In an initial decision announced today, Administrative Law Judge (ALJ) D. Michael Chappell upheld administrative complaint allegations that the February 2001 acquisition by Chicago Bridge & Iron Company N.V. (CB&I) of the Water Division and the Engineered Construction Division of Pitt-Des Moines, Inc. (PDM) violated Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. Judge Chappell found that complaint counsel had established that the effect of CB&I's acquisition of the PDM assets may be to substantially lessen competition in four relevant product markets in the United States in which both CB&I and PDM competed. The order entered by Judge Chappell would require CB&I to divest all of the assets acquired in the acquisition, in order to restore competition as it existed prior to the acquisition. The Judge's initial decision is subject to review by the full Commission, either on its own motion or on appeal by either the respondents or complaint counsel.
CB&I, a Dutch company based in Amsterdam, is one of the world's leading global engineering and construction companies. PDM, based in The Woodlands, Texas, was a diversified engineering and construction company, and a distributor of a broad range of carbon steel products. Prior to the February transaction, CB&I and PDM competed against each other as the two leading U.S. producers of large, field-erected industrial and water storage tanks and other specialized steel-plate structures.
The administrative complaint issued by the Federal Trade Commission in 2001 alleged that CB&I's acquisition significantly reduced competition in four separate markets involving the design and construction of various types of field-erected specialty industrial storage tanks in the United States:
- liquid nitrogen, liquid oxygen, and liquid argon (LIN/LOX/LAR) storage tanks;
- liquefied petroleum gas (LPG) storage tanks;
- liquefied natural gas (LNG) storage tanks and associated facilities; and
- field erected thermal vacuum chambers (used for the testing of satellites).
According to the complaint, the combination of the two companies resulted in a monopoly in the U.S. markets for two of the more difficult and costly products to construct, LNG tanks and thermal vacuum chambers. In addition, the complaint alleged that the combination of the two companies resulted in a dominant firm in the U.S. markets for LPG tanks and LIN/LOX/LAR tanks.
The ruling announced today follows an administrative trial to resolve the charges in the administrative complaint. In his opinion, Judge Chappell concluded that the acquisition "is likely to increase CB&I's ability to raise prices unilaterally in the relevant markets because the Acquisition eliminates competition from PDM, CB&I's closest competitor. . . ."; that the acquisition violated Section 7 of the Clayton Act and Section 5 of the FTC Act; and that "[c]omplete divestiture of all assets acquired in the Acquisition is required to restore competition as it existed prior to the Acquisition." The order entered by Judge Chappell would require CB&I -- no later than 180 days from the date that the order becomes final -- to "completely divest all assets, title, properties, interest, rights and privileges, of whatever nature, purchased from PDM in the Acquisition. . . . ," with the acquirer, the divestiture agreement, and the manner of sale to be approved by the Commission before the execution of the divestiture sale. The order further provides that, "[i]f at all possible . . . the divested assets shall be sold as a viable going concern that will enhance competition in the relevant markets." The order further provides that until the required divestiture is completed, CB&I shall maintain all the assets to be divested "so as to not impair the assets' operating viability, marketability, or confidentiality if applicable."
The Appeals Process
The Judge's initial decision is subject to review by the full Commission, either on its own motion or at the request of either party. The initial decision will become the decision of the Commission 30 days after it is served on the parties or 30 days after the filing of a timely notice of appeal (whichever is later), unless: (1) a party filing a notice of appeal perfects an appeal by the timely filing of an appeal brief, or (2) the Commission takes certain other actions detailed in its Rules.
Copies of the initial decision by the ALJ 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.
(FTC Docket No. 9300)
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