAN for sale in
Western North America, and increase prices for IGAN produced for
sale in Western North America.
Specifically, the Complaint alleges that two firms--Coastal and
Orica--account for over 80 percent of IGAN sales in Western North
America, which in 2002 exceeded $150 million, and that Dyno's
interest in the Geneva facility makes it the best located of the
three fringe producers that supply the market. After the proposed
acquisition, the two dominant firms together would control roughly
90 percent of such sales, with Dyno and Coastal combined having a
share of approximately 50 percent.
In Western North America, most IGAN-containing blasting agents
are consumed in mines located in one of three areas: the Powder
River Basin in Wyoming (coal mines); Northern Nevada (gold mines);
and the so-called ``Four-Corners Area'' surrounding the junction of
Utah, Colorado, New Mexico, and Arizona (coal mines). Coastal and
Orica have facilities that are well-positioned to supply the Powder
River Basin and Northern Nevada. The Geneva plant, which has an
annual capacity of about 100,000 tons and is equally owned by Orica
and Dyno, is located roughly equidistant from Northern Nevada, the
Powder River Basin, and the Four-Corners Area and is well-positioned
to serve all three areas. In contrast, the two other fringe firms
that produce IGAN for sale in Western North America are located at
the outer reaches of the relevant geographic market.
The proposed transaction, which would combine Coastal's Battle
Mountain and Cheyenne facilities with Dyno's 50 percent interest in
the Geneva facility, thus would eliminate independent competition
from the best located of the three fringe IGAN producers that supply
Western North America.
Successful entry into the Western North American IGAN market
would be expensive and time-consuming, and thus would be unlikely to
constrain an increase in the price of IGAN in Western North America.
To be successful, a new entrant likely would require an efficient
IGAN facility that could produce at least one-quarter of total IGAN
sales in Western North America in order to cover the estimated $70
million cost of constructing such a facility. An IGAN facility with
that capacity would take over two years to complete. Considering the
time and capital expense required to construct such a production
facility, entry is unlikely to occur in response to a small by
significant increase in the price of IGAN in Western North America.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment will preserve competition in the
production of IGAN for sale in Western North America. The Judgment
requires that within ninety (90) calendar days after the filing of
the Complaint in this matter, or within five (5) days after notice
of entry of the Final Judgment, whichever is later, Dyno must sell
its 50 percent interest in Geneva Nitrogen LLC, the owner of the
Geneva facility, to an acquirer acceptable to the United States. The
United States may extend this time period for divestiture for one
additional period, not to exceed sixty (60) calendar days. Dyno must
use its best efforts to divest its 50 percent interest in Geneva
Nitrogen LLC as expeditiously as possible.
If Dyno does not accomplish the ordered divestiture within the
prescribed time period, the United States will nominate, and the
Court will approve and appoint, a trustee to assume sole power and
authority to complete the divestiture of Dyno's 50 percent interest
in Geneva Nitrogen LLC. Should the trustee determine that this
divestiture cannot be accomplished expeditiously, the trustee shall
notify the United States and the parties and provide the reasons
supporting its conclusion. Upon receipt of such notice from the
trustee, the United States, in its sole discretion, shall have the
right to direct the trustee to sell Coastal's Battle Mountain
facility instead.
The United States considers the sale of Dyno's 50 percent
interest in Geneva Nitrogen LLC to be satisfactory relief. The sale
of that half-interest to a buyer that does not already produce IGAN
for sale in Western North America would leave the post-acquisition
market essentially the same as the pre-acquisition market, with the
buyer replacing Dyno in the marketplace as the best positioned of
the three fringe producers of IGAN in the region. The United States
is optimistic that an acceptable buyer for Dyno's 50 percent
interest in Geneva Nitrogen LLC can be found in a timely
[[Page 7500]]
manner. If not, the United States is satisfied that the sale of
Coastal's Battle Mountain facility to a buyer acceptable to the
United States would be a suitable alternative divestiture. Although
the Geneva facility is better located than the Battle Mountain plant
with respect to the majority of IGAN-consuming customers in Western
North America--those located in the gold mining region of Northern
Nevada, and in the coal mining industries found in the ``Four
Corners Area'' and the Powder River Basin--Dyno's share of the
Geneva facility's output is less than the capacity of the Battle
Mountain plant. Because of this capacity advantage, the competitive
significance of an independent Battle Mountain facility should be
comparable to that of the better-located Geneva facility.
