0210100

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

DAINIPPON INK AND CHEMICALS, INCORPORATED, a corporation.

 
Docket No. C-4073

COMPLAINT

Pursuant to the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission ("Commission"), having reason to believe that Respondent Dainippon Ink and Chemicals, Incorporated ("Dainippon"), a corporation, subject to the jurisdiction of the Commission, has agreed to acquire certain assets of Bayer Corporation ("Bayer"), a corporation, subject to the jurisdiction of the Commission, in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act ("FTC Act"), as amended, 15 U.S.C. 45, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its Complaint, stating its charges as follows:

I. RESPONDENT

1. Respondent Dainippon is a corporation organized, existing and doing business under and by virtue of the laws of Japan, with its offices and principal place of business located at DIC Building 7-20 Nihonbashi 3-Chome, Chou-ku Tokyo 103 Japan. Dainippon's principal subsidiary in the United States, Sun Chemical Corporation ("Sun Chemical"), is located at 222 Bridge Plaza South, Fort Lee, New Jersey 07024.

2. Respondent Dainippon is engaged in, among other things, the research, development, manufacture, and sale of perylenes.

3. Respondent Dainippon is, and at all times relevant herein has been, engaged in commerce, as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and is a corporation whose business is in or affects commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

II. THE ACQUIRED COMPANY

4. Bayer is a corporation organized, existing and doing business under and by virtue of the laws of Indiana, with its offices and principal place of business located at 100 Bayer Road, Pittsburgh, Pennsylvania 15205.

5. Bayer is engaged in, among other things, the research, development, manufacture, and sale of perylenes.

6. Bayer is, and at all times herein has been, engaged in commerce, as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and is a corporation whose business is in or affects commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

III. THE ACQUISITION

7. Pursuant to an asset purchase agreement dated February 15, 2002 (the "Purchase Agreement"), Dainippon, through Sun Chemical, agreed to acquire the high performance organic pigment business of Bayer for approximately $57.8 million in cash (the "Acquisition").

IV. THE RELEVANT MARKET

8. For the purposes of this Complaint, the relevant line of commerce in which to analyze the effects of the Acquisition is the research, development, manufacture, and sale of perylenes. Perylenes are a class of high performance organic pigments that generate unique shades of highly transparent red. Perylenes are primarily used to impart color to automotive coatings.

9 For the purposes of this Complaint, the world is the relevant geographic area in which to analyze the effects of the Acquisition.

V. THE STRUCTURE OF THE MARKET

10. As Dainippon and Bayer are two of only four viable suppliers of perylenes in the world, the market for the research, development, manufacture, and sale of perylenes is highly concentrated as measured by the Herfindahl-Hirschman Index ("HHI"). The Acquisition would significantly increase concentration in the market to an HHI level of 4,856, an increase of 680 points.

VI. BARRIERS TO ENTRY

11. Entry into the research, development, manufacture, and sale of perylenes is a difficult process because of, among other things, the time and cost associated with researching and developing perylene technology; building a perylene manufacturing facility; perfecting the art of manufacturing perylenes; and coordinating the marketing, qualification, and sale of perylenes to potential customers.

12. New entry into the relevant market is unlikely to deter or counteract the adverse competitive effects of the Acquisition because the costs of entering the market are high relative to the potential sales opportunities available to an entrant.

13. New entry into the relevant market would not occur in a timely manner to deter or counteract the adverse competitive effects of the Acquisition because it would take over two years for an entrant to accomplish the steps required for entry and achieve a significant market impact.

VII. EFFECTS OF THE ACQUISITION

14. The effects of the Acquisition, if consummated, may be substantially to lessen competition and to tend to create a monopoly in the relevant market in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45, in the following ways, among others:

a. by eliminating actual, direct, and substantial competition between Dainippon and Bayer in the relevant market;
 
b. by increasing the likelihood that Dainippon will unilaterally exercise market power in the relevant market;
 
c. by further consolidating an already concentrated market, thereby substantially increasing the likelihood of collusion and coordinated interaction in the relevant market;
 
d. by reducing existing incentives to improve service or product quality or to pursue further innovation in the relevant market; and
 
e. by increasing the likelihood that customers of perylenes would be forced to pay higher prices.

VIII. VIOLATIONS CHARGED

15. The Purchase Agreement described in Paragraph 7 constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. 45.

16. The Acquisition described in Paragraph 7, if consummated, would constitute a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this 31st day of January, 2003, issues its Complaint against said Respondent.

By the Commission.

Donald S. Clark
Secretary

SEAL: