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Citing allegations that FMC Corporation ("FMC") and Japan's Asahi Chemical Industry Co. Ltd ("Asahi Chemical") engaged in a conspiracy to monopolize the world market for microcrystalline cellulose ("MCC"), the Federal Trade Commission today announced a proposed consent order that would end the illegal restraint of competition in the market for this important pharmaceutical chemical and ensure that such restraint does not recur in the future. According to the Commission, beginning in 1984 FMC and Asahi Chemical agreed to divide territories for the sale of MCC, and later FMC attempted to eliminate all vestiges of competition by inviting smaller rivals also to collude. The FTC's order would prohibit the companies from engaging in such behavior and would impose strict distribution rules to ensure that competition in the market for MCC is not again eliminated.

Derived from purified wood cellulose, MCC is used primarily as a binder in making pharmaceutical tablets, and is found in nearly all drug tablets sold in the United States.

"The behavior of FMC and Asahi Chemical was anticompetitive and patently illegal," said Richard G. Parker, Director of the FTC's Bureau of Competition. "Agreements among competitors to divide markets or allocate customers are actions that the FTC takes very seriously."

According to the Commission's complaint, for more than a decade FMC, based in Chicago, Illinois and the largest manufacturer and seller of MCC in the world, attempted to neutralize or eliminate competing MCC sellers and to secure monopoly power within the market. To accomplish this, the FTC contends, in or about 1984, FMC entered into a conspiracy with Asahi Chemical, based in Tokyo, to divide the MCC market into two territories. FMC allegedly agreed not to sell any MCC product to customers in Japan or East Asia without Asahi Chemical's consent, while Asahi Chemical would not sell such products to customers in North America or Europe without the consent of FMC.

Also, the FTC contends, FMC sought agreements with three smaller MCC manufacturers to maintain its monopoly position. The three firms were: 1) Ming Tai Chemical Co., Ltd. ("Ming Tai"); 2) Wei Ming Pharmaceutical Mfg. Co., Ltd. ("Wei Ming"); and 3) the Mendell division of Penwest, Ltd. ("Mendell"). FMC allegedly was motivated by a fear that Ming Tai and Wei Ming had emerged as significant regional suppliers of MCC and might move from serving customers in Asia to competing with FMC in Europe and North America.

The FTC's complaint states that in or about January 1995, FMC proposed to Ming Tai that it grant FMC exclusive rights to distribute all MCC products the company was exporting from Taiwan. At about the same time, FMC proposed that Wei Ming sell its MCC products to FMC exclusively. The goal, according to the Commission, was to exclude competition from the Taiwanese manufacturers, thereby cementing FMC's monopoly power. Both companies declined FMC's offers.

Also in 1995, the complaint states, Mendell posed a competitive threat to FMC's position as the dominant MCC seller in North America and Europe. In an attempt to counter this threat, FMC proposed that Mendell enter into a market division agreement, so that the companies would not be competing for the same customers. Like the Taiwanese companies, Mendell declined FMC's invitation to collude.

According to the complaint, FMC and Asahi Chemical engaged in conduct that restrained worldwide competition for the manufacture and sale of MCC, and tended to injure consumers both in the United States and abroad.

Under the terms of the proposed settlement, FMC and Asahi Chemical would be prohibited from: 1) agreeing with competitors to divide or allocate markets, customers, contracts or geographic territories in connection with the sale of MCC, and 2) agreeing with competitors to refrain in whole or in part from producing, selling or marketing MCC. Both companies would also be barred from inviting or soliciting other companies to enter into agreements not to compete in this market.

In addition, to erase any existing anticompetitive effects of the alleged conspiracy, FMC would be barred for 10 years from acting as the U.S. distributor for any competing manufacturer of MCC (including Asahi Chemical), and for five years would be prohibited from distributing in the United States any other product manufactured by Asahi Chemical.

The proposed order contains several limited exemptions to these prohibitions that would allow FMC and Ashai to engage in certain lawful and pro-competitive activities. For example, each company would be able to enter into exclusive trademark license agreements, enforce its intellectual property rights, and abide by reasonable restraints in conjunction with a lawful joint venture agreement. If, in the future, the Commission alleges violations of the final order, it would be up to the respondents to demonstrate that their conduct satisfied the conditions of the exemptions.

Finally, the order contains provisions to help the Commission monitor the companies' compliance with its terms. First, FMC would be required to retain copies of all written communications with competing MCC manufacturers and to provide them to the Commission upon request. Asahi Chemical would be required to provide the Commission with all documents needed to determine and ensure its compliance with the order, as well, whether they are located within the United States or another jurisdiction.

A summary of the proposed consent order will be published in the Federal Register shortly. The agreement will be subject to public comment until January 22, 2001, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Commission vote to accept the proposed consent agreement and publish a summary in the Federal Register for public comment was 5-0.

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, consent agreement and 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, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the online complaint form. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

Media Contact:

Mitchell J. Katz

Office of Public Affairs

202-326-2161

Staff Contact:

Michael E. Antalics

Bureau of Competition

202-326-2821

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