9710105 UNITED STATES OF AMERICA Commissioners: In the Matter of The Dow Chemical Company, a corporation. Docket C-3785 DECISION AND ORDER The Federal Trade Commission ("the Commission"), having initiated an investigation of the proposed acquisition by The Dow Chemical Company (“Dow”), through its wholly-owned subsidiary, Dow South Africa Holdings (Pty) Ltd., of the entire issued share capital of Sentrachem Limited (“Sentrachem”), which in turn owns Hampshire Chemical Corporation (“Hampshire”), and having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with a violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18; and The respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission's Rules; and The Commission, having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Acts, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in § 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:
ORDER IT IS ORDERED that, as used in this Order, the following definitions shall apply: A. “Commission” means the Federal Trade Commission. B. “Respondent” or “Dow” means The Dow Chemical Company, its directors, officers, employees, agents and representatives, its predecessors, successors, and assigns; subsidiaries, divisions, and groups and affiliates controlled by Dow, and the respective directors, officers, employees, agents, representatives, successors and assigns of each. C. “Sentrachem” means Sentrachem Limited, a South African company, with its principal place of business at 5 Protea Place Sandown 2196, 2146 Sandton, Republic of South Africa. D. “Hampshire” means Hampshire Chemical Corporation, a wholly-owned subsidiary of Sentrachem Limited, with its principal place of business at 55 Hayden Avenue, Lexington, Massachusetts 02173. E. “Akzo” means Akzo Nobel N.V., a company located in The Netherlands, with its principal place of business at Velperweg 76, 6800 SB Arnhem, The Netherlands, and its subsidiary Akzo Nobel Chemicals Inc. F. “Acquisition” means the acquisition by Dow, through its subsidiary, Dow South Africa Holdings (Pty) Ltd., of the entire issued share capital of Sentrachem Limited. G. “Chelating Agents” means chemicals used to react with metal ions to form ring structures incorporating the metal ion within the molecule. H. “Chelant Products” means ethanoldiglycine sodium (“EDG”) and diethanolglycine sodium (“DEG”) and aminopolycarboxylic acids and salts, including, but not limited to, ethylenediaminetetraacetic acid (“EDTA”), diethylenetriaminepentaacetic acid (“DTPA”), hydroxyethylenediaminetriacetic acid (“HEDTA”), nitrilotriacetic acid (“NTA”), ethylenediaminetriacetic (“ED3A”), and the salts and nitrile precursors of EDTA, DTPA, HEDTA, ED3A, and any other Chelating Agents, but excluding propylenediaminetetraacetic acid (“PDTA”). I. “Hampshire Chelant Products” means all Chelant Products that have been, at any time in the two (2) years preceding the Acquisition, researched, developed, manufactured, distributed or sold by Hampshire in the United States or Canada, including, but not limited to, all projects in research and development by Hampshire that relate to improving existing or developing new Chelant Products, or improving processes for manufacturing Chelant Products. J. “Hampshire Non-Chelant Products” means any product other than Hampshire Chelant Products, that have been, at any time in the two (2) years preceding the Acquisition, researched, developed, manufactured, distributed, or sold at the Lima Facility or Other Hampshire Facilities, including, but not limited to, all projects in research and development by Hampshire that relate to improving existing or developing new Hampshire Non-Chelant Products, or improving processes for manufacturing Hampshire Non-Chelant Products. K. “Hampshire Products” means Hampshire Chelant Products and Hampshire Non- Chelant Products. L. “Lima Facility” means Hampshire’s Lima, Ohio manufacturing facility. M. “Other Hampshire Facilities” means Hampshire’s facilities located at Deer Park, Texas and Nashua, New Hampshire. N. “Akzo Lima Expansion” means such improvements, additions, and expansions to the Lima Facility to produce no less than 175 million pounds per annum (on a solution pound basis) of Chelant Products and to provide sufficient hydrogen cyanide (“HCN”), nitrile, and other raw material storage, Chelant Products warehouse space and related facilities, to enable the Hampshire Chelant Business to operate at sustained levels of output no less than 175 million pounds per annum (on a solution pound basis) of Chelant Products. O. “Akzo Lima Expansion Milestones” means: (i) the submission by Akzo of complete applications for any and all federal, state, and local governmental permits that may be required to complete the Akzo Lima Expansion, within twelve (12) months after the date this Order becomes final; (ii) the receipt by Akzo of all federal, state, or local governmental permits that are required to complete the Akzo Lima Expansion, within eighteen (18) months after the date this Order becomes final; provided, however that if Akzo has not received approval or final disapproval of its permit application(s) within eighteen (18) months after the date this Order becomes final, this second milestone shall be extended until Akzo receives approval or final disapproval for a period up to, but in no event longer than, twelve (12) months; (iii) the completion by Akzo of the structural steel installation required for the Akzo Lima Expansion, within twelve (12) months after permitting. P. “Dow’s Competing Chelant Business” means all assets, properties, business and goodwill, tangible and intangible of Dow relating to the research, development, manufacture, distribution or sale of Chelant Products, its employees, agents, representatives, and any other personnel assigned to such business, or to whom such persons report directly or indirectly. Q. “Dow’s Contract Manufacturing Services” means the Dow business unit engaged in the contract manufacture of chemical and polymer products and services for independent firms. R. “Hampshire Chelant Business” means all assets, properties, business and goodwill, tangible and intangible, of Hampshire relating to the research, development and manufacture in the United States, and the distribution and sale in North America, of Hampshire Chelant Products, including, but not limited to:
In addition, the “Hampshire Chelant Business” shall include all intellectual property used by Hampshire in the research, development, and manufacture in the United States, and the distribution and sale worldwide, of PDTA. S. “Hampshire Business Unit” means the Hampshire Chelant Business and all assets, properties, business and goodwill, tangible and intangible of Hampshire relating to the research, development and manufacture in the United States, and the distribution and sale in North America of Hampshire Products, including, but not limited to:
II IT IS FURTHER ORDERED that: A. Respondent shall divest, absolutely and in good faith, as an ongoing business, simultaneously with consummation of the Acquisition, the Hampshire Chelant Business to Akzo pursuant to the agreement between Dow and Akzo dated as of November 15, 1997. Provided, however, that Respondent may retain (i) a non-exclusive, fully-paid and global license from Akzo to intangible assets and intellectual property used by the Hampshire Chelant Business in the research, development or manufacture of Hampshire Chelant Products to make, have made, use and sell Hampshire Non-Chelant Products; and (ii) a non-exclusive, fully-paid and global license relating to the manufacture of ED3A to make, have made, use and sell ED3A for use as a precursor for surfactants; and (iii) a non-exclusive, fully-paid, and global license to intellectual property used in the manufacture of PDTA to make, have made, use and sell PDTA in any part of the world. B. The purpose of the divestiture of the Hampshire Chelant Business is to ensure the continuation of the Hampshire Chelant Business as an ongoing, viable business engaged in the research, development, manufacture, distribution and sale of Chelant Products independent of Dow, and in competition with Dow, and to remedy the lessening of competition resulting from the Acquisition as alleged in the Commission’s Complaint. C. On reasonable notice to Respondent, Respondent shall provide technical assistance and know-how to Akzo with respect to the Hampshire Chelant Business. Such technical assistance shall include, without limitation, consultation with knowledgeable employees of Hampshire and training at the manufacturing facilities of Hampshire. Respondent may charge the reasonable costs incurred in providing such technical assistance, including reimbursement (commensurate with the salary and benefits of Hampshire personnel involved) for the time plus expenses of Hampshire personnel providing the technical assistance. Hampshire shall continue to provide such technical assistance until Akzo is satisfied that it is capable of producing, and of developing for production, commercially saleable Chelant Products utilizing the assets of the Hampshire Chelant Business; provided, however, Hampshire shall not be required to continue providing such technical assistance and training after the earlier of (i) one (1) year after the Akzo Lima Expansion is fully operational and released to production; or (ii) three (3) years after the date this Order becomes final. III IT IS FURTHER ORDERED that: A. Respondent shall exclusively toll manufacture for Akzo Hampshire Chelant Products at the Other Hampshire Facilities, at no more than Hampshire’s historical cost as provided for in the agreement between Dow and Akzo dated as of November 15, 1997, in order to provide Akzo with sufficient time to accomplish the Akzo Lima Expansion for such period as Akzo may request, but in no event to extend beyond the earlier of (i) the date the Akzo Lima Expansion is fully operational and released to production or (ii) four (4) years after the date this Order becomes final. Upon the Akzo Lima Expansion being released to production, Respondent shall not manufacture at the Other Hampshire Facilities any Chelant Products for a period of one (1) year. B. Dow’s Contract Manufacturing Services shall (i) oversee the production of Hampshire Chelant Products at the Other Hampshire Facilities for Akzo, and (ii) administer and control the supply and allocation of HCN from Akzo at Lima, Ohio to Respondent. Dow’s Contract Manufacturing Services shall maintain any information arising from its obligations under Paragraph III.B. as confidential and not disclose such information to Dow’s Competing Chelant Business. Any Dow or Hampshire employees supervised by Dow’s Contract Manufacturing Services in carrying out the obligations of this Paragraph III.B. shall also maintain such information as confidential and not disclose such information to Dow’s Competing Chelant Business. C. Respondent shall use information relating to the Hampshire Chelant Business only to fulfill its obligations in Paragraphs II.C. and III.A., and shall not provide, disclose or otherwise make available to Dow’s Competing Chelant Business, any information relating to Hampshire Chelant Products or the Hampshire Chelant Business, including information obtained as a result of the Acquisition, or directly or indirectly from Dow’s Contract Manufacturing Services, or from Respondent’s operations of the Other Hampshire Facilities, and Dow shall not use any such information in Dow’s Competing