DNH, Dyno, El Paso, and Coastal must cooperate fully with the
trustee's efforts to divest either Dyno's 50 percent interest in
Geneva Nitrogen LLC or, should the United States so direct,
Coastal's Battle Mountain facility to an acquirer acceptable to the
United States, and they must report periodically to the United
States on their divestiture efforts. If the trustee is appointed,
defendant DNH will pay all costs and expenses of the trustee. The
trustee's commission will be based in part on the price obtained for
the divested assets and the speed with which the divestiture is
completed, thus providing an incentive for the trustee to accomplish
a speedy divestiture. After its 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.
If the divestiture has not been accomplished within six months of
the trustee's appointment, the trustee and the parties will make
recommendations to the Court, which shall enter such orders as may
be appropriate to carry out the purpose of the Final Judgment,
including 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 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 Final Judgment has no prima
facie effect in any subsequent private lawsuit that may be brought
against the defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The parties have stipulated that the proposed Final Judgment may
be entered by the Court after compliance with the provisions of the
APPA, provided that the United States has not withdrawn its consent.
The APPA conditions entry upon the Court's determination that the
proposed Final Judgment is in the public interest.
The Tunney Act provides a period of at least sixty days
preceding the effective date of the proposed Final Judgment during
which any person may submit to the United States written comments
regarding the proposed Final Judgment. Any person who wishes to
comment should do so within sixty 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
Final Judgment at any time prior to entry by the Court. 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, Chief, Litigation II Section, Antitrust Division,
United States Department of Justice, 1401 H Street, NW., Suite 3000,
Washington, DC 20530.
The proposed 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 Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against defendants DNH,
Dyno, El Paso, and Coastal. The United States could have continued
the litigation to seek preliminary and permanent injunctions against
Dyno's acquisition of Coastal's IGAN production facilities. The
United States is satisfied, however, that the proposed relief, once
implemented by the Court, will preserve and ensure competition in
the relevant market.
VII. Standard of Review Under the APPA for Proposed Final Judgment
The APPA 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 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 has held, the APPA 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. United States v. Microsoft Corp., 56
F.3d 1448, 1458-62 (D.C. Cir. 1995).
In conducting this inquiry, ``the 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.'' \1\ Rather,
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\1\ 119 Cong. Rec. 24598 (1973); See also United States v.
Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public
interest'' determination can be made properly on the basis of the
Competitive Impact Statement and Response to Comments filed by the
Department of Justice pursuant to the APPA. Although the APPA
authorizes the use of additional procedures, 15 U.S.C. 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. H.R. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974)
U.S. Code Cong., & Ad. News 6535, 6538.
``absent 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
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reasonable under the circumstances.''
United States v. Mid-America Dairymen, Inc., 1977-1 CCH Trade Cas. ]
61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured
by the decree, a court may not ``engage in an 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. Courts have held 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).\2\
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\2\ Cf. BNS, 858 F.2d at 463 (holding that the court's
``ultimate authority under the [APPA] 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' '').
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The proposed Final Judgment, therefore, should not be reviewed
under a standard of
[[Page 7501]]
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 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.
AT&T, 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 APPA is limited to
reviewing the remedy in relationship to the violations that the
United States alleges 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 did not pursue. Id. at 1459-60.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: January 21, 2004.
Respectfully submitted,
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Michael K. Hammaker
D.C. Bar No. 233684
U.S. Department of Justice
Antitrust Division, Litigation II Section
1401 H Street, NW., Suite 3000
Washington, DC 20530
Certificate of Service
I, Joshua P. Jones, hereby certify that on January 21, 2004, I
caused copies of the foregoing Competitive Impact Statement to be
served on Defendants DNH International Sarl, Dyno Nobel, Inc., El
Paso Corporation, and Coastal Chem, Inc., by facsimile and by
mailing these documents first-class, postage prepaid, to duly
authorized legal representatives of those parties, as follows:
Counsel for DNH International Sarl and Dyno Nobel, Inc.
