[Federal Register: December 4, 2007 (Volume 72, Number 232)]
[Notices]
[Page 68180-68193]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04de07-97]
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DEPARTMENT OF JUSTICE ANTITRUST DIVISION
United States v. Vulcan Materials Co., et al. 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 Final Judgment and
Competitive Impact Statement have been filed with the United States
District Court for the District of Columbia in United States v. Vulcan
Materials Co., et al., Civil Action No. 1:07-cv-2044. On November 13,
2007, the United States filed a Complaint to obtain equitable and other
relief against defendants Vulcan Materials Company (``Vulcan'') and
Florida Rock Industries, Inc. (``Florida Rock'') to prevent Vulcan's
proposed acquisition of Florida Rock. The Complaint alleges that
Vulcan's acquisition of Florida Rock would substantially lessen
competition in the production, distribution, and sale of coarse
aggregate in and around Atlanta, Georgia; Columbus, Georgia;
Chattanooga, Tennessee; and South Hampton Roads, Virginia, in violation
of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The proposed
Final Judgment, filed on November 13, 2007, requires defendants to
divest Florida Rock aggregate quarries in Northwest, West, and
Southwest Atlanta, Georgia; Columbus, Georgia; Chattanooga, Tennessee;
and Richmond, Virginia. In addition, defendants must divest a Florida
Rock distribution yard located in Chesapeake, Virginia that receives
coarse aggregate by barge from Florida Rock's Richmond quarry; a Vulcan
aggregate quarry in South Atlanta, Georgia; and a Vulcan quarry under
development in Southeast Atlanta, Georgia.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 325 7th Street,
NW., Room 215, Washington, DC 20530 (telephone: 202-514-2481), on the
Department of Justice's Web site at http://www.usdoj.gov/atr, and at
the Office of the Clerk of the United States District Court for the
District of Columbia, Washington, DC. Copies of these materials may be
obtained from the Antitrust Division upon request and payment of a
copying fee set by Department of Justice regulations.
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).
Patricia A. Brink,
Deputy Director of Operations, Antitrust Division.
United States District Court for the District of Columbia
United States of America, Department of Justice, Antitrust
Division, 1401 H Street, NW., Suite 3000, Washington, DC 20530,
Plaintiff, v. Vulcan Materials Company, 1200 Urban Center Drive,
Birmingham, AL 35242, and Florida Rock Industries, Inc., 155 East
21st Street, Jacksonville, FL 32206, Defendants.
Case: 1:07-cv-02044
Assigned To: Sullivan, Emmet G.
Assign. Date: 11/13/2007
Description: Antitrust
Deck Type: Antitrust
Date Stamp:
Complaint
Plaintiff United States of America (``United States''), acting
under the direction of the Acting Attorney General of the United
States, brings this civil antitrust action to obtain equitable and
other relief against defendants Vulcan Materials Company (``Vulcan'')
and Florida Rock Industries, Inc. (``Florida Rock'') to prevent
Vulcan's proposed acquisition of Florida Rock. Plaintiff complains and
alleges as follows:
I. Nature of the Action
1. On February 19, 2007, Vulcan and Florida Rock signed a
definitive agreement for Vulcan to acquire Florida Rock in a cash-and-
stock transaction valued at approximately $4.6 billion. The total
blended cash-and-stock consideration for this transaction is
approximately $68 per share.
2. Vulcan and Florida Rock both produce and distribute in the
United States building materials, including, among other things,
construction aggregates (which includes coarse aggregate) and ready mix
concrete. Vulcan is the largest supplier of construction aggregates in
the United States. Florida Rock is also a leading supplier of
construction aggregates in the United States. Combined, Vulcan and
Florida Rock will have construction aggregates reserves totaling
approximately 13.9 billion tons.
3. The United States brings this action to prevent the proposed
acquisition of Florida Rock by Vulcan because it would substantially
lessen competition in the production, distribution, and sale of coarse
aggregate in and around Atlanta, Georgia; Columbus, Georgia;
Chattanooga, Tennessee; and South Hampton Roads, Virginia, in violation
of Section 7 of the Clayton Act, 15 U.S.C. 18.
II. Parties to the Proposed Transaction
4. Defendant Vulcan is a New Jersey corporation with its principal
place of business in Birmingham, Alabama. Vulcan produces, distributes,
and sells, among other products, construction aggregates, ready mix
concrete, hot mix asphalt, and asphalt coating to customers in 21
states, the District of Columbia, and Mexico.
5. Vulcan is the largest producer of construction aggregates in the
United States. It has over 300 facilities for the
[[Page 68181]]
production and distribution of construction aggregates and other
products. In 2006, Vulcan shipped approximately 255 million tons of
construction aggregates, the majority of which was coarse aggregate. In
2006, Vulcan reported total sales of approximately $3 billion.
6. Defendant Florida Rock is a Florida corporation with its
principal place of business in Jacksonville, Florida. Florida Rock
produces, distributes, and sells in the Southeastern and mid-Atlantic
states, among other products, construction aggregates, ready mix
concrete, prestressed concrete, and cement.
7. Florida Rock is one of the largest United States suppliers of
construction aggregates. In 2006, Florida Rock shipped approximately 45
million tons of construction aggregates, the majority of which was
coarse aggregate. In 2006, Florida Rock reported total sales of
approximately $1.4 billion.
III. Jurisdiction and Venue
8. Plaintiff United States brings this action 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.
9. Defendants produce, distribute, and sell coarse aggregate and
other products in the flow of interstate commerce. Defendants'
activities in producing, distributing, and seIling these products
substantially affect interstate commerce. This Court has subject matter
jurisdiction over 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.
10. Defendants have consented to venue and personal jurisdiction in
this judicial district.
IV. Trade and Commerce
A. The Relevant Product Market
11. Construction aggregates consist primarily of crushed stone,
gravel, and sand produced from natural deposits of various materials
and removed from quarries, mines, or pits.
12. Coarse aggregate is a type of construction aggregate. Coarse
aggregate is crushed stone produced at quarries or mines and used for,
among other things, road base and the production of ready mix concrete
and asphalt. Coarse aggregate typically is mixed with other materials
to produce ready mix concrete and asphalt. Different sizes of coarse
aggregate are needed to meet different project specifications.
13. There are no reliable substitutes for coarse aggregate because
it differs from other products in its physical composition, functional
characteristics, customary uses, consistent availability, and pricing.
To the extent that any substitutes exist, customers already use these
to the full extent possible in light of the limits on their
availability and the amounts that can be used in a given product, and
could not use more of them in place of coarse aggregate in response to
an increase in the price of coarse aggregate.
14. A small but significant post-acquisition increase in the price
of coarse aggregate would not cause the purchasers of coarse aggregate
to substitute another product or otherwise reduce their usage of coarse
aggregate in sufficient quantities so as to make such a price increase
unprofitable.
15. Accordingly, the production, distribution, and sale of coarse
aggregate is a line of commerce and a relevant product market within
the meaning of Section 7 of the Clayton Act.
B. The Relevant Geographic Markets
16. Coarse aggregate is a bulky, heavy, and relatively low-value
product. The cost of transporting coarse aggregate is high compared to
the value of the product.
17. Transportation costs limit the distance coarse aggregate can be
economically transported from a quarry or mine to a job site or a ready
mix concrete or asphalt plant. The geographic area within which a
coarse aggregate supplier can compete most vigorously thus is limited
by the cost of hauling the coarse aggregate. As a result, the
competitiveness of a coarse aggregate supplier in a given area is
limited by its distance from customer plants or project sites relative
to other suppliers.
