The Federal Trade Commission has negotiated a settlement to resolve antitrust concerns stemming from Metso Oyj's (Metso) proposal to acquire 100 percent of the outstanding voting securities and convertible debentures of Svedala Industri AB (Svedala) for approximately $1.6 billion. Metso and Svedala are the two largest suppliers of rock processing equipment in the world. According to the FTC, this transaction, if consummated, would likely lead to anticompetitive effects in four separate rock processing equipment markets: primary gyratory crushers, jaw crushers, cone crushers, and grinding mills. Under the terms of the proposed order designed to remedy these concerns, Metso and Svedala have agreed to divest Metso's global primary gyratory crusher and grinding mill businesses and Svedala's global jaw crusher and cone crusher businesses. The three crusher businesses would be divested to Sandvik AB, a large Swedish corporation engaged in, among other activities, the supply of drilling and excavation equipment to mineral producers around the world. The grinding mill business would be divested to Outokumpu, another large metals corporation based in Finland. Both divestitures would take place no later than 20 days from the date Metso consummates its acquisition of Svedala.
"The proposed settlement will ensure continued competition in the global markets for rock processing equipment," said Joseph J. Simons, Director of the FTC's Bureau of Competition. "Sandvik and Outokumpu are both strong and viable purchasers committed to preserving competition in these markets and serving important aggregate and mineral producers around the world."
Metso is a Finnish corporation with its headquarters in Helsinki. The company was formed in 1999 by the merger of Valmet, a supplier of paper manufacturing machinery, and Rauma, a supplier of forestry, rock and mineral processing equipment and automation equipment. In 1999, Metso's sales totaled $3.4 billion. Sales of rock processing equipment, which Metso manufactures and sells globally through its Metso Minerals subsidiary, accounted for 16 percent of Metso's revenues.
Svedala, headquartered in Malmö, Sweden, is a leading global supplier of equipment for the mineral processing and construction industries. In 1999, Svedala had sales of approximately $1.7 billion. Approximately 64 percent of Svedala's revenues are generated by sales of rock and mineral processing equipment. The company also manufactures compaction equipment for asphalt paving, systems for bulk materials transport, and equipment for paper recycling.
Metso and Svedala are, by a considerable margin, the two largest manufacturers of rock processing equipment for mining and aggregate operations in the world. Rock processing equipment is used by both aggregate and mineral producers to crush and pulverize large rock formations in order to manufacture aggregates and retrieve minerals. Aggregate and mineral producers use a series of different types of rock processing equipment in a circuit to crush the rock into the desired size, shape, and form. Customers of these products state that they purchase the type and size of rock processing equipment that is optimal for their circuit and, because of the unique performance characteristics of each type and size of equipment, there is little opportunity to switch to alternative equipment.
According to the FTC's complaint, the global market is the relevant geographic area in which to analyze the effects of the acquisition in the relevant lines of commerce. The relevant lines of commerce in which to analyze the effects of the proposed acquisition are the research, development, manufacture and sale of cone crushers; jaw crushers; primary gyratory crushers; and grinding mills. In addition, the global markets for the research, development, manufacture and sale of cone crushers, jaw crushers, primary gyratory crushers, and grinding mills are highly concentrated. Metso and Svedala are two of the world's leading suppliers of cone crushers, jaw crushers, primary gyratory crushers, and grinding mills.
Metso and Svedala are actual competitors in each of the relevant markets. According to the complaint, entry into each of the relevant markets is unlikely and would not occur in a timely manner to deter or counteract the adverse competitive effects if the transaction were consummated as proposed because of, among other things, the time and expense necessary to develop new rock processing equipment and gain customer acceptance for the equipment.
The complaint alleges that the effects of the acquisition, if consummated, may be to substantially lessen competition and to tend to create a monopoly in the relevant markets in the following ways, among others:
a. by eliminating actual, direct, and substantial competition between Metso and Svedala in each of the relevant markets;
b. by increasing the likelihood that Metso will unilaterally exercise market power in each of the relevant markets;
c. by increasing the likelihood of coordinated interaction in each of the relevant markets; and
d. by increasing the likelihood that customers of cone crushers, jaw crushers, primary gyratory crushers, and grinding mills would be forced to pay higher prices.
The proposed order would remedy the acquisition's anticompetitive effects in the global markets for cone crushers, jaw crushers, primary gyratory crushers, and grinding mills by requiring Metso to divest its worldwide primary gyratory crusher and grinding mill businesses and by requiring Svedala to divest its worldwide cone crusher and jaw crusher businesses. Under the proposed settlement, the three crusher businesses would be divested to Sandvik - a publicly traded Swedish corporation and a leading global supplier of drilling and excavation machinery, equipment and tools for the mining and construction industries. The grinding mill business would be divested to Outokumpu - a diversified Finnish metals corporation involved primarily in the mining, production and fabrication of steel, chromium, zinc, copper and nickel.
Both Sandvik and Outokumpu have the necessary industry expertise to replace the competition that existed prior to the proposed acquisition. Furthermore, Sandvik and Outokumpu do not pose separate competitive issues as acquirers of the divested assets. Both divestitures would take place no later than 20 days from the date Metso consummates its acquisition of Svedala. If the Commission ultimately determines that Sandvik or Outokumpu is not an acceptable buyer or that the manner of either divestiture is not acceptable, Metso and Svedala must unwind the sale(s) and divest the crusher businesses or the grinding mill business to a Commission-approved buyer. Should they fail to do so, the Commission may appoint a trustee to divest the crusher businesses or the grinding mill business.
The proposed order contains several provisions designed to ensure that the divestitures are successful. It requires Metso and Svedala to provide incentives to all of the employees that Sandvik and Outokumpu want to hire to continue in their positions until the divestitures are accomplished. For one year after those divestitures are accomplished, Metso and Svedala would be prohibited from soliciting or inducing any employees or agents of the rock processing equipment businesses involved in the divestitures to terminate their employment with Sandvik or Outokumpu. Furthermore, to enable Sandvik and Outokumpu to develop and manufacture rock processing equipment in the same manner and quality achieved by Metso and Svedala, the proposed order would require Metso and Svedala for a period of one year to provide technical assistance and training at cost to Sandvik and Outokumpu.
Metso and Svedala also would be required to provide transitional manufacturing services for the production of jaw crushers, to enable Sandvik to deliver jaw crushers to customers without delay. The transitional manufacturing provision covers only the production of jaw crushers because Svedala currently manufactures a substantial portion of its jaw crushers in its Brazilian facility, which will not be divested. Svedala also manufactures some jaw crushers at its Swedish facility, which will be divested under the proposed settlement. Less than 24 months ago, Svedala manufactured all of its jaw crushers in the Swedish facility. Thus, the primary production assets for the manufacture of jaw crushers already exist in the Swedish facility. Sandvik will also manufacture all of its jaw crushers at the Swedish facility. Under the proposed settlement, the Commission will appoint an Interim Monitor to oversee the transfer of Svedala's jaw crusher assets located in Brazil and to insure compliance with the transitional manufacturing agreement. The Interim Monitor has the requisite capability and applicable business knowledge to supervise the proper transfer of divested assets and monitor the critical manufacturing and supply activities of Metso and Svedala. Thus, the transitional manufacturing agreement, in conjunction with the Interim Monitor, provides a guarantee to Sandvik that its production of jaw crushers will be seamless and uninterrupted after the divestiture.
To ensure that the Commission remains informed about the status of the crusher businesses and the grinding mill business pending divestiture, and about the efforts being made to accomplish the divestitures, the proposed consent agreement would require Metso and Svedala to file reports with the Commission within 30 days of the date they sign the consent agreement, and periodically thereafter, until the divestitures are accomplished.
Under the bilateral agreement on antitrust cooperation between the United States of America and the European Commission, the FTC cooperated with the European Commission in the analysis and resolution of this case. In addition, the FTC held discussions on this matter with the competition authorities of Australia, Canada, and South Africa.
The Commission vote to place the proposed settlement on the public record for comment was 4-0, with Chairman Muris not participating.
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 October 9, 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.: 001-0186)