Raymond J. Etcheverry, Esquire
Parsons, Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, UT 84111
Counsel for El Paso Corporation and Coastal Chem, Inc.
Eric H. Queen, Esquire
John R. Ingrassia, Esquire
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
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Joshua P. Jones
GA Bar No. 091645
Antitrust Division
U.S. Department of Justice
1401 H Street, NW., Suite 3000
Washington, DC 20530
(202) 307-1031
United States District Court for the District of Columbia
Case No. 1:03CV02486; Judge: Gladys Kessler; Deck Type:
Antitrust; Date Stamp: 12/02/2003
United States of America, Plaintiff, v. DNH International Sarl,
Dyno Nobel, Inc., El Paso Corporation, and Coastal Chem, Inc.,
Defendants; Final Judgment
Whereas, plaintiff, United States of America, filed its
Complaint on December 2, 2003, and plaintiff and defendants, DNH
International Sarl, Dyno Nobel, Inc., El Paso Corporation and
Coastal Chem, Inc., by their respective attorneys, have consented to
the entry of this Final Judgment without trial or adjudication of
any issue of fact or law, and without this 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 Final Judgment pending its approval by the Court;
And Whereas, the essence of this 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 Final Judgment:
A. ``Acquirer'' means the entity or entities to whom defendants
divest the Geneva Production Asset or, alternatively, the Battle
Mountain Production Asset.
B. ``DNH'' means defendant DNH International Sarl, a Luxembourg
corporation with its headquarters in Oslo, Norway, its successors
and assigns, and its subsidiaries (including defendant Dyno Nobel,
Inc.), divisions, groups, affiliates, partnerships, and joint
ventures, and their directors, officers, managers, agents, and
employees.
C. ``El Paso'' means El Paso Corporation, a Delaware corporation
with its headquarters in Houston, Texas, and its successors and
assigns, its subsidiaries, divisions (including defendant Coastal
Chem, Inc.), groups, affiliates, partnerships, and joint ventures,
and their directors, officers, managers, agents, and employees.
D. ``IGAN'' means low density or industrial grade ammonium
nitrate which, when mixed with fuel oil, forms an explosive known as
ANFO.
E. ``Geneva Production Asset'' means, unless otherwise noted,
DNH's 50 percent membership interest in Geneva Nitrogen, LLC, a
Delaware limited liability company which owns an IGAN production
facility located at 1165 North Geneva Road, Vineyard, Utah 84601,
including all of DNH's rights, titles, and interests in the
following:
1. The tangible assets of the Geneva facility and the real
property on which the Geneva facility is situated; any facilities
used for research, development, engineering or other support to the
Geneva facility, and any real property associated with those
facilities; manufacturing and sales assets relating to the Geneva
facility, including capital equipment, vehicles, supplies, personal
property, inventory, office furniture, fixed assets and fixtures,
materials, on- or off-site warehouses of storages facilities, and
other tangible property or improvements; all licenses, permits and
authorizations issued by any governmental organization relating to
the Geneva facility; all contracts, agreements, leases, commitments,
and understandings pertaining to the operations of the Geneva
facility; supply agreements; all customer lists, accounts, and
credit records; and other records maintained by DNH in connection
with the operations of the Geneva facility; and
2. The intangible assets of the Geneva facility, including all
patents, licenses and sublicenses, intellectual property,
trademarks, trade names, service marks, service names, 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 DNH provides to its employees, customers, suppliers,
agents or licensees in connection with the operations of the Geneva
facility.
F. ``Battle Mountain Production Asset'' means, unless otherwise
noted, all of El Paso's rights, titles, and interests in the IGAN
production facility located in Battle Mountain, Nevada, including:
1. All tangible assets of the Battle Mountain facility and the
real property on which the Battle Mountain facility is situated; any
facilities used for research, development, engineering or other
support to the Battle Mountain facility, and any real property
associated with those facilities; manufacturing and sales assets
relating to the Battle Mountain facility, including capital
equipment, vehicles, supplies, personal property, inventory, office
furniture, fixed assets and fixtures, materials, on- or off-site
warehouses or storages facilities, and other tangible property or
improvements; all
[[Page 7502]]
licenses, permits and authorizations issued by any governmental
organization relating to the Battle Mountain facility; all
contracts, agreements, leases, commitments, and understandings
pertaining to the operations of the Battle Mountain facility; supply
agreements; all customer lists, accounts, and credit records; and
other records maintained by El Paso in connection with the
operations of the Battle Mountain facility; and
2. All intangible assets of the Battle Mountain facility,
including all patents, licenses and sublicenses, intellectual
property, trademarks, trade names, service marks, service names,
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 El Paso provides to its employees,
customers, suppliers, agents or licensees in connection with the
operations of the Battle Mountain facility.
III. Applicability
A. This Final Judgment applies to DNH and El Paso, as defined
above, and all other persons in active concert or participation with
any of them who receive actual notice of this 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 the Geneva Production Facility or the
Battle Mountain Production Facility, that the purchaser agrees to be
bound by the provisions of this Judgment, provided, however, that
defendants need not obtain such an agreement from the Acquirer.
IV. Divestiture
A. Defendant DNH is ordered and directed, within ninety (90)
calendar days after the filing of the Complaint in this matter, or
five (5) days after notice of the entry of this Final Judgment by
the Court, whichever is later, to divest the Geneva Production Asset
in a manner consistent with this 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.
Defendant DNH agrees to use its best efforts to divest the Geneva
Production Asset as expeditiously as possible.
B. In accomplishing the divestiture ordered by this Final
Judgment, defendant DNH promptly shall make known, by usual and
customary means, the availability of the Geneva Production Asset.
Defendants shall inform any person making inquiry regarding a
possible purchase of the Geneva Production Asset that it will be
divested pursuant to this Final Judgment and provide that person
with a copy of this Final Judgment. Defendant DNH shall offer to
furnish to all prospective Acquirers, subject to customary
confidentially assurances, all information and documents relating to
the Geneva Production Asset customarily provided in a due diligence
process except such information or documents subject to the
attorney-client or work-product privilege. Defendant DNH shall make
available such information to the United States at the same time
that such information is made available to any other person.
C. Defendant DNH shall provide prospective Acquirers of the
Geneva Production Asset and the United States information relating
to the personnel involved in the production, operation, development,
and sale of the Geneva Production Asset to enable the Acquirer to
make offers of employment. Defendants will not interfere with any
negotiations by the Acquirer to employ any of defendant DNH's
employees whose responsibilities include the production, operation,
development, or sale of the products of the Geneva Production Asset.
D. Defendant DNH shall permit prospective Acquirers of the
Geneva Production Asset to have reasonable access to personnel and
to make inspections of the physical facilities of the Geneva
Production Asset; access to any and all environmental, zoning, and
other permit documents 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. Defendant DNH shall warrant to the Acquirer of the Geneva
Production Asset that each asset therein 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 the Geneva
Production Asset.
G. Defendant DNH shall warrant to the Acquirer of the Geneva
Production Asset that there are no material defects in the
environmental, zoning, or other permits pertaining to the operation
of the Geneva Production Asset, and following the sale of the Geneva
Production Asset, defendants shall not undertake, directly or
indirectly, any challenges to the environmental, zoning, or other
permits relating to the operation of the Geneva Production Asset.
H. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by trustee appointed pursuant
to section V, of this Final Judgment, shall include the entire
Geneva Production Asset or, alternatively, pursuant to section V(B),
the entire Battle Mountain Production Asset, and shall be
accomplished in such a way as to satisfy the United States, in its
sole discretion, that the divested asset can and will be used by the
Acquirer as part of a viable, ongoing business engaged in the
manufacture and sale of IGAN. Divestiture of the Geneva Production
Asset or, alternatively, the Battle Mountain Production Asset may be
made to an Acquirer, provided that it is demonstrated to the sole
satisfaction of the United States that the divested asset will
remain viable and the divestiture of such asset will remedy the
competitive harm alleged in the Complaint. The divestitures, whether
pursuant to section IV or section V of this Final Judgment,
1. Shall be made to an Acquirer that, in the United States's
sole judgment, has the managerial, operational, and financial
capability to compete effectively in the manufacture and sale of
IGAN; 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 defendant DNH has not divested the Geneva Production Asset
within the time period specified in Section IV(A), it 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
the Geneva Production Asset.
B. After the appointment of a trustee becomes effective, only
the trustee shall have the right to sell the Geneva Production
Asset. Should the trustee determine that a sale of the Geneva
Production Asset cannot be expeditiously accomplished, the trustee
shall notify the United States and the parties of its conclusion and
the reasons supporting its conclusion. Upon receipt of such notice
from the trustee, the United States, in its sole discretion, shall
have the right to direct the trustee to sell the Battle Mountain
Production Asset as an alternative to the Geneva Production Asset.
The trustee shall have the power and authority to accomplish the
divestiture of the Geneva Production Asset or, should the United
States so direct, the Battle Mountain Production Asset 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 Final
Judgment, and shall have such other powers as this Court deems
appropriate. Subject to Section V(D) of this Final Judgment, the
trustee may hire at the cost and expense of defendant DNH 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 defendant
DNH, on such terms and conditions as plaintiff approves, and shall
account for all monies derived from the sale of the Geneva
Production Asset or, alternatively, the Battle Mountain Production
Asset, and all costs and expenses so incurred. After approval by the
Court of the trustee's accounting, including fees for its services
and
[[Page 7503]]
those of any professionals and agents retained by the trustee, all
remaining money shall be paid to defendant DNH 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 the asset to be divested 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. Defendants shall use their best efforts to assist the trustee
in accomplishing the required divestiture. The trustee and any
consultants, accountants, 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
confident 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 forth the trustee's
efforts to accomplish the divestiture ordered under this 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 he
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 the Geneva
Production Asset or, alternatively, the Battle Mountain Production
Asset, and shall describe in detail each contact with any such
person. The trustee shall maintain full records of all efforts made
to divest either asset.
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 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 lout the purpose of the
Final Judgment, which may, if necessary, include 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, defendant DNH 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 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 and not
previously identified who offered or expressed an interest in or
desire to acquire any ownership interest in the Geneva Production
Asset or, alternatively, the Battle Mountain Production Asset,
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 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 Final Judgment. Absent written notice
that the United Sates 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 Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished, defendants shall take all steps necessary to comply
with the Hold Separate Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the
divestiture ordered 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 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 the
Geneva Production Asset or, alternatively, the Battle Mountain
Production Asset, 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 the asset to be divested, 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 VIII of this 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 the Geneva Production Asset and the Battle Mountain
Production Asset and to divest either asset until one year after
such divestiture has been completed.
X. Compliance Inspection
A. For purposes of determining or securing compliance with this
Final Judgment, or of determining whether the 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, an don reasonable
notice to defendants, be permitted:
1. Access during defendants' office hours to inspect and copy,
or at plaintiff's 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 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 Final
Judgment as may be requested.
[[Page 7504]]
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
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 the asset divested
under this Final Judgment during the term of this Final Judgment.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this
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 Final Judgment, to modify any of its provisions, to
enforce compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten years from the date of its entry.