18. Florida Rock owns and operates a coarse aggregate quarry
located in Cedarton, Georgia, known as the Six Mile quarry. This quarry
serves a geographic area that includes, among other areas, all or part
of Floyd, Polk, Haralson, and Bartow Counties in Georgia (hereafter
referred to as ``Northwest Atlanta''). Customers with plants or jobs
within Northwest Atlanta may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Adairsville, Bartow, and Rockmart quarries and from another
competitor's quarry located in Cartersville, Georgia. Other quarries
cannot on a regular basis compete successfully for customers with
plants or jobs in Northwest Atlanta because they are too far away and
the hauling costs are too great.
19. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in Northwest
Atlanta would not cause those customers to procure coarse aggregate
from quarries farther away than those identified in paragraph 18 in
sufficient quantities so as to make such a price increase unprofitable.
20. Florida Rock owns and operates a coarse aggregate quarry
located in Yorkville, Georgia, known as the Paulding quarry. This
quarry serves a geographic area that includes, among other areas, all
or part of Paulding, Douglas, Carroll, Haralson, Polk, and Cobb
Counties in Georgia (hereafter referred to as ``West Atlanta'').
Customers with plants or jobs within West Atlanta may, depending on the
location of their plant or job sites, also economically procure coarse
aggregate from Vulcan's Villa Rica, Kennesaw, and Lithia Springs
quarries and from the quarries of other competitors located in Dallas,
Georgia, and Douglasville, Georgia. Other quarries cannot on a regular
basis compete successfully for customers with plants or jobs in West
Atlanta because they are too far away and the hauling costs are too
great.
21. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in West Atlanta
would not cause those customers to procure coarse aggregate from
quarries farther away than those identified in paragraph 20 in
sufficient quantities so as to make such a price increase unprofitable.
22. Florida Rock owns and operates a coarse aggregate quarry
located in Tyrone, Georgia, known as the Tyrone quarry. This quarry
serves a geographic area that includes, among other areas, all or part
of Fulton, Coweta, Fayette, and Clayton Counties in Georgia (hereafter
referred to as ``Southwest Atlanta''). Customers with plants or jobs
within Southwest Atlanta may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Madras quarry and from another competitor's quarry located in Tyrone,
Georgia. Other quarries cannot on a regular basis compete successfully
for customers with plants or jobs in Southwest Atlanta because they are
too far away and the hauling costs are too great.
23. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in Southwest
Atlanta would not cause those customers to procure coarse aggregate
from quarries farther away than those identified in paragraph 22 in
sufficient quantities so as to make such a price increase unprofitable.
[[Page 68182]]
24. Florida Rock owns and operates a coarse aggregate quarry
located in Riverdale, Georgia, known as the Forest Park quarry. This
quarry serves a geographic area that includes, among other areas, all
or part of Fulton, Clayton, Henry, DeKalb, and Fayette Counties in
Georgia (hereafter referred to as ``South Atlanta''). Customers with
plants or jobs within South Atlanta may, depending on the location of
their plant or job sites, also economically procure coarse aggregate
from Vulcan's Red Oak quarry and from another competitor's quarry
located in College Park, Georgia. Other quarries cannot on a regular
basis compete successfully for customers with plants or jobs in South
Atlanta because they are too far away and the hauling costs are too
great.
25. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in South Atlanta
would not cause those customers to procure coarse aggregate from
quarries farther away than those identified in paragraph 24 in
sufficient quantities so as to make such a price increase unprofitable.
26. Florida Rock owns and operates a coarse aggregate quarry
located in Zotella, Georgia, known as the Griffin quarry. This quarry
serves a geographic area that includes, among other areas, all or part
of Spalding and Henry Counties in Georgia (hereafter referred to as
``Southeast Atlanta''). Customers with plants or jobs within Southeast
Atlanta may, depending on the location of their plant or job sites,
also economically procure coarse aggregate from Vulcan's Stockbridge
quarry. In addition, Vulcan is in the process of opening a new quarry
in Butts County, Georgia, expected to be operational in 2008, from
which it plans to serve, among other areas, customers in all or part of
Southeast Atlanta. Other quarries cannot on a regular basis compete
successfully for customers with plants or jobs in Southeast Atlanta
because they are too far away and the hauling costs are too great.
27. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in Southeast
Atlanta would not cause those customers to procure coarse aggregate
from quarries farther away than those identified in paragraph 26 in
sufficient quantities so as to make such a price increase unprofitable.
28. Florida Rock owns a majority interest in a company that owns
and operates a coarse aggregate quarry located in Columbus, Georgia,
known as the Columbus quarry. This quarry serves a geographic area that
includes, among other areas, all or part of Muscogee and Harris
Counties in Georgia (hereafter referred to as ``Columbus''). Customers
with plants or jobs within Columbus may, depending on the location of
their plant or job sites, also economically procure coarse aggregate
from Vulcan's Barin quarry and from another competitor's quarry located
in Midland, Georgia. Other quarries cannot on a regular basis compete
successfully for customers with plants or jobs in Columbus because they
are too far away and the hauling costs are too great.
29. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in Columbus would
not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 28 in sufficient
quantities so as to make such a price increase unprofitable.
30. Florida Rock owns and operates a coarse aggregate quarry
located in Chattanooga, Tennessee, known as the Jersey Pike quarry.
This quarry serves a geographic area that includes, among other areas,
all or part of Hamilton County in Tennessee (hereafter referred to as
``Chattanooga''). Customers with plants or jobs within Chattanooga may,
depending on the location of their plant or job sites, also
economically procure coarse aggregate from Vulcan's Chattanooga quarry
and from another competitor's quarries located in Chattanooga and
Ringgold, Georgia. Other quarries cannot on a regular basis compete
successfully for customers with plants or jobs in Chattanooga because
they are too far away and the hauling costs are too great.
31. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in Chattanooga
would not cause those customers to procure coarse aggregate from
quarries farther away than those identified in paragraph 30 in
sufficient quantities so as to make such a price increase unprofitable.
32. Florida Rock owns and operates a coarse aggregate quarry
located in Richmond, Virginia, known as the Richmond quarry, a coarse
aggregate quarry located in Havre de Grace, Maryland, known as the
Havre de Grace quarry, and a barge-served distribution yard located in
Chesapeake, Virginia, known as the Gilmerton yard. Florida Rock also
operates a distribution yard owned by a third party located in
Chesapeake, Virginia. Via these distribution yards, Florida Rock serves
a geographic area that includes, among other areas, all or part of the
cities of Norfolk, Suffolk, Portsmouth, Chesapeake, and Virginia Beach
in Virginia (hereafter referred to as ``South Hampton Roads'').
Customers with plants or jobs within South Hampton Roads may, depending
on the location of their plant or job sites, also economically procure
coarse aggregate from Vulcan rail and barge terminals supplied by
Vulcan's Richmond, Lawrenceville, and Skippers quarries. Other quarries
cannot on a regular basis compete successfully for customers with
plants or jobs in South Hampton Roads because they do not have
appropriate distribution facilities in the area and/or quarries
similarly proximate to rail lines or navigable water sources.
33. A small but significant post-acquisition increase in the price
of coarse aggregate to customers with plants or jobs in South Hampton
Roads would not cause those customers to procure coarse aggregate from
quarries farther away than those identified in paragraph 32 in
sufficient quantities so as to make such a price increase unprofitable.
34. Accordingly, the relevant geographic markets, within the
meaning of Section of the Clayton Act, are locations of coarse
aggregate customers in: Northwest Atlanta, West Atlanta, Southwest
Atlanta, South Atlanta, Southeast Atlanta, Columbus, Chattanooga, and
South Hampton Roads.
C. Anticompetitive Effects
1. The Proposed Transaction Will Harm Competition in the Markets for
Coarse Aggregate in the Relevant Geographic Markets
35. Price competition between Vulcan and Florida Rock in the
production, distribution, and sale of coarse aggregate has benefited
customers.
