UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- Robert Pitofsky, Chairman
- Sheila F. Anthony
- Mozelle W. Thompson
- Orson Swindle
In the matter of
Dominion Resources, Inc., a corporation, and
Consolidated Natural Gas Company, a corporation.
Docket No. C-3901
ORDER TO HOLD SEPARATE
The Federal Trade Commission having initiated an investigation of the proposed
acquisition by Respondent Dominion Resources, Inc. ("Dominion"), of 100 percent
of the voting securities of Respondent Consolidated Natural Gas Company ("CNG"),
and Respondents having been furnished thereafter with a copy of a draft of Complaint that
the Bureau of Competition presented to the Commission for its consideration and which, if
issued by the Commission, would charge Respondents with violations of Section 7 of the
Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade
Commission Act, as amended, 15 U.S.C. § 45; and
Respondents, their attorneys, and counsel for the Commission having thereafter executed
an Agreement Containing Consent Orders ("Consent Agreement"), containing an
admission by Respondents 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 Respondents that the law has been violated as
alleged in such Complaint, or that the facts as alleged in such Complaint, other than
jurisdictional facts, are true, 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 Respondents have violated the said Acts, and that a Complaint
should issue stating its charges in that respect, and having determined to accept the
executed Consent Agreement and to place such Consent Agreement on the public record for a
period of thirty (30) days, the Commission hereby issues its Complaint, makes the
following jurisdictional findings and issues this Order to Hold Separate:
- 1. Respondent Dominion is a corporation organized, existing and doing business under and
by virtue of the laws of Virginia, with its office and principal place of business located
at 120 Tredegar Street, Richmond, Virginia 23219.
- 2. Respondent CNG is a corporation organized, existing and doing business under and by
virtue of the laws of Delaware, with its office and principal place of business located at
625 Liberty Avenue, CNG Tower, Pittsburgh, Pennsylvania 15222.
- 3. The Federal Trade Commission has jurisdiction of the subject matter of this
proceeding and of Respondents, and the proceeding is in the public interest.
IT IS ORDERED that, as used in this Order to Hold Separate, the
following definitions shall apply:
A. "Dominion" means Dominion Resources, Inc., its directors, officers,
employees, agents, representatives, successors, and assigns; its subsidiaries, divisions,
groups, and affiliates controlled by Dominion, and the respective directors, officers,
employees, agents, representatives, successors, and assigns of each.
B. "CNG" means Consolidated Natural Gas Company its directors, officers,
employees, agents, representatives, successors, and assigns; its subsidiaries, divisions,
groups, and affiliates controlled by CNG, and the respective directors, officers,
employees, agents, representatives, successors, and assigns of each.
C. "Respondents" means Dominion and CNG, individually and collectively.
D. "Commission" means the Federal Trade Commission.
E. "Virginia Natural Gas" or "VNG " means Virginia Natural Gas,
Inc., the subsidiary of CNG that provides local gas distribution service within the
Commonwealth of Virginia, including, but not limited to, the following assets used in any
of VNG's businesses:
- 1. all assets, properties, business and goodwill, tangible and intangible, including the
intrastate pipeline that connects VNG's service facility to the interstate pipeline
facilities of CNG;
- 2. machinery, fixtures, equipment, vehicles, transportation facilities, furniture, tools
and other tangible personal property;
- 3. all customer lists, vendor lists, catalogs, sales promotion literature, advertising
materials, research materials, technical information, management information systems,
software, inventions, trade secrets, intellectual property, patents, technology, know-how,
specifications, designs, drawings, processes and quality control data;
- 4. inventory and storage capacity;
- 5. all rights, titles and interests in and to owned or leased real property, together
with appurtenances, licenses and permits;
- 6. all rights, titles and interests in and to the contracts entered into in the ordinary
course of business with customers (together with associated bid and performance bonds),
suppliers, sales representatives, distributors, agents, personal property lessors,
personal property lessees, licensors, licensees, consignors and consignees;
- 7. all rights under warranties and guarantees, express or implied;
- 8. all books, records, and files; and
- 9. all items of prepaid expense.
F. "Acquisition" means the proposed acquisition of 100 percent of the voting
securities of Consolidated Natural Gas Company by Dominion pursuant to the Agreement and
Plan of Merger dated March 31, 1999, as amended May 11, 1999.
G. "VSCC Stipulation" means the Stipulation entered into by and between the
staff of the State Corporation Commission of the Commonwealth of Virginia, Dominion, and
CNG in State Corporation Case No. PUA990020, attached hereto as Appendix I.
H. "Material Confidential Information" means competitively sensitive or
proprietary information not independently known to an entity from sources other than the
entity to which the information pertains, and includes, but is not limited to, all
customer lists, marketing methods, technologies, processes, or other trade secrets.
I. "Hold Separate Period" means the time period during which the Order to
Hold Separate is in effect.
J. "Service Company Agreement" means the agreement pursuant to which CNG
provides services to VNG, attached hereto as Appendix II.
IT IS FURTHER ORDERED that:
A. Respondents shall hold VNG as a separate and independent business, except to the
extent that Respondents must exercise direction and control over VNG to assure compliance
with this Order to Hold Separate or with the Consent Agreement, or to assure compliance
with the Virginia State Corporation Commission, Securities and Exchange Commission, and/or
Federal Energy Regulatory Commission regulations and orders, and except as otherwise
provided in this Order to Hold Separate, and shall vest VNG with all powers and
authorities necessary to conduct its business. The purpose of this Order is to: (i)
preserve VNG as a viable, competitive, and ongoing business, independent of Respondents,
until divestiture is achieved; (ii) assure that no Material Confidential Information is
exchanged between Respondents and VNG; and (iii) prevent interim harm to competition
pending divestiture and other relief.
B. Respondents shall hold VNG separate and independent on the following terms and
- 1. The Commission at any time may appoint an Independent Auditor to monitor Respondents'
compliance with Paragraph II. of this Order to Hold Separate, and Respondents shall give
the Independent Auditor, if one is appointed, all powers and authority necessary to
effectuate his/her responsibilities pursuant to this Order to Hold Separate.
- 2. If an Independent Auditor is appointed by the Commission, Respondents shall consent
to the following procedures:
- a. The Commission shall select the Independent Auditor, subject to the consent of
Respondents, which consent shall not be unreasonably withheld. The Independent Auditor
shall be a person with experience necessary to perform his or her duties. If Respondents
have not opposed, in writing, including the reasons for opposing, the selection of any
proposed Independent Auditor within ten (10) days after notice by the staff of the
Commission to Respondents of the identity of any proposed Independent Auditor, Respondents
shall be deemed to have consented to the selection of the proposed Independent Auditor.
- b. Within ten (10) days after appointment of the Independent Auditor, Respondents shall
execute an Independent Auditor agreement that, subject to the prior approval of the
Commission, transfers to the Independent Auditor all rights and powers necessary to permit
the Independent Auditor to perform his/her duties.
- c. The Independent Auditor shall have full and complete access to all personnel, books,
records, documents and facilities of VNG and Respondents or to any other relevant
information, as the Independent Auditor may reasonably request, including but not limited
to all documents and records kept in the normal course of business that relate to VNG.
Respondents shall develop such financial or other information as the Independent Auditor
may request and shall cooperate with the Independent Auditor. Respondents shall take no
action to interfere with or impede the Independent Auditor's ability to perform his/her
responsibilities consistent with the terms of this Order to Hold Separate or to monitor
Respondents' compliance with this Order to Hold Separate and the Consent Agreement.
- d. The Independent Auditor shall have the authority to employ, at the cost and expense
of Respondents, such consultants, accountants, attorneys, and other representatives and
assistants as are necessary to carry out the Independent Auditor's duties and
- e. Respondents may require the Independent Auditor to sign a confidentiality agreement
prohibiting the disclosure of any material information gained as a result of his or her
role as Independent Auditor to anyone other than the Commission.
- 3. Respondents shall appoint, subject to the approval of the Independent Auditor, if one
is appointed, three (3) individuals from among the current employees of VNG or Respondents
involved in the management, sales, marketing, or financial operations of VNG to manage and
maintain VNG ("The Management Team"). The Management Team, in its capacity as
such, shall report directly and exclusively to the Independent Auditor, and shall manage
VNG independently of the management of Respondents. The Management Team shall not be
involved in any way in the operations of the businesses of Respondent, other than the VNG
business, during the Hold Separate Period.
- 4. Respondents shall not change the composition of the management of VNG, except that
the Management Team shall be permitted to remove management employees for cause subject to
approval of the Independent Auditor. The Independent Auditor, if one is appointed, shall
have the power to remove members of the Management Team for cause and to require
Respondents to appoint replacement members to the Management Team in the same manner as
provided in subparagraph II. B. 3. of this Order to Hold Separate.
- 5. The Independent Auditor, if one is appointed, shall have responsibility, through the
Management Team, for managing VNG consistent with the terms of this Order to Hold
Separate; for maintaining the independence of VNG consistent with the terms of this Order
to Hold Separate and the Consent Agreement; and for assuring Respondents' compliance with
their obligations pursuant to this Order to Hold Separate.
- 6. VNG shall be staffed with sufficient employees to maintain the viability and
competitiveness of VNG. The VNG employees shall include: (i) all personnel employed by VNG
as of the date the Commission accepts the Consent Agreement for public comment; and (ii)
those persons hired from other sources. The Management Team, with the approval of the
Independent Auditor, if one is appointed, shall have the authority to replace employees
who have otherwise left their positions with VNG since January 1, 1999. To the extent that
VNG employees leave VNG prior to the divestiture of VNG, the Management Team, with the
approval of the Independent Auditor, may replace the departing VNG employees with persons
who have similar experience and expertise.
- 7. Respondents shall cause the Independent Auditor, each member of the Management Team,
and each VNG employee involved in the management, sales, marketing, gas supply
acquisition, and financial operations, to submit to the Commission a signed statement that
the individual will maintain the confidentiality required by the terms and conditions of
this Order to Hold Separate. These individuals must retain and maintain all Material
Confidential Information relating to the held separate business on a confidential basis
and, except as is permitted by this Order to Hold Separate, including services provided
pursuant to the Service Company Agreement, such persons shall be prohibited from
providing, discussing, exchanging, circulating, or otherwise furnishing any such Material
Confidential Information to or with any other person whose employment involves any of
Respondents' businesses other than the VNG business. These persons shall not be involved
in any way in the management, sales, marketing, and financial operations of the competing
products of Respondents.
- 8. Respondents shall establish written procedures to be approved by the Independent
Auditor, if one is appointed, covering the management, maintenance, and independence of
VNG consistent with the provisions of this Order to Hold Separate.
- 9. Respondents shall circulate to VNG employees and to Respondents' employees who are
responsible for the operation or marketing of the VNG business, a notice of this Order to
Hold Separate and Consent Agreement, in the form attached as Attachment A.
- 10. The Independent Auditor, if one is appointed, and the Management Team shall serve,
without bond or other security, at the cost and expense of Respondents, on reasonable and
customary terms commensurate with each person's experience and responsibilities.
Respondents shall indemnify the Independent Auditor and the Management Team, and hold the
Independent Auditor and the Management Team harmless against any losses, claims, damages,
liabilities, or expenses arising out of, or in connection with, the performance of the
Independent Auditor's or the Management Team's duties, including all reasonable fees of
counsel and other expenses incurred in connection with the preparation for or defense of
any claim, whether or not resulting in any liability, except to the extent that such
liabilities, losses, damages, claims, or expenses result from misfeasance, gross
negligence, willful or wanton acts, or bad faith by the Independent Auditor or the
- 11. Respondents shall provide VNG with sufficient working capital to operate VNG at
least at current rates of operation, to meet all capital calls in respect of VNG, and to
carry on, at least at their scheduled pace, all capital projects for VNG that are ongoing,
planned, or approved as of January 1, 1999, plus any additional expenditures authorized
since that date. During the period this Order to Hold Separate is effective, Respondents
shall make available for use by VNG funds sufficient to perform all necessary routine
maintenance to, and replacements of, VNG's assets. Respondents shall provide VNG with such
funds as are necessary to maintain the viability, competitiveness, and marketability of
VNG until the date the divestiture is completed.