XIV. Public Interest Determination
Entry of this 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
United States District Court for the District of Columbia
CASE NUMBER 1: 03CV02486; JUDGE: Gladys Kessler; DECK TYPE:
Antitrust; DATE STAMP: 12/02/2003
United States of America, U.S. Department of Justice Antitrust
Division 1401 H Street, NW Suite 3000 Washington, DC 20530,
Plaintiff, v. DNH International Sarl, 23 Avenue Monterey L-2086
Luxemburg, Dyno Nobel, Inc., 50 S. Main Street Salt Lake City, UT
84144; El Paso Corporation, 1001 Louisiana Street Houston, TX
77002; and Coastal Chem, Inc., 1001 Louisiana Street Houston, TX
77002, Defendants; 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 injunctive relief against defendants, and alleges
as follows:
1. DNH International Sarl (``DNH'') intends to acquire, through
its wholly-owned subsidiary Dyno Nobel, Inc. (``Dyno''), certain
assets associated with the nitrogen products businesses of El Paso
Corporation (``El Paso''). The assets to be acquired include two
industrial grade ammonium nitrate (``IGAN'') manufacturing
facilities owned by Coastal Chem, Inc. (``Coastal''), a wholly-owned
subsidiary of El Paso. One of these facilities is located in Battle
Mountain, Nevada, and the other is in Cheyenne, Wyoming.
2. Dyno and Coastal sell IGAN in the United States. IGAN is an
essential ingredient in nearly all blasting agents. Coastal and one
other firm are the primary suppliers of IGAN consumed in the western
United States and western Canada (``Western North America''),
accounting for over 75 percent of all plant capacity regularly used
to make IGAN for sale in that region. Dyno, which owns a 50 percent
interest in an IGAN production facility near Salt Lake City, Utah,
is the best located of a few fringe IGAN suppliers in Western North
America.
3. Unless the proposed acquisition is enjoined, Dyno's
acquisition of Coastal's Battle Mountain and Cheyenne IGAN
production facilities will substantially lessen competition in the
production of IGAN for sale in Western North America, and consumers
of IGAN in that region likely will pay higher process as a result of
the reduced competition.
Jurisdiction and Venue
4. 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.
5. DNH, through Dyno, and El Paso, through Coastal, produce and
sell IGAN in the flow of interstate commerce. DNH's and El Paso's
activities in producing and selling IGAN 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.
6. DNH, Dyno, El Paso, and Coastal have consented to personal
jurisdiction and venue in this judicial district.
II. Defendants
7. DNH is a Luxembourg corporation with its headquarters in
Oslo, Norway. DNH is one of the world's largest producers of
explosives. In 2002, DNH reported total sales of approximately $630
million. Dyno, a subsidiary of DNH, is a Delaware corporation with
its principal place of business in Salt Lake City, Utah. Dyno, one
of the two largest producers of IGAN in North America, reported 2002
sales of about $316 million.
8. El Paso is a Delaware corporation with its headquarters in
Houston, Texas. El Paso is the leading provider of natural gas
services and the largest pipeline company in North America. In 2002,
El Paso reported sales of roughly $12 billion. Coastal, a subsidiary
of El Paso, is a Delaware corporation with its principal place of
business in Houston, Texas. Coastal, one of the two largest
producers of IGAN in Western North America, reported 2002 sales of
approximately $146 million.
III. The Proposed Transaction
9. Pursuant to an Asset Purchase Agreement dated August 6, 2003,
Dyno, a wholly-owned subsidiary of DNH, intends to acquire certain
assets of the nitrogen products businesses owned by El Paso's
subsidiaries. The assets to be acquired include Coastal's IGAN
manufacturing facilities in Battle Mountain, Nevada and Cheyenne,
Wyoming.
IV. Trade and Commerce
A. The Relevant Product Market
10. IGAN, which is in the form of low-density, porous prills (or
granules), is used to make blasting agents, one of two types of
explosives for industrial uses like mining and construction. The
other type is high explosives like dynamite, which are much more
expensive than blasting agents. The principal physical difference
between high explosives and blasting agents is in their sensitivity
to detonation; a high explosive can be detonated with only a
blasting cap, while blasting agents are detonated using high
explosives. Blasting agents, which accounted for nearly all of the
explosives sold in North America last year, are used principally to
mine coal, rock and other nonmetals, and metals such as gold and
copper. Blasting agents constitute a relatively small portion of the
costs of mining and the other industrial uses to which they are put.
