FTC Intervenes in Dow Chemical's $18.8 Billion Acquisition of Rohm & Haas

Dow Chemical Company has settled Federal Trade Commission charges that its proposed $18.8 billion acquisition of rival chemical manufacturer Rohm & Haas Company would be anticompetitive and would violate federal law. Under the proposed consent order allowing the transaction to proceed, Dow will sell a range of assets to an FTC-approved acquirer, including its acrylic monomer, hollow sphere particle, and acrylic latex polymer businesses. Dow also must put procedures in place to ensure it does not have access to competitively sensitive non-public information regarding any businesses it acquires from Rohm & Haas.

“Dow and Rohm & Haas are direct and significant competitors in certain markets for acrylics and other industrial chemicals used to make coated paper products, paints, and adhesives,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The FTC consent order announced today will ensure that consumers continue to benefit from competition in the markets for these important products and will not face the prospect of higher prices as a result of the acquisition.”

According to the Commission’s complaint, Dow’s proposed acquisition of Rohm & Haas would reduce competition in the North American markets for the research, development, manufacture, and sale of certain acrylic monomers – including glacial acrylic acid, butyl acrylate, and ethyl acrylate – as well as hollow sphere particles and acrylic latex polymers for traffic paint used to mark lines on streets and highways.

Each of the relevant acrylic monomer products is made from crude acrylic acid. Glacial acrylic acid is used in the production of super-absorbent polymers which are used in personal care and hygiene products. Butyl acrylate and ethyl acrylate are acrylate esters used to make the latex polymers that are used in paints, architectural coatings, and pressure-sensitive adhesives. Hollow sphere particles are a type of specialty polymer used in the manufacture of coated paper to provide gloss, brightness, and opacity. Acrylic latex polymer for traffic paint is a quick-drying polymer used to mark highway traffic lines.

The FTC contends that each of the relevant product markets is highly concentrated and that the proposed acquisition would lead to fewer competitors in each market. For the acrylic monomer markets, the deal would reduce the number of significant competitors from four to three, with the combined Dow/Rohm & Haas having a significant share of each market. The combined firm would have a more than 40 percent share in the market for glacial acrylic acid; a nearly 75 percent share in the market for butyl acrylate; and a nearly 90 percent share in the market for ethyl acrylate. The markets for hollow sphere particles and acrylic latex polymer for traffic paint are even more concentrated, the complaint states, as Dow and Rohm & Haas currently are the only two suppliers. In those markets, the proposed acquisition would be a merger to monopoly.

Finally, the complaint alleges that the proposed acquisition would eliminate direct and substantial competition between Dow and Rohm & Haas in the relevant markets, reducing competition and increasing Dow’s ability to exercise market power unilaterally. The complaint also alleges that the proposed transaction would increase the likelihood of coordinated interaction for glacial acrylic acid, butyl acrylate, and ethyl acrylate. New entry or fringe expansion in these markets is unlikely to counteract the alleged anticompetitive impact of the acquisition.

The FTC’s order is designed to remedy the anticompetitive impacts of the proposed transaction. It requires Dow to divest a single part of its acrylic monomer and polymer research and development and production assets to a Commission-approved buyer. These assets include: 1) Dow’s acrylic monomer production facility in Clear Lake, Texas; 2) its acrylic polymer production assets in St. Charles, Louisiana; 3) its acrylic polymer production facility in Alsip, Illinois; 4) its acrylic polymer production facility in Torrance, California; 5) its acrylic monomer research and development group in South Charleston, West Virginia; 6) its acrylic latex polymer research and development group in Cary, North Carolina; and 7) other assets related to these businesses. The divestitures will include all of the technology related to these businesses, and the order also will require Dow to licence any intellectual property to the acquirer that is not directly related to, but is used in, those businesses.

To ensure the successful transition of the acrylic monomer and polymer assets and the viability of the acquirer, the order requires Dow to provide certain input processes and transition services to the acquirer for a short time. The order also requires Dow to continue to provide the acquirer with site services related to the acrylic polymer production assets in St. Charles, Louisiana, where the acquirer will be operating a separate business on the grounds of a larger Dow facility.

The consent order remedies the competitive impact in the markets for hollow sphere particles and acrylic latex polymer for traffic paint by requiring Dow to sell intellectual property primarily used to make these products and to license certain other intellectual property. Dow also must supply hollow sphere particles and acrylic latex polymer for traffic paint to the acquirer at its manufacturing cost, until the buyer can develop its own manufacturing processes.

Next, the order requires Dow to put procedures in place to ensure that it does not have access to any competitively sensitive information obtained from the businesses and facilities to be divested or to use any information it already has in an anticompetitive matter. Further, the order will allow the FTC to appoint an interim monitor to ensure Dow complies with its obligations. If Dow does not sell the assets it is required to divest within 240 days of when the consent order is accepted for public comment or 240 days from the acquisition date, whichever is later, a Commission-appointed divestiture trustee may sell the assets on its behalf. The order also contains reporting and record keeping requirements to ensure Dow’s compliance with its terms.

The Commission vote to accept the complaint and consent order and place copies on the public record was 4-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The complaint, consent order, and an analysis to aid public comment can be found now on the Commission’s Web site at http://www.ftc.gov/os/caselist/0810214/index.shtm.

The agreement will be subject to public comment for 30 days, beginning today and continuing through February 23, 2009, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

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 documents related to this matter are available from the FTC's web site at http://www.ftc.gov and the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0214)
(Rohm & Haas.final.wpd)