- 12. Respondents shall continue to provide the same support services to VNG as are being
provided to VNG by Respondents pursuant to the Service Company Agreement, attached hereto
as Appendix II. Respondents may charge VNG the same fees, if any, charged by Respondents
for such support services under the Service Company Agreement. Respondents shall assure
that personnel providing support services retain and maintain all Material Confidential
Information of VNG on a confidential basis, and, except as is permitted by this Order to
Hold Separate, shall prohibit such persons from providing, discussing, exchanging,
circulating, or otherwise furnishing any such information to or with any person whose
employment involves any of Respondents' businesses other than VNG. Such personnel shall
also execute confidentiality agreements prohibiting the disclosure of any Material
Confidential Information of VNG.
- 13. Except as provided in this Order to Hold Separate, Respondents shall not employ or
make offers of employment to VNG employees during the Hold Separate Period. The acquirer
of VNG shall have the option of offering employment to the VNG employees. After the Hold
Separate Period, Respondents may offer employment to VNG employees who have not accepted
employment with or whose employment has been terminated by the acquirer of VNG.
Respondents shall not interfere with the employment of VNG employees by the acquirer of
VNG; shall not offer any incentive to VNG employees to decline employment with the
acquirer of VNG or accept other employment with the Respondents; shall remove any
impediments that may deter VNG employees from accepting employment with the acquirer of
VNG, including, but not limited to, any non-compete or confidentiality provisions of
employment or other contracts with VNG or Respondents that would affect the ability of VNG
employees to be employed by the acquirer of VNG; and shall continue the payment of all
accrued bonuses, pensions and other accrued benefits to which VNG employees would
otherwise have been entitled had they remained in the employment of the Respondents.
- 14. Notwithstanding subparagraph II. B. 13., Respondents may offer a bonus or severance
to those VNG employees that continue their employment with VNG until the date that VNG is
- 15. Respondents shall not exercise direction or control over, or influence directly or
indirectly, VNG, the Independent Auditor, the Management Team, or any of their operations;
provided, however, that Respondents may exercise only such direction and control over VNG
as is necessary to assure compliance with this Order to Hold Separate or the Consent
Agreement, or with all applicable laws, rules or regulations.
- 16. Except for the Management Team and except to the extent provided in subparagraphs
II. B. 12 and II. B. 15., Respondents shall not permit any non-VNG employees, officers, or
directors to be involved in the operations of VNG.
- 17. Respondents shall maintain the viability, competitiveness, and marketability of VNG;
shall not sell, transfer, or encumber VNG's assets (other than in the normal course of
business); and shall not cause or permit the destruction, removal, wasting, or
deterioration, or otherwise impair the viability, competitiveness, or marketability of
- 18. If the Independent Auditor ceases to act or fails to act diligently and consistent
with the purposes of this Order to Hold Separate, the Commission may appoint a substitute
Independent Auditor in the same manner as provided in Paragraph II. B. 1. of this Order to
- 19. Until the divestiture of VNG is accomplished, Respondents shall ensure that VNG
employees continue to be paid their salaries, all accrued bonuses, pensions and other
accrued benefits to which the VNG employees would otherwise have been entitled had they
remained in the employment of Respondents during the Hold Separate Period.
