FTC Settlement Would Restore Competition in U.S. Market for Nitrous Oxide

The Federal Trade Commission today announced a settlement of charges that Airgas, Inc.'s (Airgas) purchase of the Puritan Bennett Medical Gas Business (Puritan Bennett) from Mallinckrodt, Inc. in January 2000 had an adverse effect on competition in the nitrous oxide market in the United States and Canada (North America) and violated federal antitrust law. Under the agreement, designed to restore competition in this market, Airgas has agreed to divest a nitrous oxide business to Air Liquide America Corporation (Air Liquide) within 10 days after the Commission issues its decision and order.

"This settlement will create a strong, independent competitor in the nitrous oxide market, which will restore the level of competition existing prior to the merger," said Joe Simons, Director of the FTC's Bureau of Competition, "and customers of nitrous oxide will have the benefits of increased services and lower prices."

Nitrous oxide is a clear, odorless gas mainly used in dental and surgical procedures as an analgesic agent or as a supplement to anesthesia. According to customers of nitrous oxide, there are no alternatives for nitrous oxide in dental procedures and the few potential substitutes for use in surgical procedures are far more expensive or have other detriments.

Airgas, based in Radnor, Pennsylvania, is the nation's largest distributor of industrial, medical, and specialty gases, and currently is the only producer and seller of nitrous oxide in North America. Puritan Bennett, prior to its $90 million purchase by Airgas, was a leading distributor of medical gases, and was also a producer and seller of nitrous oxide in North America. Before the acquisition, Airgas and Puritan Bennett were direct competitors for a wide variety of nitrous oxide customers in the United States. The complaint alleges that Airgas's acquisition of Puritan Bennett effectively eliminated any competition in the North American market for the production and sale of nitrous oxide. According to the FTC, there are substantial barriers to new entry into the nitrous oxide market.

In order to remedy the competitive problems raised by its acquisition, the proposed settlement requires Airgas to divest to Air Liquide a nitrous oxide business, which consists of two nitrous oxide production plants located in Donora, Pennsylvania and Richmond, California; customer contracts; and all related assets necessary for distribution and storage. The proposed agreement also requires Airgas to supply Air Liquide with a sufficient amount of bulk liquid nitrous oxide from its Pensacola, Florida nitrous oxide production plant in order to ensure that Air Liquide has the same volume of nitrous oxide as Airgas did before its acquisition of Puritan Bennett.

Air Liquide is a Delaware corporation, with its principal offices in Houston, Texas. According to the FTC, Air Liquide has all of the necessary attributes to restore competition in the relevant market. Not only does it produce other medical gases, such as medical grade oxygen and nitrogen, but it already has extensive contacts with gas distributors, which are the major customers of nitrous oxide. Indeed, many distributors already buy a wide variety of other gases from Air Liquide. In addition, Air Liquide currently does not produce nitrous oxide, so its acquisition of this business does not raise any competitive issues.

According to the proposed settlement, Airgas must complete these divestitures and enter into this supply agreement within10 business days after the Commission issues the final order in this matter or, in the event that the Commission notifies Airgas that Air Liquide is not an acceptable purchaser or that the manner of divestiture is not acceptable, Airgas shall immediately rescind the transaction with Air Liquide and shall divest the divestiture assets to another acquirer within six months from the date the order becomes final. If Airgas fails to divest these assets and enter into the supply agreement within the time frame stated in the order, the Commission may appoint a divestiture trustee to divest the nitrous oxide assets to a new acquirer.

Finally, to ensure that the Commission remains informed about the status of the Airgas nitrous oxide business and the efforts being made to accomplish the divestiture, the proposed settlement requires Airgas to report to the Commission within 30 days, and every 60 days thereafter, until the divestiture is completed.

The Commission vote to accept the proposed consent agreement and place it on the public record for comment was 5-0. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until November 26, 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.

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 agreement, and an analysis of the agreement to aid in 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 complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No.: 001-0040)