Degussa Agrees to Settle FTC Charges

Degussa Corporation, and its parent company, Degussa Aktiengesellschaft, have agreed to settle Federal Trade Commission charges that their proposed acquisition of E.I. du Pont de Nemours & Co.’s worldwide hydrogen peroxide business, as originally structured, would substantially lessen competition in the highly concentrated North American market for this widely-used chemical. Instead of acquiring all of DuPont’s hydrogen peroxide assets, Degussa will acquire one plant and has agreed, first, to obtain Commission prior approval if it attempts to acquire either of the two plants that DuPont will retain, and, second, to provide the Commission with prior notification if it attempts to acquire any other hydrogen peroxide facilities in North America.

Degussa, headquartered in Frankfurt am Main, Germany, is a wholly owned subsidiary of Degussa Aktiengesellschaft, a German corporation with worldwide sales exceeding $8.7 billion in 1997. DuPont, located in Wilmington, Delaware, reported revenues of $43.8 billion in 1996.

According to the FTC, both companies sell hydrogen peroxide for commercial and consumer uses in North America and around the world. Hydrogen peroxide is an inorganic chemical that is used in a variety of applications as an oxidizing agent to encourage different chemical reactions. While the paper and pulp industry is by the far the most significant consumer of hydrogen peroxide in North America, other significant users include the textile and mining industries, the agency said.

Originally, Degussa planned to acquire DuPont’s entire worldwide hydrogen peroxide business, including its North American production facilities in Memphis, Tennessee; Maitland, Ontario, Canada; and Gibbons, Alberta, Canada. With the restructured transaction, Degussa would acquire only the Gibbons production plant, and DuPont would retain the facilities in Memphis and Maitland. The proposed consent order would require Degussa to obtain the prior approval of the Commission before acquiring either of the two plants that DuPont retained. It also would require Degussa to provide prior notification to the Commission before consummating an acquisition of any other North American hydrogen peroxide production facilities.

According to the FTC’s complaint, Degussa’s proposed acquisition of DuPont’s hydrogen peroxide business would have increased concentration in an already highly concentrated industry, making coordinated activity among producers more likely. The complaint cited several bases for this conclusion, including:

• That fact that hydrogen peroxide is a highly homogenous product that is purchased primarily on the basis of price;
• The availability of hydrogen peroxide pricing information;
• The past history of express collusion among hydrogen peroxide producers;
• Industry practices that serve to facilitate interdependence and coordination in a concentrated market; and
• Large differentials in pricing among different end-uses.

The Commission’s complaint also pointed to projections in documents of higher hydrogen peroxide prices if the originally proposed acquisition was consummated.

The Commission vote to approve the consent order was 4-0, with Commissioner Mary L. Azcuenaga recused.

An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent order, and an analysis to aid public comment are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-326-2502. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(File File No. 9710118)