36. In Southeast Atlanta and South Hampton Roads, the proposed
acquisition will eliminate the competition between Vulcan and Florida
Rock and reduce the number of suppliers of many specifications of
coarse aggregate from two to one. In Southeast Atlanta, the acquisition
will also eliminate the competition between Florida Rock and Vulcan
that would result from the opening of Vulcan's new quarry in Butts
County.
37. In Northwest Atlanta, Southwest Atlanta, South Atlanta,
Columbus, and Chattanooga, the proposed acquisition will eliminate the
competition between Vulcan and Florida Rock and reduce the number of
coarse aggregate suppliers from three to two generally, and for some
customers and projects from two to one.
38. In West Atlanta, the proposed acquisition will eliminate the
[[Page 68183]]
competition between Vulcan and Florida Rock and reduce the number of
coarse aggregate suppliers from four to three generally, and for some
customers and projects from three to two.
39. The proposed acquisition will substantially increase the
likelihood that Vulcan will unilaterally increase the price of coarse
aggregate to a significant number of customers in Northwest Atlanta,
West Atlanta, Southwest Atlanta, South Atlanta, Southeast Atlanta,
Columbus, Chattanooga, and South Hampton Roads.
40. The response of other coarse aggregate suppliers in the
relevant geographic markets would not be sufficient to constrain a
unilateral exercise of market power by Vulcan after the acquisition
because those suppliers likely would not have sufficient capacity and/
or incentives to increase production and sales enough to defeat an
anticompetitive price increase by Vulcan. State permits and county
zoning restrictions in many cases limit quarries' hours of operation
and/or production levels, and many coarse aggregate suppliers face
practical limitations on the amount of truck traffic their facilities
can handle. Moreover, because coarse aggregate mined from quarries is a
depletable natural resource and every quarry has finite reserves, every
sale by a supplier today represents a tradeoff against future sales.
41. In addition, and notwithstanding competitor responses, post-
merger Vulcan will be able to increase prices to those customers that
have plants or job sites for which both a Vulcan quarry and a Florida
Rock quarry are closer than any other quarries producing coarse
aggregate meeting their specifications. Coarse aggregate suppliers know
the locations of their competitors' quarries and the distance from
their own quarries and their competitors' quarries to a customer's
plant or job site. Generally, because of transportation costs, the
farther a supplier's closest competitor is from a job site, the less
price competition that supplier faces for that project. Post-
acquisition, in instances where Vulcan and Florida Rock quarries would
be the closest quarries to a customer's plant or project and the next
closest coarse aggregate supplier's plant is farther from the
customer's plant or project, the combined firm, using the knowledge of
its competitors' quarry locations, would be able to charge such
customers higher prices.
42. Without the constraint of competition between Vulcan and
Florida Rock, the combined firm will have a greater ability to exercise
market power by raising prices to customers for whom Vulcan or Florida
Rock were sources of coarse aggregate.
43. In addition, Vulcan's elimination of Florida Rock as an
independent competitor in the production, distribution, and sale of
coarse aggregate is likely to facilitate anticompetitive coordination
among the remaining coarse aggregate suppliers in Northwest Atlanta,
West Atlanta, Southwest Atlanta, South Atlanta, Columbus, and
Chattanooga. Coarse aggregate is homogeneous and suppliers have access
to information about competitors' output, capacity, and costs. Given
these market conditions, eliminating one of the few coarse aggregate
competitors is likely to further increase the ability of the remaining
competitors to coordinate successfully.
44. The transaction therefore will substantially lessen competition
in the production, distribution, and sale of coarse aggregate in the
relevant geographic markets. This is likely to lead to higher prices
for the ultimate consumers of coarse aggregate, in violation of Section
7 of the Clayton Act.
2. Entry Is Not Likely To Deter the Exercise of Market Power
45. Timely and successful entry into the production, distribution,
and sale of coarse aggregate is unlikely in the relevant geographic
areas.
46. Securing the proper site for a coarse aggregate quarry or mine
is difficult, time-consuming, and costly. It requires the investigation
and extensive testing of candidate sites, as well as negotiating
necessary land transfers, leases, and/or easements. The location of a
quarry, mine, or yard is important due to the high cost of transporting
coarse aggregate, but there are few sites, especially in metropolitan
areas, on which to locate coarse aggregate operations.
47. Due to the geology in South Hampton Roads, coarse aggregate for
most applications in South Hampton Roads is produced outside the area.
For an entrant to compete effectively in South Hampton Roads with a
combined Vulcan and Florida Rock, that entrant must pair a new or
existing rail- or water-served quarry with a distribution yard in the
South Hampton Roads area that is capable of receiving coarse aggregate
from such a quarry. Rail- or water-served quarries situated to compete
effectively in South Hampton Roads, and the proper sites for
distribution yards to serve those quarries, are scarce.
48. Obtaining necessary zoning variances and governmental permits
for a coarse aggregate quarry or mine also can be difficult, time-
consuming, and costly. In metropolitan areas, land of the necessary
size and geology often is already utilized or does not have the
appropriate zoning, and obtaining zoning variances can be extremely
difficult. Attempts to open a new coarse aggregate quarry or mine,
especially in metropolitan areas (such as West Atlanta, Southwest
Atlanta, South Atlanta, Columbus, Chattanooga, and South Hampton Roads)
but also frequently in rural areas, often face fierce public
opposition. This public opposition can prevent a coarse aggregate
quarry or mine from opening or make opening it much more time-consuming
and costly. In addition, state and federal water, air quality, and
other permitting process requirements must be met.
49. Even after a quarry or mine site is acquired and properly zoned
and permitted, the owner must spend significant time and resources to
prepare the land and install the equipment necessary to run the
operation.
50. Therefore, entry by any other firm into the coarse aggregate
market in the relevant geographic areas will not be timely, likely, or
sufficient to defeat an anticompetitive price increase.
V. Violations Alleged
51. The proposed acquisition of Florida Rock by Vulcan would
substantially lessen competition and tend to create a monopoly in
interstate trade and commerce in violation of Section 7 of the Clayton
Act, 15 U.S.C. 18.
52. Unless restrained, the transaction will have the following
anticompetitive effects, among others:
a. Actual and potential competition between Vulcan and Florida Rock
in the production, distribution, and sale of coarse aggregate in the
relevant geographic markets will be eliminated;
b. Competition generally in the production, distribution, and sale
of coarse aggregate in the relevant geographic markets will be
substantially lessened; and
c. Prices for coarse aggregate in the relevant geographic markets
likely will increase.
VI. Request for Relief
53. Plaintiff requests that:
a. Vulcan's proposed acquisition of Florida Rock be adjudged and
decreed to be unlawful and in violation of Section 7 of the Clayton
Act, 15 U.S.C. 18;
[[Page 68184]]
b. Defendants and all persons acting on their behalf be permanently
enjoined and restrained from consummating the proposed acquisition or
from entering into or carrying out any contract, agreement, plan, or
understanding, the effect of which would be to combine Vulcan with the
operations of Florida Rock;
c. Plaintiff be awarded its costs for this action; and
d. Plaintiff receive such other and further relief as the Court
deems just and proper.
Respectfully submitted,
For Plaintiff United States of America:
Thomas O. Barnett,
Assistant Attorney General D.C. Bar #426840
David L. Meyer,
Deputy Assistant Attorney General D.C. Bar #414420
Patricia A. Brink,
Deputy Director of Operations
Maribeth Petrizzi,
Chief, Litigation II Section D.C. Bar #435204
Dorothy B. Fountain,
Assistant Chief, Litigation II Section D.C. Bar #439469
Robert W. Wilder,
Helena Gardner,
Christine A. Hill (D.C. Bar 461048),
Leslie Peritz,
Lowell Stern (D.C. Bar 440487),
James S. Yoon (D.C. Bar 491309),
Attorneys, United States Department of Justice Antitrust Division,
Litigation II Section, 1401 H Street, NW., Suite 3000, Washington,
DC 20530, (202) 307-6336
Dated: November 13, 2007
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Vulcan Materials Company
and Florida Rock Industries, Inc., Defendants.