11. Virtually all blasting agents used in North America contain
ammonium nitrate in the form of IGAN, and essentially all IGAN sold
in North America is used to make blasting agents. The most widely
used blasting agent is known as ANFO, which is made by soaking IGAN
in fuel oil (Ammonium Nitrate plus Fuel Oil). Although ammonium
nitrate is also available in an agricultural grade, which is in the
form of high-density prills, the more porous IGAN prills are used to
make ANFO. The greater porosity of the IGAN prill allows for
significantly better absorption of the fuel oil and makes an
explosive with a much higher sensitivity to detonation. IGAN is also
used to make explosive slurries, gels, and emulsions, which can be
used as blasting agents either alone or in combination with ANFO.
12. A small but significant increase in the price of IGAN would
not cause consumers of IGAN to use sufficiently less IGAN so as to
make such a price increase unprofitable. Accordingly, the production
and sale of IGAN 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
13. IGAN typically is shipped to customers in bulk either by
rail or by truck. Freight costs are a significant component of the
total delivered price of IGAN and limit the geographic area that an
IGAN production facility profitably can serve. In addition, IGAN
degrades over time as moisture in the air causes it to ``cake,''
rendering it much less economical to use as an ingredient to make
[[Page 7505]]
blasting agents. Also, the more IGAN is handled between production
and use, the more the IGAN prills break down into unusuable fine
particles.
14. El Paso, through Coastal, produces IGAN at two facilities,
one located in Battle Mountain, Nevada and the other in Cheyenne,
Wyoming. IGAN produced at these facilities is sold within Western
North America. DNH, through Dyno, owns a 50 percent interest in an
IGAN plant near Salt Lake City, Utah (known as the ``Geneva plant'')
from which it supplies IGAN into Western North America. Only three
other firms own facilities that regularly produce IGAN for sale in
the eleven contiguous western-most states in the United States and
the Canadian provinces of British Columbia, Alberta, and
Saskatchewan (``Western North America''). One of those three firms
is Orica Limited (``Orica''), which owns the remining 50 percent
interest in the Geneva plant and also owns an IGAN facility located
in Alberta, Canada. The other two facilities are located in Benson,
Arizona and Manitoba, Canada.
15. No other firm owns an IGAN production facility from which it
supplies IGAN on a regular basis to Western North America. Apart
from the facilities referenced in paragraph 14 above, the IGAN
facilities closest to Western North American customers are located
along the Mississippi River. The additional transportation costs
needed to supply Western North America from these facilities,
coupled with the increased risk of degradation of the IGAN due to
prolonged shipping and handling, significantly limit the ability of
these distant facilities to supply IGAN to Western North America.
16. A small but significant increase in the price of IGAN
produced for sale in Western North America would not cause consumers
of IGAN in Western North America to purchase sufficient amounts of
IGAN produced at facilities not already regularly supplying IGAN to
Western North America that such a price increase would be
unprofitable. Accordingly, Western North America is a relevant
geographic market within the meaning of Section 7 of the Clayton
Act.
C. Anticompetitive Effects
17. Two firms account for over 80 percent of IGAN sales in
Western North America. After the proposed acquisition, the two
dominant firms together would control about 90 percent of sales,
with Dyno and Coastal combined having a share of about 50 percent.
Total sales of IGAN in Western North America exceed 750,000 tons
annually, or over $150 million a year.
18. Concentration in the Western North American IGAN market
would increase significantly if DNH, through Dyno, acquired
Coastal's IGAN production facilities in Battle Mountain and
Cheyenne. The proposed acquisition would increase the Herfindahl-
Hirschman Index (``HHI''), a measure of market concentration defined
and explained in Appendix A, by approximately 220 points, based on
plant capacity, resulting in a post-merger HHI of roughly 3400, well
in excess of levels that ordinarily would raise significant
antitrust concerns.
19. IGAN-containing blasting agents are used primarily in four
industries in North America: Coal mining, which accounted for about
70 percent of total consumption in the United States in 2002;
quarrying and nonmetal mining (13 percent); metal mining (8
percent); and construction (8 percent). In Western North America,
most IGAN-containing blasting agents are consumed in mines located
in one of three areas: The Powder River Basin in Wyoming (coal
mines); North Nevada (gold mines); and the so-called ``Four-Corners
Area'' surrounding the junction of Utah, Colorado, New Mexico, and
Arizona (coal mines).
