With Conditions, FTC Clears Occidental Chemicals Purchase of Vulcans Chemical Assets

Under a consent order announced today, the Federal Trade Commission will allow Occidental Chemical Company’s (OxyChem) proposed purchase of the chemical assets of Vulcan Materials Company (Vulcan), provided OxyChem divests Vulcan’s Port Edwards, Wisconsin, chemical facility and related assets within 10 days of its acquisition. The purchase price for the Vulcan assets is approximately $214 million, subject to adjustment for changes in net working capital, plus future contingent payments projected to equal $145 million.

The consent order will alleviate the alleged anticompetitive impact of the proposed acquisition, as OxyChem and Vulcan are direct competitors in the markets for three chemicals: KOH (potassium hydroxide) and APC (anhydrous potassium carbonate), which are produced at the Port Edwards facility, and potassium carbonate (potcarb), which includes APC and liquid potassium carbonate. The Port Edwards facility will be divested to ERCO Worldwide (USA) (ERCO), or to another Commission-approved buyer within six months if a problem is encountered with ERCO sale.

The Relevant Product Markets

The chemicals comprising the relevant product markets are produced at Vulcan’s Port Edwards, Wisconsin facility. KOH is the raw material for the production of many potassium chemicals, such as food additives for low-sodium foods. The largest end use of KOH is the production of potassium carbonate (potcarb) which is used as a nutrition supplement for dairy cattle, in the production of cathode-ray tubes for televisions and computer monitors, and as a food additive, among other things. Potcarb can be produced in liquid or flake (solid) form, with more than 90 percent of the total potcarb production in the United States made up of the flake form, known as APC. For most users, the liquid form of potcarb is not an acceptable substitute for APC. The complaint alleges both an APC and a larger potcarb market, in which APC is the dominant form of the product. The complaint alleges that the proposed transaction is likely to substantially lessen competition under both market definitions.

The FTC’s Complaint

According to the FTC’s complaint, the proposed acquisition would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended, by reducing competition in the markets for the production and sale of KOH, potcarb, and APC. The Commission contends that these markets are each highly concentrated, and that OxyChem and Vulcan have been the primary U.S. competitors in these markets for many years and are the only producers of APC in the country. The complaint states that consumers have relied on competition between OxyChem and Vulcan to maintain competitive pricing for these chemicals and that the proposed acquisition would eliminate that competition, absent the relief provided by the consent order. The complaint further alleges that entry into the relevant chemical markets would not be timely, likely, nor sufficient enough to alleviate the anticompetitive impacts of the transaction.

The Consent Order

The consent order remedies the allegedly anticompetitive impact of OxyChem’s proposed acquisition of Vulcan’s chemical assets by requiring that respondents divest Vulcan’s facility in Port Edwards, Wisconsin, and related assets. In addition to KOH and APC, the Port Edwards facility produces chlorine, caustic soda (sodium hydroxide), and HCL (hydrochloric acid). The order requires that these assets be divested to ERCO, an indirect subsidiary of Superior Plus, Inc., a Canadian company, or, if the Commission finds reason to believe ERCO is not an acceptable buyer, to an alternate FTC-approved purchaser within six months. The divestiture to ERCO must be completed within 10 days of OxyChem’s acquisition of the Vulcan chemical assets. The Commission also may appoint a divestiture trustee to divest the assets in a manner it finds acceptable.

The Commission has also issued an order to maintain assets, to ensure that the assets to be divested remain viable, competitive, and ongoing until their divestiture is achieved. The order ensures that no interim harm to competition occurs while the divestiture is pending. Both the order to maintain assets and the consent order prohibit the exchange of confidential information between Vulcan, OxyChem, and the Port Edwards business, except as provided for in the orders. Finally, the consent order allows the Commission to appoint a monitor trustee to oversee Vulcan and OxyChem’s compliance with its terms, and requires the respondents to file regular reports with the FTC demonstrating that they are in compliance. The order to maintain assets appoints Richard M. Klein of Cherry Hill, New Jersey, as the monitor. Klein is the former president and CEO of Sybron Chemicals and has been appointed monitor or hold separate trustee in previous matters before the Commission.

The Commission vote to issue the complaint, consent order, and order to maintain assets was 5-0. The consent order will be subject to public comment for 30 days, until July 2, 2005, after which the Commission will decide whether to make it final. Comments should be sent to the: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 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, consent order, order to maintain assets, 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, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No.: 051-0009)