Case No.:
Judge:
Deck Type: Antitrust
Date Stamp:
Final Judgment
Whereas, plaintiff, United States of America, filed its Complaint
on November 13, 2007, and plaintiff and defendants, Vulcan Materials
Company (``Vulcan'') and Florida Rock Industries, Inc. (``Florida
Rock''), 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 defendants to assure
that competition is not substantially lessened;
And whereas, the United States 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 divestitures 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'' or ``Acquirers'' means the entity or entities to
whom defendants divest some or all of the Divestiture Assets.
B. ``Coarse aggregate'' means crushed stone produced at quarries or
mines and used for, among other things, road base and the production of
ready mix concrete and asphalt.
C. ``Divestiture Assets'' means:
1. The following quarries and yard:
a. The Florida Rock Six Mile quarry, located at 3785 Cave Springs
Road, Cedarton, Georgia;
b. The Florida Rock Paulding quarry, located at 112 Quarry Road,
Yorkville, Georgia;
c. The Florida Rock Tyrone quarry, located at 240 Rockwood Road,
Tyrone, Georgia;
d. The Vulcan Red Oak quarry, located at 5414 Buffington Road, Red
Oak, Georgia;
e. The Vulcan quarry under development in Butts County, located on
Greer Dairy Road, Jackson, Georgia;
f. The Florida Rock interest in Columbus Quarry LLC, which owns the
Columbus quarry, located at 3001 Smith Road, Columbus, Georgia;
g. The Florida Rock Jersey Pike quarry, located at 2 Pelican Drive,
Chattanooga, Tennessee;
h. The Florida Rock Richmond quarry, located at 2100 Deepwater
Terminal Road, Richmond, Virginia (but excluding the Florida Rock ready
mix concrete plant, the real property necessary for the operation of
the plant (provided the conveyance of such property does not interfere
with the operation of the Richmond quarry), and all other tangible and
intangible assets exclusively used in the plant's operations) and, at
the option of the Acquirer, use of the real property, parking lot,
equipment shop, and office building equivalent to that which Florida
Rock currently has for its quarry operations; and
i. The Florida Rock Gilmerton yard, located at 4606 Bainbridge
Boulevard, Chesapeake, Virginia (but excluding the Florida Rock ready
mix concrete plant, the real property necessary for the operation of
the plant (provided the conveyance of such property does not interfere
with the operation of the Gilmerton yard), and all other tangible and
intangible assets exclusively used in the plant's operations) and, at
the option of the Acquirer, use of the real property, parking lot,
equipment shop, fuel station, and office building equivalent to that
which Florida Rock currently has for its operation of the yard;
2. All tangible assets used in or for the quarries and yard listed
in Paragraphs II(C)(1)(a) through (i), including but not limited to all
research and development activities (except for any such research and
development activities that are principally devoted to either
defendant's operations as a whole and not specifically to the
operations of the quarries and yard listed in Paragraphs II(C)(1)(a)
through (i), and that are not necessary to the operation of the
quarries and yard listed in Paragraphs II(C)(1)(a) through (i)),
equipment, tooling and fixed assets, real property (leased or owned),
personal property, inventory, coarse aggregate reserves, office
furniture, materials, supplies, on- or off-site warehouses or storage
facilities relating to the quarries and yard; all licenses, permits,
and authorizations issued by any governmental organization relating to
the quarries and yard; all contracts, teaming arrangements, agreements,
leases (including renewal rights), commitments, certifications, and
understandings relating to the quarries and yard, including sales
agreements and supply agreements; all customer lists, contracts,
accounts, and credit records relating to the quarries and yard; all
repair and performance records and all other records relating to the
quarries and yard; at the option of the Acquirer or Acquirers, a number
of trucks, rail cars, and other vehicles usable at the
[[Page 68185]]
quarries and yard listed in Paragraphs II(C)(1)(a) through (i) equal
to, for each separate type of truck, rail car, or other vehicle, the
average number of trucks, rail cars, and other vehicles of that type,
owned or controlled by defendants, used at each such quarry or yard per
month during the months of operation of the quarry or yard between
January 1, 2006 and December 31, 2006 (calculated by averaging the
number of trucks, rail cars, and other vehicles of each type, owned or
controlled by defendants, that were used at each quarry or yard at any
time during each month that the quarry or yard was in operation); and
at the option of the Acquirer or Acquirers, a number of barges usable
at the quarry and yard listed in Paragraphs II(C)(1)(h) and (i) equal
to, for each separate type of barge, the average number of barges of
that type, owned or controlled by defendants, used at such quarry or
yard per month during the months of operation of the quarry or yard
between January 1, 2006 and December 31, 2006 (calculated by averaging
the number of barges of that type, owned or controlled by defendants,
that were used at such quarry or yard at any time during each month
that the quarry or yard was in operation); and
3. All intangible assets used in the development, production,
servicing, distribution, and sale of products produced by or in the
quarries or stored in the yard listed in Paragraphs II(C)(1)(a) through
(i), including but not limited to all contractual rights (except for
any such contractual rights that are principally devoted to either
defendant's operations as a whole and not specifically to the
operations of the quarries and yard listed in Paragraphs II(C)(1)(a)
through (i), and that are not necessary to the operation of the
quarries and yard listed in Paragraphs II(C)(1)(a) through (i)),
patents, licenses and sub-licenses, intellectual property rights,
copyrights, 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, all manuals
and technical information defendants provide to their own employees,
customers, suppliers, agents, or licensees, and all research data
(including coarse aggregate reserve testing information) concerning
historic and current research and development efforts relating to the
quarries and yard, including but not limited to designs of experiments
and the results of successful and unsuccessful designs and experiments.
Notwithstanding anything to the contrary in this Final Judgment, if
requested by an Acquirer, and subject to approval by the United States
in its sole discretion, defendants shall offer to enter into a
transition services agreement with respect to computer software
(including dispatch software and management information systems) and
related documentation, and design tools and simulation capability.
D. ``Florida Rock'' means defendant Florida Rock Industries, Inc.,
a Florida corporation with its headquarters in Jacksonville, Florida,
its successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees.
E. ``Vulcan'' means defendant Vulcan Materials Company, a New
Jersey corporation with its headquarters in Birmingham, Alabama, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees.
III. Applicability
A. This Final Judgment applies to Vulcan and Florida Rock, as
defined above, and all other persons in active concert or participation
with Vulcan or Florida Rock who receive actual notice of this Final
Judgment by personal service or otherwise.
B. If, prior to complying with Sections IV and V of this Final
Judgment, defendants sell or otherwise dispose of all or substantially
all of their assets or of lesser business units that include the
Divestiture Assets, they shall require the purchaser to be bound by the
provisions of this Final Judgment. Defendants need not obtain such an
agreement from the acquirers of the assets divested pursuant to this
Final Judgment.
IV. Divestitures
A. Defendants are 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 Divestiture Assets in a manner
consistent with this Final Judgment to an Acquirer or Acquirers
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 the Divestiture Assets as
expeditiously as possible.
B. In accomplishing the divestitures ordered by this Final
Judgment, defendants promptly shall make known, by usual and customary
means, the availability of the Divestiture Assets. Defendants shall
inform any person making inquiry regarding a possible purchase of the
Divestiture Assets that they are being divested pursuant to this Final
Judgment and provide that person with a copy of this Final Judgment.
Unless the United States otherwise consents in writing, defendants
shall offer to furnish to all prospective Acquirers, subject to
customary confidentiality assurances, all information and documents
relating to the Divestiture Assets customarily provided in a due
diligence process except such information or documents subject to the
attorney-client or work-product privileges. Defendants shall make
available such information to the United States at the same time that
such information is made available to any other person.
C. Defendants shall not take any action that win impede in any way
any person from competing for or obtaining the lease to the Branscome
Chesapeake yard, located at 120 Dominion Boulevard, Chesapeake,
Virginia.
D. Unless the United States otherwise consents in writing,
defendants shall provide the Acquirer or Acquirers and the United
States information relating to personnel involved in production,
operations, development, and sales at the Divestiture Assets to enable
the Acquirer or Acquirers to make offers of employment. Defendants
shall not interfere with any negotiations by the Acquirer or Acquirers
to employ any employee of the Divestiture Assets whose primary
responsibility is production, operations, development, or sales at the
Divestiture Assets.
E. Unless the United States otherwise consents in writing,
defendants shall permit prospective Acquirers of the Divestiture Assets
to have reasonable access to personnel and to make inspections of the
physical facilities of the Divestiture Assets; 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.
F. With the exception of the Butts County site listed in Paragraph
II(C)(1)(e), defendants shall warrant to the Acquirer or Acquirers that
each asset will be operational on the date of sale. Vulcan shall
further warrant to the Acquirer that it has obtained all environmental,
zoning, or other permits required to produce coarse aggregate at
[[Page 68186]]
the Vulcan quarry under development in Butts County, identified in
Paragraph II(C)(1)(e), and that such permits are transferable to the
Acquirer.
G. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
H. Defendants shall warrant to the Acquirer or Acquirers that there
are no material defects in the environmental, zoning, or other permits
pertaining to the operation of the Divestiture Assets. Defendants shall
not undertake, directly or indirectly, any challenges to the
environmental, zoning, or other permits relating to the operation of
the Divestiture Assets.
I. Unless the United States otherwise consents in writing, any
divestiture pursuant to Section IV, or by trustee appointed pursuant to
Section V, of this Final Judgment, shall include the entire Divestiture
Assets, and shall be accomplished in such a way as to satisfy the
United States, in its sole discretion, that the Divestiture Assets can
and will be used by the Acquirer or Acquirers as viable, ongoing
businesses engaged in producing and distributing coarse aggregate, that
the Divestiture Assets will remain viable, and that the divestiture of
such assets will remedy the competitive harm alleged in the Complaint.
The sale of the Divestiture Assets may be made to one or more
Acquirers, so long as the Florida Rock Richmond quarry, identified in
Paragraph II(C)(1)(h) above, and the Florida Rock Gilmerton yard,
identified in Paragraph II(C)(1)(i) above, are divested to a single
Acquirer. The divestitures, whether pursuant to Section IV or Section V
of this Final Judgment:
1. Shall be made to an Acquirer or Acquirers that, in the United
States's sole judgment, has the intent and capability (including the
necessary managerial, operational, technical and financial
capability) to compete effectively in the production, distribution,
and sale of coarse aggregate; 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 or Acquirers and defendants gives defendants the ability
to unreasonably raise the Acquirer's costs, to lower the Acquirer's
efficiency, or otherwise to interfere in the ability of the Acquirer
to compete effectively in the production, distribution, and sale of
coarse aggregate.
V. Appointment of Trustee To Effect Divestitures
A. If defendants have not divested the Divestiture Assets within
the time period specified in Paragraph 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 the
Divestiture Assets.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Divestiture Assets. 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 Final Judgment, and shall have such other powers as this Court
deems appropriate. Subject to Paragraph V(D) of this 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 objection 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 the United States approves, and shall
account for all monies derived from the sale of the assets sold by the
trustee 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 the Divestiture Assets 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 reasonable protection
for trade secrets 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 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 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 the Divestiture Assets, and
shall describe in detail each contact with any such person. The trustee
shall maintain full records of all efforts made to divest the
Divestiture Assets.
G. If the trustee has not accomplished the divestitures ordered
under this Final Judgment 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 report contains information that the trustee deems
confidential, such report shall not be filed in the public docket of
the Court. The trustee shall at the same time furnish such report to
the United States, which 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 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 Divestitures
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 Final Judgment. If the trustee is responsible, it shall
similarly notify defendants. The notice shall set forth the details of
the
[[Page 68187]]
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 the
Divestiture Assets, 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 defendant,
the proposed Acquirer or Acquirers, any other third party, or the
trustee, if applicable, additional information concerning the proposed
divestiture, the proposed Acquirer or Acquirers, 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 defendant, the
proposed Acquirer or Acquirers, any third party, or 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 defendant's limited right to object to the
sale under Paragraph V(C) of this 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 Paragraph 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 divestitures required by this Final Judgment have 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 divestitures have been completed under Section IV or V, defendants
shall deliver to the United States an affidavit as to the fact and
manner of their 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 (30) calendar
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 Divestiture Assets, 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 Divestiture
Assets, 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) calendar 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 and divest the Divestiture Assets until one year after such
divestitures have been completed.
X. Compliance Inspection
A. For the 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 authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall, upon written request of an 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 the option of the United States, to require defendants to
provide hard or electronic copies of, all books, ledgers, accounts,
records, data 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 defendant.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports or responses to written
interrogatories, under oath if requested, relating to any of the
matters contained in this 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 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 Divestiture Assets
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
[[Page 68188]]
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. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States's responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, 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
United States of America, Plaintiff, v. Vulcan Materials Company
and Florida Rock Industries, Inc., Defendants.
Case: 1:07-cv-02044
Assigned To: Sullivan, Emmet G.
Assign. Date: 11/13/2007
Description: Antitrust
Deck Type: Antitrust
Date Stamp:
Competitive Impact Statement
Plaintiff United States of America (``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
The United States filed a civil antitrust Complaint on November 13,
2007, seeking to enjoin the proposed acquisition by Vulcan Materials
Company (``Vulcan'') of Florida Rock Industries, Inc. (``Florida
Rock''). The Complaint alleges that the likely effect of this
acquisition would be to lessen competition substantially in the
production, distribution, and sale of coarse aggregate in certain areas
of Georgia, Tennessee and Virginia, in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18. This loss of competition likely would result
in higher prices for coarse aggregate in the affected areas.
At the same time the Complaint was filed, the United States also
filed a Hold Separate Stipulation and Order and a proposed Final
Judgment, which were designed to eliminate the anticompetitive effects
of the acquisition. Under the proposed Final Judgment, which is
explained more fully below, Vulcan and Florida Rock are required to
divest single coarse aggregate quarries in Chattanooga, Tennessee,
Columbus, Georgia, and Richmond, Virginia; four quarries and one site
that is being developed for use as a quarry in the western and southern
parts of the Atlanta area; and a distribution yard in Chesapeake,
Virginia. Until the divestitures required by the Final Judgment have
been accomplished, the Hold Separate Stipulation and Order requires
Vulcan and Florida Rock to preserve, maintain, and continue to operate
the plants discussed above (hereafter ``Divestiture Assets'') as
independent, ongoing, economically viable competitive businesses held
entirely separate, distinct, and apart from those of defendants' other
operations.
The United States, Vulcan, and Florida Rock have stipulated that
the proposed Final Judgment may be entered after compliance with the
APPA. 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 proposed Final Judgment and to punish
violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Vulcan is a New Jersey corporation with its principal place of
business in Birmingham, Alabama. It is the nation's largest producer of
construction aggregates, and is also a major provider of other
construction materials and related services. In 2006, Vulcan shipped
approximately 255 million tons of construction aggregates--the majority
of which were coarse aggregate--to customers in 21 states, the District
of Columbia, and Mexico. Its 2006 sales were over $3 billion.
Florida Rock is a Florida corporation with its principal place of
business in Jacksonville, Florida. It produces, distributes, and sells,
among other products, construction aggregates, ready mix concrete,
prestressed concrete, and cement. Its sales are concentrated in the
southeastern and mid-Atlantic states. In 2006, Florida Rock shipped
approximately 45 million tons of construction aggregates, a majority of
which were coarse aggregate, and reported total sales of approximately
$1.4 billion.
