The Federal Trade Commission has given final approval to a consent agreement with Montedison S.p.A. and the Royal Dutch/Shell Group of Companies, the world's largest polypropylene producers. The agreement, requiring divestiture of Shell's U.S. polypropylene business, settles charges that the formation of Montell Polyolefins, a $6 billion joint venture between Montedison and Shell, could substantially reduce competition in several polypropylene and polypropylene-related production and licensing markets, and reduce U.S. export sales.
Polypropylene is used in a wide variety of consumer goods including playground equipment, storage containers and toys. Total U.S. polypropylene sales are approximately $4 billion a year, according to industry trade sources.
The consent order involves significant export markets in excess of $250 million annually. "This action demonstrates the ability of the antitrust laws to protect U.S. export commerce," said William J. Baer, Director of the FTC's Bureau of Competition. "By requiring the divestiture of Shell's polypropylene and catalyst business, the consent order protects the opportunity to compete in the polypropylene licensing business. This will help protect competition in this important market," Baer said.
"This is the first order issued in an international antitrust case since the International Antitrust Guidelines were issued, and it illustrates the Guidelines' theme of cooperation with foreign antitrust authorities," Baer continued. Both the FTC and the European Commission took remedial action against the joint venture. Baer stated that "consultation at the staff level helped the Commission consider whether the EC's remedy eliminated competitive problems in the United States and helped assure that the Commission's order was coordinated with the EC's remedy."
Montedison, an Italian firm, is the leading competitor in world polypropylene markets through its wholly-owned, indirect subsidiary, HIMONT Incorporated. HIMONT, also named in the FTC complaint detailing the charges in this case, is based in Wilmington, Delaware. The complaint also names Royal Dutch Petroleum Company, based in The Netherlands, and The "Shell" Transport and Trading Company, p.l.c., based in London. Both of these companies are public holding companies of the Royal Dutch/Shell Group of Companies (collectively referred to here as Shell), the world's second largest producer of polypropylene. Finally, the complaint names Shell Oil Company, of Houston, Texas, a member of the Royal Dutch/Shell Group of Companies.
The final order requires Shell and Shell Oil to divest to Union Carbide, of Danbury, Connecticut, or to another Commission-approved acquirer, within six months, all of Shell Oil's polypropylene assets including its interest in the Unipol/SHAC polypropylene technology and catalyst licensing business and the Seadrift polypropylene plant, both conducted jointly with Union Carbide Corporation. Under an existing agreement between Shell Oil and Union Carbide, any transfer of Shell Oil's rights to Unipol/SHAC and Seadrift prior to March 1997 requires Union Carbide's consent. The order provides that if Union Carbide declines to acquire these assets at an appraised price or if it objects to another acquirer, the divestiture period can be extended until March 31, 1997. The ultimate acquirer, if other than Union Carbide, and divestiture agreement must be approved by the Commission.
To preserve competition pending divestiture, the respondents also have signed a separate agreement requiring Shell to hold separate and manage the assets to be divested independently of Shell and Montell, pending divestiture. In addition, Montedison is required to manage its polypropylene technology and polypropylene catalyst businesses independently of Shell and Montell until Shell has completed the required divestiture. If the divestiture is not completed on time, the settlement permits the Commission to appoint a trustee to complete it.
The settlement also resolves charges regarding a royalty and profit-sharing agreement between Montedison and Mitsui Petrochemical Industries Ltd., Montedison's partner for the licensing of both polypropylene technology and polypropylene catalyst. The FTC charged that the accord restricts price competition and constitutes an illegal agreement to allocate markets. The Commission's action makes the consent order provisions binding on the respondents. The order prohibits Montedison and Montell from sharing in royalties from future polypropylene-related technology licenses granted by Mitsui for use in the United States, and from entering into similar agreements to allocate markets.
Finally, the settlement requires Shell, Montedison and Montell, for 10 years, to obtain Commission approval before acquiring any interest in a company that is engaged either in the polypropylene technology, polypropylene licensing or polypropylene catalyst business anywhere in the world, or in the manufacture or sale of polypropylene polymers in the United States or Canada.
"In an increasingly global marketplace, it is critically important that we cooperate with our foreign colleagues," said Baer. "Cooperation is good for consumers and, by diminishing the likelihood of inconsistent remedies, it is good for business." Cooperation with foreign authorities was a major theme of the Antitrust Enforcement Guidelines for International Operations, issued by the FTC and the Department of Justice on April 5, 1995. "In the future, under the International Antitrust Enforcement Assistance Act of 1994, the FTC and the Department will be able to cooperate more fully with foreign antitrust authorities; if they enter into reciprocal agreements that meet the act's requirements, they will be able to share confidential information," Baer said.
The consent agreement was announced for a public-comment period on Jan. 11. The Commission vote to issue it in final form occurred on May 25, and was 5-0.
NOTE: A consent agreement is for settlement purposes only and does not constitute 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 by the respondents. Each violation of such an order may result in a civil penalty of up to $10,000.
A news release summarizing the complaint and consent agreement was issued at the time the Commission accepted the consent agreement for public comment. Copies of that release and of the complaint and final order are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
(FTC File No. 941 0043)
(Docket No. C-3580)