20. The two leading producers of IGAN sold in Western North
America, Coastal and Orica, have facilities that are well-positioned
to supply the Powder River Basin and Northern Nevada. The Geneva
plant, which has a capacity of about 100,000 tons/year and is
equally owned by Orica and Dyno, is located roughly equidistant from
Northern Nevada, the Powder River Basin, and the Four-Corners Area
and is well-positioned to serve all three areas.
21. The proposed transaction would combine Coastal's Battle
Mountain and Cheyenne facilities with Dyno's 50 percent interest in
the Geneva plant, thus eliminating independent competition from
Dyno, the best located of three fringe IGAN producers that supply
Western North America. Unlike the Geneva plant, which is centrally
located to all three primary IGAN-containing blasting agent-
consuming areas in Western North America, the two remaining fringe
firms are located at the outer reaches of the relevant geographic
market.
22. Purchasers of IGAN in Western North America have benefitted
from competition between Dyno and Coastal through lower prices for
IGAN. By acquiring Coastal's Battle Mountain and Cheyenne IGAN
production facilities, DNH would eliminate that competition.
D. Entry Unlikely To Deter a Post-Acquisition Exercise of Market
Power
23. Successful entry into the IGAN market in Western North
America would not be timely, likely, or sufficient to deter any
coordinated exercise of market power as a result of the transaction.
24. Significant barriers prevent de novo entry into the
production of IGAN for sale in Western North America. De novo entry
would be a lengthy process. The two most time-consuming steps--
construction of the IGAN plant itself and the obtaining of permits
needed to construct the plant--would take over two years. Also,
economies of scale in plant capacity are significant. To be
successful, a new entrant likely would require a facility that could
produce at least one-quarter of total IGAN sales in Western North
America. An IGAN facility with that capacity would cost over $70
million. All of these factors make entry unlikely in response to a
small but significant increase in IGAN prices.
V. Violations Alleged
25. DNH's proposed acquisition from El Paso of Coastal's IGAN
production facilities in Battle Mountain, Nevada and Cheyenne,
Wyoming, likely will lessen competition substantially and tend to
create a monopoly in interstate trade and commerce in violation of
Section 7 of the Clayton Act.
26. The transaction likely will have the following
anticompetitive effects, among others:
a. Competition generally in the production of IGAN for sale in
Western North America will be substantially lessened;
b. Actual and potential competition between Dyno and Coastal in
the production of IGAN for sale in Western North America will be
eliminated; and
c. Prices for IGAN produced for sale in Western North America
likely will increase.
27. Unless prevented, the acquisition by DNH of Coastal's Battle
Mountain and Cheyenne IGAN production facilities would violate
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18.
VI. Requested Relief
28. Plaintiff requests:
a. That DNH's proposed acquisition from El Paso of Coastal's
IGAN production facilities in Battle Mountain, Nevada and Cheyenne,
Wyoming, 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 DNH and Coastal's Battle Mountain and Cheyenne IGAN
production facilities;
c. That plaintiff recover the costs of this action; and
d. That plaintiff receive such other and further relief as the
case requires and this Court may deem proper.
Dated: December 2, 2003.
Respectfully submitted,
For Plaintiff United States of America:
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R. Hewitt Pate
Assistant Attorney General
DC Bar 473598
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Deborah P. Majoras
Deputy Assistant Attorney General
DC Bar 474239
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Dorothy Fountain
Deputy Director of Operations
DC Bar 439469
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Maribeth Petrizzi
Chief, Litigation II Section
DC Bar 435204
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Michael K. Hammaker
DC Bar 233684
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P. Terry Lubeck
CA Bar 46372
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Joshua P. Jones
GA Bar 91645
Trial Attorneys
U.S. Department of Justice,
Antitrust Division
[[Page 7506]]
Litigation II Section
1401 H Street, NW., Suite 3000
Washington, DC 20530
Telephone: (202) 307-0924
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 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.
[FR Doc. 04-3384 Filed 2-13-04; 8:45 am]
BILLING CODE 4410-11-M