On February 19, 2007, Vulcan and Florida Rock entered into an
agreement for Vulcan to acquire Florida Rock in a cash-and-stock
transaction valued at approximately $4.6 billion.
B. The Competitive Effects of the Transaction on the Market for Coarse
Aggregate.
1. Relevant Product Market
The Complaint alleges that the production, distribution, and sale
of coarse aggregate is a relevant product market within the meaning of
Section 7 of the Clayton Act. Coarse aggregate is a type of
construction aggregate, and includes crushed stone of varying sizes
produced at quarries or mines.\1\ Among other things, it is used as
base material for roads and other construction sites and for the
production of ready mix concrete and asphalt. Different sizes of coarse
aggregate are needed to meet different project specifications.
---------------------------------------------------------------------------
\1\ Construction aggregates include crushed stone, grave, sand,
recycled asphalt, and recycled concrete.
---------------------------------------------------------------------------
There are no reliable substitutes for coarse aggregate because it
differs from other products in its physical composition, functional
characteristics, customary uses, consistent availability, and pricing.
To the extent that any substitutes exist, most customers already use
these to the full extent possible in light of the limits on their
availability and the amounts that can be used in a given product, and
cannot use more of them in place of coarse aggregate in response to an
increase in the price of coarse aggregate. The Complaint alleges that a
small but significant post-acquisition increase in the price of coarse
aggregate would not cause its purchasers to substitute another product
in sufficient quantities so as to make such a price increase
unprofitable. Accordingly, the production, distribution, and sale of
coarse aggregate is a relevant product market.
2. Relevant Geographic Markets
Coarse aggregate is a bulky, heavy, and relatively low-value
product. In some markets, coarse aggregate is delivered to customers
exclusively by truck. In other markets, the lack of native coarse
aggregate sources and the availability of rail and/or navigable
waterways makes it economical to rail
[[Page 68189]]
barge, and/or ship coarse aggregate directly to customer plants or job
sites, or, much more frequently, to a distribution yard from which it
is picked up by truck and delivered to the end customer. The cost of
transporting coarse aggregate is high compared to its value, which
limits the distance it can be economically transported from a quarry or
distribution yard to a ready mix concrete or asphalt plant or job site.
Transportation costs, as well as the location of competitors relative
to a customer's plant or job site, thus limit the geographic area
within which a coarse aggregate supplier can effectively compete.
The Complaint alleges that there are a number of geographic areas
that constitute geographic markets in which the proposed acquisition by
Vulcan of Florida Rock will harm competition in the production,
distribution, and sale of coarse aggregate. As discussed below, in each
of these geographic markets, Vulcan and Florida Rock quarries face
limited competition from other suppliers in the delivery of coarse
aggregate to customers in the market and, because of transportation
costs, a small but significant post-acquisition increase in the price
of coarse aggregate would not cause customers to procure coarse
aggregate from quarries farther away.
a. Northwest Atlanta
Florida Rock owns and operates a coarse aggregate quarry located in
Cedarton, Georgia, known as the Six Mile quarry. This quarry serves a
geographic area that includes, among other areas, all or part of Floyd,
Polk, Haralson, and Bartow Counties in Georgia (hereafter referred to
as ``Northwest Atlanta''). Customers with plants or jobs within
Northwest Atlanta may, depending on the location of their plant or job
sites, also economically procure coarse aggregate from Vulcan's
Adairsville, Bartow, and Rockmart quarries and from another
competitor's quarry located in Cartersville, Georgia.
b. West Atlanta
Florida Rock owns and operates a coarse aggregate quarry located in
Yorkville, Georgia, known as the Paulding quarry. This quarry serves a
geographic area that includes, among other areas, all or part of
Paulding, Douglas, Carroll, Haralson, Polk, and Cobb Counties in
Georgia (hereafter referred to as ``West Atlanta''). Customers with
plants or jobs within West Atlanta may, depending on the location of
their plant or job sites, also economically procure coarse aggregate
from Vulcan's Villa Rica, Kennesaw, and Lithia Springs quarries and
from the quarries of other competitors located in Dallas, Georgia, and
Douglasville, Georgia.
c. Southwest Atlanta
Florida Rock owns and operates a coarse aggregate quarry located in
Tyrone, Georgia, known as the Tyrone quarry. This quarry serves a
geographic area that includes, among other areas, all or part of
Fulton, Coweta, Fayette, and Clayton Counties in Georgia (hereafter
referred to as ``Southwest Atlanta''). Customers with plants or jobs
within Southwest Atlanta may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Madras quarry and from another competitor's quarry located in Tyrone,
Georgia.
d. South Atlanta
Florida Rock owns and operates a coarse aggregate quarry located in
Riverdale, Georgia, known as the Forest Park quarry. This quarry serves
a geographic area that includes, among other areas, all or part of
Fulton, Clayton, Henry, DeKalb, and Fayette Counties in Georgia
(hereafter referred to as ``South Atlanta''). Customers with plants or
jobs within South Atlanta may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Red Oak quarry and from another competitor's quarry located in College
Park, Georgia.
e. Southeast Atlanta
Florida Rock owns and operates a coarse aggregate quarry located in
Zotella, Georgia, known as the Griffin quarry. This quarry serves a
geographic area that includes, among other areas, all or part of
Spalding and Henry Counties in Georgia (hereafter referred to as
``Southeast Atlanta''). Customers with plants or jobs within Southeast
Atlanta may, depending on the location of their plant or job sites,
also economically procure coarse aggregate from Vulcan's Stockbridge
quarry. In addition, Vulcan is in the process of opening a new quarry
in Butts County, Georgia, expected to be operational in 2008, from
which it plans to serve, among other areas, customers in all or part of
Southeast Atlanta.
f. Columbus
Florida Rock owns a majority interest in a company that owns and
operates a coarse aggregate quarry located in Columbus, Georgia, known
as the Columbus quarry. This quarry serves a geographic area that
includes, among other areas, all or part of Muscogee and Harris
Counties in Georgia (hereafter referred to as ``Columbus''). Customers
with plants or jobs within Columbus may, depending on the location of
their plant or job sites, also economically procure coarse aggregate
from Vulcan's Barin quarry and from another competitor's quarry located
in Midland, Georgia.
g. Chattanooga
Florida Rock owns and operates a coarse aggregate quarry located in
Chattanooga, Tennessee, known as the Jersey Pike quarry. This quarry
serves a geographic area that includes, among other areas, all or part
of Hamilton County in Tennessee (hereafter referred to as
``Chattanooga''). Customers with plants or jobs within Chattanooga may,
depending on the location of their plant or job sites, also
economically procure coarse aggregate from Vulcan's Chattanooga quarry
and from another competitor's quarries located in Chattanooga,
Tennessee, and Ringgold, Georgia.
h. South Hampton Roads
Florida Rock owns and operates a coarse aggregate quarry located in
Richmond, Virginia, known as the Richmond quarry, a coarse aggregate
quarry located in Havre de Grace, Maryland, known as the Havre de Grace
quarry, and a barge-served distribution yard located in Chesapeake,
Virginia, known as the Gilmerton yard. Florida Rock also operates a
distribution yard owned by a third party located in Chesapeake,
Virginia. Via these distribution yards, Florida Rock serves a
geographic area that includes, among other areas, all or part of the
cities of Norfolk, Suffolk, Portsmouth, Chesapeake, and Virginia Beach
in Virginia (hereafter referred to as ``South Hampton Roads'').
Customers with plants or jobs within South Hampton Roads may, depending
on the location of their plant or job sites, also economically procure
coarse aggregate from Vulcan rail and barge terminals supplied by
Vulcan's Richmond, LawrenceviIle, and Skippers quarries. Other quarries
cannot on a regular basis compete successfully for customers with
plants or jobs in South Hampton Roads because they do not have
appropriate distribution facilities in the area and/or quarries
similarly proximate to rail lines or navigable water sources.
3. Anticompetitive Effects of the Acquisition
In each relevant geographic area, the proposed acquisition will
eliminate the competition between Vulcan and Florida Rock and
substantially increase market concentration. In Southeast
[[Page 68190]]
Atlanta and South Hampton Roads, it will reduce the number of
suppliers of most specifications of coarse aggregate from two to one.
In Northwest Atlanta, Southwest Atlanta, South Atlanta, Columbus, and
Chattanooga, the proposed acquisition will reduce the number of coarse
aggregate suppliers from three to two generally, and for some customers
and projects, will reduce the number from two to one. In West Atlanta,
the proposed acquisition will reduce the number of coarse aggregate
suppliers from four to three generally, and for some customers and
projects, will reduce the number from three to two.
The proposed acquisition will substantially increase the likelihood
that Vulcan will unilaterally increase the price of coarse aggregate to
a significant number of customers in all of the relevant geographic
areas. The response of other coarse aggregate suppliers in the relevant
geographic markets would not be sufficient to constrain a unilateral
exercise of market power by Vulcan after the acquisition because those
suppliers likely would not have sufficient capacity and/or incentives
to increase production and sales enough to defeat an anticompetitive
price increase by Vulcan. State permits and county zoning restrictions
in many cases limit quarries' hours of operation and/or production
levels, and many coarse aggregate suppliers face practical limitations
on the amount of truck traffic their facilities can handle. Moreover,
because coarse aggregate mined trom quarries is a depletable natural
resource and every quarry has finite reserves, every sale by a supplier
today represents a tradeoff against future sales.
Likewise, the response of customers would be insufficient to
constrain a unilateral exercise of market power by Vulcan. To the
extent that cost-effective substitutes exist, these already are being
used to the full extent possible, and customers would not increase
their use of these substitutes in response to an increase in the price
of coarse aggregate. Thus, customers would not be able to prevent
Vulcan's exercise of market power.
In addition, and notwithstanding competitor responses, post-
acquisition Vulcan will be able to increase prices to those customers
that have plants or job sites for which both a Vulcan quarry and a
Florida Rock quarry are closer than any other quarries producing coarse
aggregate meeting their specifications. Coarse aggregate suppliers know
the locations of their competitors' quarries and the distance from
their own quarries and their competitors' quarries to a customer's
plant or job site. Generally, because of transportation costs, the
farther a supplier's closest competitor is from a job site, the less
price competition that supplier faces for that project. Post-
acquisition, in instances where Vulcan and Florida Rock quarries would
be the closest quarries to a customer's plant or project and the next
closest coarse aggregate supplier's plant is farther from the
customer's plant or project, the combined firm, using the knowledge of
its competitors' quarry locations, would be able to charge such
customers higher prices.
Further, the proposed acquisition is likely to facilitate
anticompetitive coordination among the remaining coarse aggregate
suppliers in Northwest Atlanta, West Atlanta, Southwest Atlanta, South
Atlanta, Columbus, and Chattanooga. Coarse aggregate is homogeneous and
suppliers have access to information about competitors' output,
capacity, and costs. Given these market conditions, eliminating Florida
Rock as one of the few coarse aggregate competitors is likely to
further increase the ability of the remaining competitors to coordinate
successfully.
Finally, timely and successful entry into the production,
distribution, and sale of coarse aggregate is unlikely in any of the
geographic areas and thus will not defeat anticompetitive unilateral or
coordinated price increases resulting from the proposed acquisition.
Securing the proper site for a coarse aggregate quarry or mine is
difficult, time-consuming, and costly; it requires the investigation
and extensive testing of candidate sites to find ones with adequate
reserves of sufficient quality, and can require negotiations with
multiple landowners as well as with government officials. Additional
difficulties face a new entrant seeking to provide coarse aggregate to
South Hampton Roads. In South Hampton Roads, the area's geology is such
that coarse aggregate for most applications must be imported from
outside the area. For an entrant to compete effectively in South
Hampton Roads with Vulcan post-acquisition, that entrant must pair a
new or existing rail-or water-served quarry with a distribution yard in
South Hampton Roads that is capable of receiving coarse aggregate from
such a quarry. Rail-or water-served quarries situated to compete
effectively in South Hampton Roads, and the proper sites for
distribution yards to serve such quarries, are scarce. In all of the
relevant geographic markets the location of a quarry or yard is
important due to the high cost of transporting coarse aggregate, but
there are very few sites, especially in metropolitan areas, on which to
locate coarse aggregate operations.
Obtaining necessary zoning variances and government permits for a
coarse aggregate quarry can also be difficult, time-consuming, and
costly. In metropolitan areas, land of the necessary size and geology
is often already utilized or does not have the appropriate zoning, and
obtaining zoning variances can be extremely difficult. Attempts to open
a new coarse aggregate quarry or mine, especially in metropolitan areas
(such as West Atlanta, Southwest Atlanta, South Atlanta, Columbus,
Chattanooga, and South Hampton Roads) but also frequently in rural
areas, often face fierce public opposition, which delays and raises the
expense of opening such operations or prevents such projects
altogether. In addition, state and federal water, air quality, and
other permitting process requirements must be met, which can take from
months to years.
Finally, even after a quarry or mine site is selected, acquired,
and properly zoned and permitted, the owner must spend significant time
and resources to prepare the land and install the equipment necessary
to run the operation. As a result of all of these costly and time-
consuming barriers to entry, entry by any other firm. into the coarse
aggregate market in the relevant geographic areas will not be timely,
likely, or sufficient to defeat an anti competitive price mcrease.
III. Explanation of the Proposed Final Judgment
A. The Divestiture Assets
The divestitures provided for in the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in the markets
for the production, distribution, and sale of coarse aggregate in all
of the relevant geographic markets. In each market, the divestitures
will establish a new, independent, and economically viable competitor.
The Divestiture Assets include the following quarries and yard:
a. The Florida Rock Six Mile quarry, located at 3785 Cave Springs
Road, Cedarton, Georgia, divestiture of which will remedy the
competitive concerns in Northwest Atlanta;
b. The Florida Rock Paulding quarry, located at 112 Quarry Road,
Yorkville, Georgia, divestiture of which will remedy the competitive
concerns in West Atlanta;
c. The Florida Rock Tyrone quarry, located at 240 Rockwood Road,
Tyrone,
[[Page 68191]]
Georgia, divestiture of which will remedy the competitive concerns in
Southwest Atlanta;
d. The Vulcan Red Oak quarry, located at 5414 Buffington Road, Red
Oak, Georgia, divestiture of which will remedy the competitive concerns
in South Atlanta;
e. The Vulcan quarry under development in Butts County, located on
Greer Dairy Road, Jackson, Georgia, divestiture of which will remedy
the competitive concerns in Southeast Atlanta;
f. The Florida Rock interest in Columbus Quarry LLC, which owns the
Columbus quarry, located at 3001 Smith Road, Columbus, Georgia,
divestiture of which will remedy the competitive concerns in Columbus;
g. The Florida Rock Jersey Pike quarry, located at 2 Pelican Drive,
Chattanooga, Tennessee, divestiture of which will remedy the
competitive concerns in Chattanooga;
h. The Florida Rock Richmond quarry located at 2100 Deepwater
Terminal Road, Richmond, Virginia (but excluding the Florida Rock ready
mix concrete plant, the real property necessary for the operation of
the plant (provided the conveyance of such property does not interfere
with the operation of the Richmond quarry), and all other tangible and
intangible assets exclusively used in the plant's operations) and, at
the option of the Acquirer, use of the real property, parking lot,
equipment shop, and office building equivalent to that which Florida
Rock currently has for its quarry operations, divestiture of which (in
addition to the yard listed in Paragraph (i)) will remedy the
competitive concerns in South Hampton Roads; and
i. in South Hampton Roads, the Florida Rock Gilmerton yard, located
at 4606 Bainbridge Boulevard, Chesapeake, Virginia (but excluding the
Florida Rock ready mix concrete plant, the real property necessary for
the operation of the plant (provided the conveyance of such property
does not interfere with the operation of the Gilmerton yard), and all
other tangible and intangible assets exclusively used in the plant's
operations) and, at the option of the Acquirer, use of the real
property, parking lot, equipment shop, fuel station, and office
building equivalent to that which Florida Rock currently has for its
operation of the yard, divestiture of which (in addition to the quarry
listed in Paragraph (h)) will remedy the competitive concerns in South
Hampton Roads.
The proposed merger does not raise competitive concerns with
respect to the sale of ready mix concrete in either Richmond or South
Hampton Roads. Thus, parts (h) and (i) of the Divestiture Assets
definition above excludes property related to Florida Rock's ready mix
concrete operations located at the Richmond quarry and Gilmerton yard
properties that is not necessary to the operation of the quarry and
coarse aggregate yard, and specifically grant back to the Acquirer the
right to use real property and facilities that are currently used by
both the coarse aggregate and the ready mix operations.
The Divestiture Assets also include all tangible assets used in or
for the above-listed quarries and yard as well as all intangible assets
used in the development, production, servicing, distribution, and sale
of products produced by or in the quarries or stored in the yard.
The sale of the Divestiture Assets according to the terms of the
proposed Final Judgment will ensure that Vulcan's acquisition of
Florida Rock does not harm competition in any of the affected
geographic areas.
B. Selected Provisions of the Proposed Final Judgment
In antitrust cases involving mergers in which the United States
seeks a divestiture remedy, it requires completion of the divestiture
within the shortest time period reasonable under the circumstances. A
quick divestiture has the benefits of restoring competition lost in the
acquisition and reducing the possibility of dissipation of the value of
the assets. Paragraph IV(A) of the proposed Final Judgment requires
Defendants to divest the Divestiture Assets as viable ongoing
businesses within 90 days after the filing of the Complaint in this
matter or five days after notice of the entry of the Final Judgment by
the Court, whichever is later.\2\
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\2\ The Final Judgment also provides that this 90-day time
period may be extended by the United States in its sole discretion
for a total period not exceeding 60 calendar days, and that the
Court will receive prior notice of any such extension.
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Paragraph IV (D) provides that Defendants shall not impede in any
way any person from competing for or obtaining the lease to the
Branscome Chesapeake yard. This yard is owned by a contractor who
leases it to other companies. Currently, the lessee is Florida Rock,
which barges coarse aggregate to the yard to supply the owner's
operations. The lease with Florida Rock expires on December 31, 2007.
Paragraph IV(D) is designed to ensure that the buyer of the Florida
Rock Richmond quarry and Florida Rock Gilmerton yard divestiture
assets, or any other interested party, has the opportunity to compete
for the lease upon its expiration.
The Vulcan quarry under development in Butts County is not yet
operational, but Paragraph IV(F) requires Defendants to warrant to the
Acquirer that they have obtained all environmental, zoning, or other
permits required to begin production of coarse aggregate at the Butts
site.
Paragraph IV(J) of the proposed Final Judgment provides that the
sale of the Divestiture Assets may be made to one or more Acquirers,
except that the Richmond quarry and Gilmerton yard must be divested to
a single acquirer. This provision ensures that the owner of the barge-
served quarry also owns a barge-served distribution facility in South
Hampton Roads so that it can compete effectively in South Hampton
Roads.
Paragraph IV(J) of the proposed Final Judgment also provides that
the assets must be divested in such a way as to satisfy the United
States in its sole discretion that the operations can and will be
operated by the purchaser as a viable, ongoing business that can
compete effectively in the relevant markets. The provisions of
Paragraph IV are designed to ensure that Defendants take all reasonable
steps necessary to accomplish the divestitures quickly and cooperate
with prospective purchasers.
Finally, Paragraph V of the proposed Final Judgment provides that
in the event that Defendants do not accomplish the divestitures within
the periods prescribed in the proposed Final Judgment, the Court will
appoint a trustee selected by the United States to effect the
divestitures. If a trustee is appointed, the proposed Final Judgment
provides that 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 divestitures are accomplished. After his or her
appointment becomes effective, the trustee will file monthly reports
with the Court and the United States setting forth his or her efforts
to accomplish the divestitures. If the divestitures have not been
accomplished at the end of six months, the trustee and the United
States will make recommendations to the Court, which shall enter such
orders as appropriate in order to carry out the purpose of the trust,
including extending the trust or 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
[[Page 68192]]
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 Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants 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 APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within 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 (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. 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 St. 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. The
United States could have continued the litigation and sought
preliminary and permanent injunctions against Vulcan's acquisition of
Florida Rock. The United States is satisfied, however, that the
divestiture of assets described in the proposed Final Judgment will
preserve competition in the production, distribution, and sale of
coarse aggregate in the relevant geographic markets identified by the
United States. Thus, the proposed Final Judgment would achieve all or
substantially all of the relief the United States would have obtained
through litigation, but avoids the time, expense, and uncertainty of a
full trial on the merits of the Complaint.
Vll. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by 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.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, 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)(1)(A)-(B); see generally United States v. SBC Commc'ns,
Inc., 489 F. Supp. 2d 1, 11 (D.D.C. 2007) (concluding that the 2004
amendments ``effected minimal changes'' to scope of review under Tunney
Act, leaving review ``sharply proscribed by precedent and the nature of
Tunney Act proceedings'').\3\
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\3\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for the court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006).
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As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, 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 Corp., 56 F.3d 1448, 1458-62 (DC Cir. 1995). 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). \4\ In
making its public interest determination, a district court ``must
accord deference to the government's predictions about the efficacy of
its remedies, and may not require that the remedies perfectly match the
alleged violations because this may only reflect underlying weakness in
the government's case or concessions made during negotiation.'' SBC
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461
(noting the need for courts to be ``deferential to the government's
predictions as to the effect of the proposed remedies''); United States
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003)
(noting that the court should grant due respect to the United States'
prediction as to the effect of proposed remedies, its perception of
[[Page 68193]]
the market structure, and its views of the nature of the case).
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\4\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (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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Court approval of a consent decree requires a standard more
flexible and less strict than that appropriate to court adoption of a
litigated decree following 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. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982)
(citations omitted) (quoting United States v. Gillette Co., 406 F.
Supp. 713, 716 (D. Mass. 1975)), 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). To
meet this standard, the United States ``need only provide a factual
basis for concluding that the settlements are reasonably adequate
remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, the Court's role under the APPA 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 did not pursue. Id.
at 1459-60. As this court recently confirmed in SBC Communications,
courts ``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction ``[n]othing in this
section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2). This instruction explicitly writes
into the statute the standard intended by the Congress that enacted the
Tunney Act in 1974, as Senator Tunney then explained: ``[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). Rather, the procedure
for the public interest determination is left to the discretion of the
court, with the recognition that the court's ``scope of review remains
sharply proscribed by precedent and the nature of Tunney Act
proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11. \5\
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\5\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone''); S.
Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.''); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade
Cas. (CCH) ] 61,508, at 71,980 (W.D. Mo. 1977) (``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 reasonable under the
circumstances.'').
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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: November 13, 2007.
Respectfully submitted,
Robert W. Wilder, Esquire,
United States Department of Justice, Antitrust Division, Litigation
II Section, 1401 H Street, NW., Suite 3000, Washington, DC 20530
(202) 307-6336
[FR Doc. 07-5902 Filed 12-3-07; 8:45 am]
BILLING CODE 4410-11-M