Chelant Business, until Respondent has fulfilled all obligations under Paragraph III.A., above. IV IT IS FURTHER ORDERED that: A. In the event that any of the Akzo Lima Expansion Milestones is not achieved, Respondent shall acquire back from Akzo, within thirty (30) days, the Hampshire Chelant Business pursuant to the agreement between Dow and Akzo dated as of November 15, 1997. B. Upon its acquisition of the Hampshire Chelant Business pursuant to Paragraph IV.A., above, Respondent shall divest, absolutely and in good faith, within sixty (60) days after Respondent has obtained from Akzo all assets pursuant to Paragraph IV.A. the Hampshire Business Unit as a viable and competitive business. Provided, however, Respondent may seek Commission approval to divest, in lieu of the divestiture of the Hampshire Business Unit, less than all assets of the Hampshire Business Unit and/or such other assets if such divestiture meets the purpose of Paragraph IV.C., below. Respondent shall divest the Hampshire Business Unit or such other assets approved by the Commission only to an Acquirer that receives the prior approval of the Commission and only in a manner that receives the prior approval of the Commission. C. The purpose of the divestiture of the Hampshire Business Unit is to ensure the continuation of the Hampshire Chelant Business as an ongoing, viable enterprise engaged in the research, development, manufacture, distribution and sale of Chelant Products independent of Dow, and in competition with Dow, and to remedy the lessening of competition alleged in the Commission’s Complaint. D. Respondent shall take such actions as are necessary to maintain the viability and marketability of the Hampshire Business Unit and shall not cause or permit the destruction, removal, wasting, deterioration, or impairment of the Hampshire Business Unit, except in the ordinary course of business and except for ordinary wear and tear, until the Akzo Lima Expansion Milestones are achieved, or until the divestiture required by Paragraph IV.B., above. V IT IS FURTHER ORDERED that: A. In the event that any of the Akzo Lima Expansion Milestones is not achieved, and if Respondent has not divested, absolutely and in good faith and with the Commission’s prior approval, the Hampshire Business Unit or such other assets approved by the Commission pursuant to Paragraph IV.B. within the time required by Paragraph IV of this Order, then the Commission may appoint a trustee to divest the Hampshire Business Unit. The trustee shall have all rights and powers necessary to permit the trustee to effect the divestiture of the Hampshire Business Unit in order to assure the viability, competitiveness, and marketability of the Hampshire Business Unit so as to expeditiously accomplish the remedial purposes of this Order. In the event the Commission or the Attorney General brings an action pursuant to Section 5(l) of the Federal Trade Commission Act, 15 U.S.C. § 45(l), or any other statute enforced by the Commission, Respondent shall consent to the appointment of a trustee in such action. Neither the appointment of a trustee nor a decision not to appoint a trustee under this Paragraph shall preclude the Commission or the Attorney General from seeking civil penalties or any other relief (including, but not limited to, a court-appointed trustee) pursuant to the Federal Trade Commission Act or any other statute, for any failure by Respondent to comply with this Order. B. If a trustee is appointed by the Commission or a court pursuant to Paragraph V.A. of this Order, Respondent shall consent to the following terms and conditions regarding the trustee’s powers, duties, authority, and responsibilities:
VI IT IS FURTHER ORDERED that within thirty (30) days after the date this Order becomes final, and every ninety (90) days thereafter until Respondent has fully complied with the provisions of Paragraphs II and III of this Order, Respondent shall submit to the Commission verified written reports setting forth in detail the manner and form in which Respondent intends to comply, is complying, and has complied with Paragraphs II and III of this Order. Provided, however, that within ten (10) days of Akzo’s failure to meet any of the Akzo Lima Expansion Milestones, and every thirty (30) days thereafter until Respondent has fully complied with the provisions of Paragraphs IV and V of this Order, Respondent shall submit to the Commission verified written reports setting forth in detail the manner and form in which Respondent intends to comply, is complying, and has complied with Paragraphs IV and V. Respondent shall include in its compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with Paragraphs II, III, IV and V of the Order, including a description of all substantive contacts or negotiations for any divestiture required under Paragraph IV and the identity of all parties that have contacted Respondent or that have been contacted by Respondent. Respondent shall include in its compliance reports copies of all written communications to and from such parties, all internal memoranda, and all reports and recommendations concerning divestiture. VII IT IS FURTHER ORDERED that Respondent shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate Respondent, such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in Dow that may affect compliance obligations arising out of the Order. VIII IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this Order, Respondent shall permit any duly authorized representatives of the Commission:
IX IT IS FURTHER ORDERED that this Order shall terminate on February 20, 2008. By the Commission, Commissioner Azcuenaga and Commissioner Thompson not participating. Donald S. Clark ISSUED: February 20, 1998 SEAL |