- 20. Except as required by law, and except to the extent that necessary information is
exchanged in the course of consummating the Acquisition, defending investigations,
defending or prosecuting litigation, obtaining legal advice, negotiating agreements to
divest assets pursuant to the Consent Agreement, or complying with this Order to Hold
Separate or the Consent Agreement, Respondents shall not receive or have access to, or use
or continue to use, any Material Confidential Information, not in the public domain, about
VNG. Respondents may receive, on a regular basis, aggregate financial information relating
to VNG necessary to allow Respondents to prepare United States consolidated financial
reports and tax returns. Any such information that is obtained pursuant to this
subparagraph shall be used only for the purposes set forth in this subparagraph.
- 21. Within thirty (30) days after the date Respondents sign the Consent Agreement and
every thirty (30) days thereafter until the Order to Hold Separate terminates, the
Independent Auditor or the Management Team shall report in writing to the Commission
concerning the efforts to accomplish the purposes of this Order to Hold Separate. Included
within that report shall be the Independent Auditor's or the Management Team's assessment
of the extent to which VNG is meeting (or exceeding) its projected goals as are reflected
in operating plans, budgets, projections or any other regularly prepared financial
IT IS FURTHER ORDERED that Respondents shall notify the Commission at
least thirty (30) days prior to any proposed change in the corporate Respondents 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 the corporations that
may affect compliance obligations arising out of this Order to Hold Separate.
IT IS FURTHER ORDERED that for the purposes of determining or securing
compliance with this Order to Hold Separate, and subject to any legally recognized
privilege, and upon written request with reasonable notice to Respondents made to their
principal office, Respondents shall permit any duly authorized representatives of the
- A. Access, during office hours of Respondents and in the presence of counsel, to all
facilities, and access to inspect and copy all books, ledgers, accounts, correspondence,
memoranda, and all other records and documents in the possession or under the control of
the Respondents relating to compliance with this Order to Hold Separate; and
- B. Upon five (5) days' notice to Respondents and without restraint or interference from
Respondents, to interview officers, directors, or employees of Respondents, who may have
counsel present, regarding such matters.
IT IS FURTHER ORDERED that this Order to Hold Separate shall terminate
on the earlier of:
- A. Three (3) business days after the Commission withdraws its acceptance of the Consent
Agreement pursuant to the provisions of Commission Rule 2.34, 16 C.F.R. § 2.34; or
- B. The day after the divestiture of VNG, as required by the Decision & Order
contained in the Consent Agreement, is completed.
By the Commission.
Donald S. Clark
ISSUED: November 4, 1999
NOTICE OF DIVESTITURE AND REQUIREMENT FOR
Dominion Resources, Inc. ("Dominion") and Consolidated Natural Gas Company
("CNG") have entered into an Agreement Containing Consent Orders ("Consent
Agreement") with the Federal Trade Commission relating to the divestiture of certain
As used herein, the term "VNG" means CNG's subsidiary that provides local gas
distribution service within the Commonwealth of Virginia, as defined in Paragraph I. E. of
the Decision & Order. Under the terms of the Consent Agreement, Dominion must divest
VNG within the time period set forth in Paragraphs 1 and 3 of the VSCC Stipulation, as
defined in Paragraph I. G. of the Decision & Order .
The term "Acquisition" means the acquisition of CNG by Dominion.
VNG must be managed and maintained as a separate, ongoing business, independent of all
other Dominion and CNG businesses, until it is divested. All competitive information
relating to VNG must be retained and maintained by the persons involved in the operation
of VNG on a confidential basis, and such persons shall be prohibited from providing,
discussing, exchanging, circulating, or otherwise furnishing any such information to or
with any other person whose employment involves any other Dominion or CNG business.
Similarly, persons involved in similar activities in Dominion or CNG shall be prohibited
from providing, discussing, exchanging, circulating, or otherwise furnishing any similar
information to or with any other person whose employment involves VNG. The obligations and
prohibitions of this paragraph are subject to and modified by the provisions of the Order
to Hold Separate, and do not affect VNG's ability to provide information to CNG to the
extent necessary to obtain services under the Service Company Agreement, attached as
Appendix II of the Order to Hold Separate.
Any violation of the Consent Agreement may subject Dominion to civil penalties and
other relief as provided by law.