UNITED STATES OF AMERICA
ORDER REOPENING AND MODIFYING ORDER
On September 16, 2002, Aventis S.A. ("Aventis"), the successor to respondents Hoechst AG and Rhone-Poulenc S.A. named in the consent order issued by the Commission on January 18, 2000, in Docket No. C-3919 ("Order"), filed its Petition of Aventis to Reopen and Modify Order ("Petition"), seeking to modify the Order to divest its interest in Rhodia, a French chemical company. For the reasons stated below, the Commission has determined to grant the Petition.
Paragraph VI.C. of the Order requires Aventis to reduce its holdings in Rhodia voting securities to five percent or less within three months after the Commission accepts the Agreement Containing Consent Order ("Consent Agreement") for public comment. The Consent Agreement was accepted for public comment on December 7, 1999; thus, the deadline for divesting the Rhodia voting securities was March 7, 2000. For purposes of calculating Aventis' holdings of Rhodia voting securities, Paragraph VI.C. of the Order excludes any Rhodia voting securities that Aventis holds in escrow in connection with a certain private placement plan referenced in the Order. By March 7, 2000, Aventis had complied with the Order, subject to the escrow condition permitted by the Order. The private placement plan referenced in the Order involves a sale undertaken by Aventis of notes that may be exchanged for Rhodia shares (instead of redeemed for cash) during an exchange period that terminates on the maturity date of the notes, which is October 22, 2003. The escrow arrangement serves to set aside shares of Rhodia that may be exchanged for notes and, in conjunction with a proxy system relating to the shares in escrow, serves to prevent Aventis from exercising any of its voting rights in the shares. Pursuant to Paragraph VI.D. of the Order, Aventis is required to divest any Rhodia shares remaining at the end of the note exchange period no later than six months from the date the exchange period ends. Accordingly, the ultimate deadline for divestiture of the shares pursuant to the Order is April 22, 2004.
Aventis believes it unlikely that any note holder will exchange its notes for Rhodia shares when the exchange period ends. The terms and conditions of the note exchange plan are such that an exchange of notes would be attractive starting at a price per share of approximately EUR 23. The recent price of Rhodia shares has been EUR 9, and Aventis has no reason to expect any significant improvement in the price in the near to medium term. Because it is unlikely that any note holders will exchange notes for shares on or before October 22, 2003, Aventis will likely be required to divest at least 20 percent of Rhodia's shares in a six-month period and risk driving share values down, which would not only harm Rhodia's non-party shareholders, but also threaten Rhodia's ability to raise financial capital, should Rhodia need to do so. Such an adverse effect on Rhodia would frustrate the successful operation of the Commission's Order. To avoid divesting the shares in such a short period of time, Aventis seeks to use an alternative method for divesting the shares. The first step in disposing of the shares in another manner, however, would require Aventis to buy back the notes, which would place it in violation of the Order.(1) Aventis therefore requests that the Order be modified to allow it to use an alternative method for divesting the shares that would still maintain both the escrow arrangement for unsold shares and the proxy system for such shares, and would be completed by the Order's current deadline of April 22, 2004.
Aventis makes its request to modify the Order under the public interest standard set forth in Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. § 45(b). Under Section 5(b), the Commission may modify an order when the Commission determines that the public interest so requires.(2) The Commission has described the showing needed to obtain a modification based on the public interest standard:
A request to reopen and modify does not contain a "satisfactory showing" if it is merely conclusory or otherwise fails to set forth by affidavit specific facts demonstrating in detail the reasons why the public interest would be served by the modification.(4) If, after determining that the requester has made the required showing, the Commission decides to reopen the order, the Commission will then consider and balance all of the reasons for and against modification. In no instance does a decision to reopen an order oblige the Commission to modify it,(5) and the burden remains on the requester in all cases to demonstrate why the order should be reopened and modified. The petitioner's burden is not a light one in view of the public interest in repose and the finality of Commission orders.(6)
The Commission has determined that it is in the public interest to reopen and modify the Order as requested by Aventis. The purpose of the Order -- to allow for an orderly disposition of Rhodia voting securities -- would be more effectively and efficiently achieved by a modification that permits Aventis to buy back the notes and sell the Rhodia shares in another manner. By allowing Aventis to buy back the notes as soon as possible before October 22, 2003, the requested modification will give Aventis significantly more time to dispose of the Rhodia shares systematically before the April 22, 2004 deadline. With the modification, Aventis can sell the Rhodia shares in a manner that would avoid a significant decline in the Rhodia share price and harm to Rhodia shareholders and Rhodia. This modification will help the Order serve the Commission's goal to maintain competition through an independent and competitive Rhodia. The final divestiture deadline, the escrow arrangement and the proxy system -- the Order's key competitive features -- would not be affected by the modification. Therefore, the reasons to modify the Order outweigh the reasons to retain it as written. In addition, as reflected below, several technical modifications to Paragraph VII of the Order are necessary to conform to the modifications of Paragraph VI.
Accordingly, IT IS ORDERED that this matter be, and it hereby is, reopened; and
IT IS FURTHER ORDERED that Paragraph VI.C. of the Order be, and it hereby is, modified, as of the effective date of this order, to read as follows:
IT IS FURTHER ORDERED that Paragraph VI.D. of the Order be, and it hereby is, modified, as of the effective date of this order, to read as follows:
IT IS FURTHER ORDERED that Paragraph VII.A. of the Order be, and it hereby is, modified, as of the effective date of this order, to read as follows:
IT IS FURTHER ORDERED that Paragraph VII.B.2. of the Order be, and it hereby is, modified, as of the effective date of this order, to read as follows:
By direction of the Commission.
Donald S. Clark
ISSUED: November 22, 2002
1. The buy-back would violate Paragraph VI.C. of the Order because only those shares held in escrow pursuant to the private placement plan referenced in the Order are to be excluded when determining whether Aventis holds more than five percent of Rhodia's shares.
2. Section 5(b) also provides that the Commission shall reopen an order to consider whether it should be modified if the respondent "makes a satisfactory showing that changed conditions of law or fact" so require. Aventis has not asserted that any changed condition of law or fact requires reopening the Order, and the Commission has, therefore, not considered that issue.
3. 65 Fed. Reg. 50637 (August 21, 2000).
4. 16 C.F.R. § 2.51.
5. See United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376-77 (9th Cir. 1992) (reopening and modification are independent determinations).
6. See Federated Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality).