RHI AG to Pay $650,000 Civil Penalty and Perform Asbestos Cleanup to Settle FTC Order Violation Charges

The Federal Trade Commission today announced a settlement with RHI AG (RHI) to resolve charges that RHI has violated provisions of an FTC order issued in 2001. Under the terms of the settlement, RHI has agreed to pay a civil penalty of at least $650,000 for the violations and to conduct asbestos remediation at a divested plant, substantially beyond the remediation required in the original order.

The FTC's order was issued pursuant to a 1999 consent agreement with RHI that followed the FTC's investigation of RHI's acquisition of Global Industrial Technologies, Inc., and resolved concerns that the acquisition would decrease competition in North American markets for refractory bricks used to line steel-making equipment. The order, as drafted in 1999, required RHI to divest to Resco Products, Inc. (Resco) two refractories plants and other assets in Canada and the United States in a manner set out in contracts between Resco and NARCO, an RHI subsidiary. However, before the order became final, the FTC determined in 2000 that NARCO had failed to divest all of the requisite assets to Resco. NARCO thereupon entered into a settlement agreement with Resco that addressed the FTC's concerns and was incorporated into the FTC's order, and the final order was issued in March 2001. As part of that settlement agreement, NARCO paid $5 million to Resco.

The FTC has investigated further RHI's compliance with the settlement agreement that was made a part of the 2001 order. As detailed in a complaint that will be filed in federal district court in connection with the current settlement, NARCO failed to perform fully its obligations under the settlement agreement, and NARCO was late making payments to Resco under the settlement agreement. The complaint also charges that NARCO manufactured refractory bricks in violation of a patent license that was part of the order, and in violation of specific order language. In addition, the complaint alleges that NARCO breached its order obligation to pay the FTC's trustee fees on time. Finally, although the order prohibited any modification of the earlier settlement agreement with Resco, without FTC approval, the complaint asserts that NARCO modified that agreement without that approval.

Pursuant to the settlement announced today, RHI has stipulated that NARCO failed to comply with the settlement agreement and order while it was a wholly owned, indirect subsidiary of RHI. RHI also has agreed to the entry of a consent judgment against RHI.

While the 2001 order was successful in preserving competition in the markets affected by the acquisition and there is little evidence of bad faith in RHI's violations of that order, the consent judgment nonetheless will require RHI to pay a civil penalty of $650,000 within 30 days after entry of judgment by the court. In addition, the consent judgment will require RHI to perform specified asbestos remediation at a plant divested to Resco located in Marelan, Quebec, Canada. Depending on the final cost of this remediation, the consent judgment may require RHI to pay an additional civil penalty equal to the amount by which the cost of remediation is less than $350,000.

"Although the FTC order ultimately preserved competition as it was designed to do, RHI's many violations of the order placed achieving that remedy at risk," said Susan Creighton, Director of the FTC's Bureau of Competition. "RHI has already refunded Resco $5 million of the original divestiture price. The new obligations, both to pay a civil penalty and to perform asbestos remediation beyond the original divestiture contract's terms, should make clear to RHI and all respondents that they will be held to comply fully with all of their order obligations, regardless of the other challenges that they may face."

The FTC expects to file the complaint, stipulation, and consent judgment in the United States District Court for the District of Columbia. The Commission vote to accept the settlement, and to notify the Department of Justice of its intention to file the settlement, was 5-0.

In addition to approving the settlement between the FTC and RHI, the Commission also voted to grant RHI's petition to reopen and modify the FTC's 2001 order. In the petition, RHI asked the Commission to approve a second settlement agreement, signed in 2002 between NARCO and Resco, and to incorporate it into the order. The Commission vote to grant RHI's petition was 5-0.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

NOTE: This stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation, except as specifically stipulated.

Copies of the documents mentioned in this release are or will be available from the FTC's Web site at www.ftc.gov. 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. 021-0105; Docket No. C-4005)