United States v. Cameron International Corp., et al.; Proposed Final Judgment and Competitive Impact Statement, 5132-5144 [2010-1961]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 75, Number 20 (Monday, February 1, 2010)]
[Notices]
[Pages 5132-5144]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1961]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Cameron International Corp., et al.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States v. Cameron Int'l Corp., et al., No. 09-cv-02165-RMC. On November 
17, 2009, the United States filed a Complaint alleging that the 
proposed acquisition by Cameron International Corporation (``Cameron'') 
of NATCO Group Inc. (``NATCO'') would violate Section 7 of the Clayton 
Act, 15 U.S.C. 18. The proposed Final Judgment, filed the same time as 
the Complaint, requires Cameron to divest certain tangible and 
intangible assets related to the development, production, sale, repair, 
and service of customized electrostatic desalters used in the 
downstream oil refining industry, an option to purchase either 
Cameron's or NATCO's pilot plant, and a license to NATCO's intellectual 
property and other assets primarily used in or necessary to the 
development, production, sale, repair, or service of downstream 
refinery desalters that utilize dual frequency transformers and AC/DC 
power supplies.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at https://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, 
U.S. Department of Justice, 450 Fifth Street, NW., Suite 8700, 
Washington, DC 20530 (telephone: 202-307-0924).

Patricia A. Brink,
Deputy Director of Operations and Civil Enforcement.
    United States of America, Antitrust Division, 450 5th Street, 
NW., Suite 8700, Washington, DC 20530, Plaintiff, v. Cameron 
International Corporation, 1333 West Loop South, Suite 1700, 
Houston, TX 77027, and NATCO Group Inc., 11210 Equity Drive, Suite 
100, Houston, TX 77041, Defendants.

Case No.: Case: 1:09-cv-02165.
Assigned To: Bates, John D.
Assign Date: 11/17/2009.
Description: Antitrust.

Complaint

    The United States of America (``United States''), acting under the 
direction of the Attorney General of the United States, brings this 
civil antitrust action against defendants Cameron International 
Corporation (``Cameron'') and NATCO Group Inc. (``NATCO'') to enjoin 
Cameron's proposed acquisition

[[Page 5133]]

of NATCO, to remedy the harm to competition caused by Cameron's 
acquisition of certain assets from Chicago Bridge & Iron N.V. 
(``CB&I''), and to obtain other equitable relief. United States 
complains and alleges as follows:

I. Nature of the Action

    1. On June 1, 2009, Cameron and NATCO entered into an Agreement and 
Plan of Merger pursuant to which Cameron agreed to acquire NATCO in an 
all-stock transaction. On November 18, 2009, NATCO intends to hold a 
meeting for shareholders to vote on whether to approve the transaction.
    2. Cameron is a worldwide provider of products, systems, and 
services used at or near oil or gas wells (upstream) and in refineries 
(downstream); of valves, auxiliary equipment, and flow measurement 
systems used in oil and gas drilling, production, transportation, and 
refining markets; and of compression products, systems, and services to 
the oil, gas, and process industries. Cameron is the leading U.S. 
supplier of customized electrostatic desalters used in the oil refining 
industry (hereafter, ``refinery desalters'').
    3. NATCO is a worldwide provider of equipment, systems, and 
services used to separate oil, gas, and water within a production 
stream and to remove contaminants. It also sells equipment used in 
downstream refinery and petrochemical facilities around the world to 
improve processing and separation. After Cameron, NATCO is the next 
most significant U.S. supplier of refinery desalters.
    4. In the United States, Cameron's proposed acquisition of NATCO 
would reduce from three to two the number of companies that bid on 
refinery desalter projects and would give Cameron virtual monopoly 
power in the U.S. refinery desalter market. Unless the proposed 
acquisition is enjoined, competition for the supply of refinery 
desalters will be substantially reduced in the United States. The 
proposed acquisition likely would result in higher prices, less 
favorable terms of sale, and less innovation in the U.S. refinery 
desalter market.
    5. On October 7, 2005, Cameron, through Petreco International, 
Inc., and CB&I, through Howe Baker Engineers Ltd. (``Howe Baker''), 
entered into an agreement for the sale of assets of the desalting, 
dehydration, distillate treating, and gas oil separation equipment 
business of Howe Baker (hereafter, the ``Howe Baker assets'') for $8.25 
million. Cameron acquired the Howe Baker assets in late 2005.
    6. In the United States, Cameron's acquisition of the Howe Baker 
assets reduced from two to one the number of sellers of refinery 
desalters in the United States and created a monopoly in the U.S. 
refinery desalter market. After Cameron acquired the Howe Baker assets, 
NATCO entered the market for refinery desalters.
    7. The United States brings this action to prevent the proposed 
acquisition of NATCO by Cameron because that acquisition would 
substantially lessen competition in the development, production, and 
sale of refinery desalters in the United States in violation of Section 
7 of the Clayton Act, 15 U.S.C. 18 and to remedy the loss of 
competition caused by Cameron's acquisition of the Howe Baker assets 
because that acquisition substantially lessened competition in the 
development, production, and sale of refinery desalters in the United 
States also in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.

II. The Parties

    8. Cameron is incorporated in Delaware and has its principal place 
of business in Houston, Texas. In 2008, Cameron reported total sales of 
approximately $5.85 billion, and its sales of refinery desalters in the 
United States were approximately $10.2 million in 2008.
    9. NATCO also is incorporated in Delaware and has its principal 
place of business in Houston, Texas. NATCO reported 2008 revenues of 
$657 million, and its sales of refinery desalters in the United States 
were approximately $10.55 million.

III. Jurisdiction and Venue

    10. The United States brings this action under Section 15 of the 
Clayton Act, 15 U.S.C. 4 and 25, as amended, to prevent and restrain 
defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    11. Defendants develop, produce, and sell refinery desalters and 
other products in the flow of interstate commerce. Defendants' 
activities in the development, production, and sale of these products 
substantially affect interstate commerce. This Court has subject matter 
jurisdiction over this action pursuant to Section 15 of the Clayton 
Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
    12. Defendants have consented to venue and personal jurisdiction in 
this judicial district.

IV. Trade and Commerce

A. The Relevant Product Market

    13. When oil is produced ``upstream'' at a production well head, it 
may be mixed with water, dissolved salt, and other impurities including 
solids. Upstream, a variety of separation equipment is used to remove 
such impurities from the oil, and electrostatic separation equipment 
sometimes is required to meet transportation specifications. If 
electrostatic separation equipment is required upstream, water 
typically is specified to be removed to a volume of about one percent. 
Outside of the United States, producers sometimes also must use 
electrostatic equipment upstream to remove salt to levels of 
approximately two to ten pounds per thousand barrels prior to 
transport, but more often salt is not removed upstream.
    14. In the United States, refinery desalters are used to remove 
salt from crude oil ``downstream'' at the oil refining stage of 
production. Prior to introduction of the crude into the refinery 
desalter, fresh water is mixed into the incoming crude at a volume of 
about three to ten percent in order to dissolve the salt. Separation of 
the resulting salt-water mixture from the oil results in removal of 
salt to levels of no more than two pounds of salt per thousand barrels, 
and often significantly less, and of water to levels of approximately 
0.2 to 0.5 percent by volume. Desalting is a critical initial stage of 
the refining process.
    15. Compared to upstream electrostatic separation equipment, 
refinery desalters remove water and salt to lower specified levels and 
must produce cleaner effluent water. Refinery desalters handle higher 
oil volumes than upstream electrostatic separation equipment because 
refinery capacity typically is much greater than output at a single 
production wellhead. Unlike most upstream electrostatic separation 
equipment, refinery desalters often must remove solids; must handle oil 
that has been pre-heated to approximately 230 to 300 degrees, which 
changes the electrical properties of oil; must handle water droplets of 
a much smaller size and tighter emulsions of oil and water; and must be 
able to perform effectively with blends of incoming crudes and changing 
feedstocks. Both upstream electrostatic separation equipment and 
refinery desalters are used in conjunction with chemicals that enhance 
their performance, but optimizing chemical usage for refinery desalters 
is much more difficult than optimizing chemical usage upstream.

[[Page 5134]]

    16. Refinery desalters consist of a steel pressure vessel with an 
external transformer and controller as well as a set of ``internals'' 
that include electrodes. Inside the desalter pressure vessel, high-
voltage electrical charges cause water droplets containing dissolved 
salt to coalesce into larger and larger droplets. As water droplets 
reach a critical size, they sink to the bottom of the vessel because 
water is more dense than oil. Oil is removed from the top of the vessel 
for further processing in the refinery; waste water is removed from the 
vessel bottom. Solids that sink to the bottom of the vessel also are 
removed. When incoming oil has especially high salt content and/or is 
particularly dense, refineries may have to use two successive refinery 
desalter units (or, in rare cases, three units) to meet their salt 
removal requirements.
    17. Refineries vary widely in processing capacity. In addition, the 
characteristics of feedstock oil purchased by refineries vary across 
refineries and within refineries over time in terms of density, the 
blends of crudes mixed together, electrical properties, salt content, 
and the amount of other impurities. Refineries also differ in the 
levels of salt and entrained water that they specify may remain in the 
oil. As a result, refinery desalters are custom-designed to be able to 
remove salt and water from different crude feedstocks to different 
customer-specified levels, and to handle different customer-specified 
volumes. Further, some customers demanding refinery desalters require 
only new internals to replace worn-out internals, to accommodate a 
capacity expansion, or to handle a new type of crude feedstock, whereas 
other customers require a complete system including the pressure vessel 
and internals.
    18. Chemicals frequently are added to enhance the separation of oil 
from the water containing salt in refinery desalters. However, 
chemicals alone cannot remove salt to desired levels, and the cost of 
adding chemicals to achieve a given level of salt removal is 
significantly higher than the cost of purchasing and operating a 
refinery desalter to achieve a similar level of salt removal.
    19. Refinery desalters are sold pursuant to bids, which are based 
on technical specifications from the customer and include commercial 
terms. Suppliers of refinery desalters use patented and/or proprietary 
technology and know-how--including expertise gained through years or 
decades of trial and error and experience with prior installations--to 
custom-design refinery desalters that satisfy technical specifications.
    20. Refineries (and the firms that they consult) evaluate competing 
bids based on their compliance with technical specifications and 
commercial considerations such as price, delivery schedule, and terms 
of sale. The combined technical and commercial needs of the customer 
differ for each refinery desalter project.
    21. A small but significant post-acquisition increase in refinery 
desalter prices would not cause customers to substitute upstream 
electrostatic equipment (or any other type of equipment) or to utilize 
a chemicals-only solution with sufficient frequency so as to make such 
price increases unprofitable. Accordingly, refinery desalters are a 
line of commerce and relevant product market within the meaning of 
Section 7 of the Clayton Act.

B. The Relevant Geographic Market

    22. Those competitors that could constrain Cameron from raising 
prices on bids for refinery desalters in the United States typically 
are suppliers with a substantial physical United States presence, 
including sales, technical, and support personnel and parts 
distribution.
    23. Refineries prefer such suppliers because, during the design, 
bid, execution, and installation phases of a desalter project, 
customers interact with suppliers to address design recommendations and 
changes, track construction progress, and ensure successful 
installation. Further, customers purchasing refinery desalters can 
avoid costly delays or downtime in refinery operations by selecting a 
desalter supplier that is able to respond to requests for service or 
replacement parts during the operating life of the desalter.
    24. A small but significant increase in the price of refinery 
desalters would not cause a sufficient number of customers in the 
United States to turn to manufacturers of refinery desalters that do 
not have a substantial physical presence in the United States so as to 
make such a price increase unprofitable. Accordingly, the United States 
is a relevant geographic market within the meaning of Section 7 of the 
Clayton Act.

C. Competitive Effects

1. The Proposed Acquisition of NATCO by Cameron
    25. The proposed acquisition of NATCO by Cameron would 
substantially lessen competition in the U.S. refinery desalter market. 
The competition between Cameron and NATCO in the development, 
production, and sale of refinery desalters has benefitted customers. 
Cameron and NATCO compete directly on price, terms of sale, and 
technology. For many oil refineries, NATCO is the preferred alternative 
to Cameron. The proposed acquisition would eliminate Cameron's most 
significant competitor in the sale of refinery desalters in the United 
States.
    26. Only three competitors, including Cameron and NATCO, have sold 
refinery desalters in the United States since 2007. The third company 
often does not submit bids on U.S. refinery desalter projects and has 
sold just one refinery desalter in the United States, which occurred in 
2008.
    27. Most desalter sales are competitive, with the customer seeking 
alternative bidders. When sales are competitive, each bidder may be 
aware of its competitors, but it does not know the technical or 
commercial terms of its competitors' bids prior to submitting its own 
bid. That uncertainty restrains each bidder's pricing.
    28. Cameron's acquisition of NATCO would eliminate many customers' 
preferred alternative to Cameron and reduce from three to two--or for 
some bids, reduce from two to one--the number of bidders. Post-
acquisition, Cameron would gain the incentive and ability to profitably 
raise its bid prices significantly above pre-acquisition levels.
    29. The response of the remaining refinery desalter manufacturer 
would not be sufficient to constrain a unilateral exercise of market 
power by Cameron after the acquisition. Cameron would be aware that 
many customers strongly prefer it as a supplier, allowing it to raise 
prices above pre-acquisition levels. The sole remaining bidder would 
have an incentive to increase its bid price in response. Thus, the 
acquisition of NATCO by Cameron creates an incentive for Cameron and 
the remaining bidder to bid a higher amount than each otherwise would 
if NATCO were still a competitor. Likewise, elimination of NATCO as a 
competitor would reduce the remaining bidders' incentives to offer 
quick delivery or other terms of sale attractive to customers and to 
invest in certain technology improvements, such as NATCO's dual 
frequency technology.
    30. Therefore, the proposed acquisition would substantially lessen 
competition in the development, production, and sale of refinery 
desalters in the United States and lead to higher prices, less 
favorable terms of sale, and less innovation in the refinery

[[Page 5135]]

desalter market, in violation of Section 7 of the Clayton Act.
2. The Acquisition of the Howe Baker Assets
    31. When Cameron acquired the Howe Baker assets in 2005, Cameron 
accounted for approximately 75 percent of refinery desalter sales in 
the United States, and CB&I accounted for approximately 25 percent of 
such sales, between 2003 and 2005. Through its purchase of the Howe 
Baker assets, Cameron willfully acquired a monopoly in refinery 
desalter sales.
    32. The acquisition of the Howe Baker assets by Cameron 
substantially lessened competition in the U.S. refinery desalter 
market. Competition between Cameron and CB&I in the development, 
production, and sale of refinery desalters benefitted customers. 
Cameron and CB&I competed directly on price, terms of sale, and 
technology. The acquisition eliminated Cameron's then only competitor 
in the sale of refinery desalters in the United States and gave Cameron 
the market power to raise prices, offer less favorable terms of sale, 
and invest less in technology.
    33. Through its purchase of the Howe Baker assets, Cameron 
substantially lessened competition and willfully acquired a monopoly in 
the development, production, and sale of refinery desalters in the 
United States, in violation of Section 7 of the Clayton Act.

V. Entry

    34. Substantial, timely entry of additional competitors is unlikely 
and, therefore, will not prevent the harm to competition caused by 
elimination of NATCO as a bidder.
    35. A small number of companies have sold refinery desalters 
outside the United States, but these companies have no relevant, 
substantial U.S. presence. Given the small size of the U.S. refinery 
desalter market, they are unlikely to invest in establishing the 
personnel and parts distribution presence required to compete 
effectively in the United States. When NATCO entered the U.S. refinery 
desalter market in 2007, it had made numerous sales of refinery 
desalters outside the United States. However, NATCO was uniquely 
motivated and well-situated to enter the market because of its status 
as a worldwide leader in electrostatic technology and because it 
already had a relevant, substantial U.S. presence in other products.
    36. Firms attempting to enter into the development, production, and 
sale of refinery desalters in the United States face a combination of 
barriers to entry. The technology and expertise involved in developing 
and producing refinery desalters capable of handling U.S. crude 
feedstocks is a significant entry barrier. To develop the technical 
expertise necessary to produce a reliable refinery desalter, it is not 
sufficient that a producer be successful in meeting customer 
specifications for separation equipment sold upstream at the production 
wellhead. For many years, NATCO has been the leading supplier of 
electrostatic dehydrators sold upstream. Nonetheless, NATCO technical 
personnel have spent approximately three years improving their 
understanding of the nuances of refinery desalters to meet the needs of 
U.S. customers.
    37. The crude feedstock purchased by U.S. refineries has grown 
heavier and more difficult to process over time as lighter crude 
sources are being depleted. In recent years, several U.S. refinery 
customers have needed to upgrade existing refining desalters in order 
to process heavier feedstocks than the refinery desalters were 
initially designed to handle. Similar upgrades are likely to be a 
source of refinery desalter demand in the United States in the years 
ahead. As a result, NATCO has invested in research to develop and 
improve technologies specifically aimed at processing heavy crude oils. 
To compete effectively in the U.S. refinery desalter market, a supplier 
must offer a product capable of processing heavy crude oils, which 
contributes to the technical and expertise-related barrier to entry 
facing potential entrants.
    38. Establishing a reputation for successful performance and/or 
gaining customer confidence is a second significant barrier to entry. 
If a refinery desalter is not performing up to specification in terms 
of removing salt and water from oil, removing oil from produced water, 
or removing solids, refinery equipment can be damaged, a customer may 
run afoul of environmental waste water regulations, and refinery 
operations may even need to be shut down to carry out repairs. As a 
result of these costly consequences of poor refinery desalter 
performance, U.S. oil refineries are reluctant to purchase a refinery 
desalter from a supplier that does not have either a reputation and 
track record of successful performance on crude oil comparable to the 
crude oil the customer expects to treat or a significant new technology 
that the customer is satisfied will work on its expected crude.
    39. Establishing a reputation for successful performance and/or 
gaining customer confidence in a significant new technology can take 
years and the expenditure of substantial sunk costs. Since 2007, NATCO 
has had several employees and consultants partly or fully devoted to 
developing relationships with U.S. refineries. It has also invested 
significant funds in developing and improving its latest electrostatic 
technology and making other improvements related to refinery desalters.
    40. Financial scale is an additional barrier to entry. Customers 
prefer suppliers able to stand financially behind a multi-million 
dollar order, and to respond quickly and effectively to a request for 
service or parts and to meet warrantee obligations years after the 
initial sale. A supplier of refinery desalters therefore must be able 
to prove that it is financially sound and has sales far in excess of 
the price of a refinery desalter.
    41. For these reasons, entry or expansion by any other firm into 
the U.S. refinery desalter market would not be timely, likely, and 
sufficient to defeat the substantial lessening of competition that 
would result if Cameron acquires NATCO.

VI. Violations Alleged

First Cause of Action

Violation of Section 7 of the Clayton Act: Proposed Acquisition of 
NATCO
    42. The United States incorporates the allegations of paragraphs 1 
through 41 above.
    43. The proposed acquisition of NATCO by Cameron would 
substantially lessen competition and tend to create a monopoly in 
interstate trade and commerce in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18.
    44. Unless restrained, the transaction will have the following 
anticompetitive effects, among others:
    a. Actual and potential competition between Cameron and NATCO in 
the development, production, and sale of refinery desalters in the 
United States will be eliminated;
    b. Competition generally in the development, production, and sale 
of refinery desalters in the United States will be substantially 
lessened; and
    c. Prices for refinery desalters in the United States likely will 
increase, the terms of sale to customers in the United States likely 
will be less favorable, and innovation relating to refinery desalters 
in the United States likely will decline.

[[Page 5136]]

Second Cause of Action

Violation of Section 7 of the Clayton Act: Acquisition of Howe Baker 
Assets
    45. The United States incorporates the allegations of paragraphs 1 
through 41 above.
    46. The acquisition of the Howe Baker assets by Cameron 
substantially lessened competition and created a monopoly in interstate 
trade and commerce, in violation of Section 7 of the Clayton Act, 15 
U.S.C. 18.
    47. The transaction had the following anticompetitive effects, 
among others:
    a. Actual and potential competition between Cameron and CB&I in the 
development, production, and sale of refinery desalters in the United 
States was eliminated; and
    b. Competition generally in the development, production, and sale 
of refinery desalters in the United States was substantially lessened, 
and Cameron acquired a monopoly.

VII. Request for Relief

    48. Plaintiff requests that this Court:
    a. Adjudge and decree Cameron's proposed acquisition of NATCO to be 
unlawful and in violation of Section 7 of the Clayton Act, 15 U.S.C. 
18;
    b. Adjudge and decree Cameron's acquisition of the Howe Baker 
assets to be unlawful and in violation of Section 7 of the Clayton Act, 
15 U.S.C. 18;
    c. Preliminarily and permanently enjoin and restrain defendants and 
all persons acting on their behalf from consummating the proposed 
acquisition of NATCO by Cameron or from entering into or carrying out 
any contract, agreement, plan, or understanding, the effect of which 
would be to combine Cameron with the operations of NATCO;
    d. Compel Cameron to divest the Howe Baker assets and to take any 
further actions necessary to restore the U.S. refinery desalter market 
to the competitive position that existed prior to the acquisition of 
the Howe Baker assets by Cameron;
    e. Award the United States its costs for this action; and
    f. award the United States such other and further relief as the 
Court deems just and proper.

Dated: November 17, 2009.

    Respectfully submitted for Plaintiff United States of America.

Christine A. Varney,
Assistant Attorney General.

Molly S. Boast,
Deputy Assistant Attorney General.

Patricia A. Brink,
Deputy Director of Operations.

Maribeth Petrizzi,
Chief, Litigation II Section, DC Bar #435204.

Dorothy B. Fountain,
Assistant Chief, Litigation II Section, DC Bar #439469.

Christine A. Hill,
DC Bar#461048.

James K. Foster.
Warren A. Rosborough,
DC Bar#495063.

Alexander G. Krulic,
DC Bar#490070.

Attorneys, United States Department of Justice, Antitrust Division, 
Litigation II Section, 450 Fifth Street NW., Suite 8700, Washington, 
DC 20530. (202) 305-2738.

    United States of America, Plaintiff, v. Cameron International 
Corporation, and NATCO Group Inc., Defendants.

Case No.: 1:09-cv-02165.
Deck Type: Antitrust.
Date Stamp: November 17, 2009.
Judge: Bates, John D.

Proposed Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on November 17, 2009, the United States and defendants, Cameron 
International Corporation (``Cameron'') and NATCO Group Inc. 
(``NATCO''), by their respective attorneys, have consented to the entry 
of this Final Judgment without trial or adjudication of any issue of 
fact or law, and without this Final Judgment constituting any evidence 
against or admission by any party regarding any issue of fact or law;
    And whereas, defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by the defendants to 
assure that competition is not substantially lessened;
    And whereas, the United States requires defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And whereas, defendants have represented to the United States that 
the divestitures required below can and will be made and that 
defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the divestiture 
provisions contained below;
    Now therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ordered, adjudged and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against defendants under Section 7 of the Clayton 
Act, 15 U.S.C. 18, as amended.

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' or ``Acquirers'' mean the entity or entities to 
whom defendants shall divest the Divestiture Assets.
    B. ``Cameron'' means defendant Cameron International Corporation, a 
Delaware corporation with its headquarters in Houston, Texas, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and all of their 
directors, officers, managers, agents, and employees.
    C. ``NATCO'' means defendant NATCO Group Inc., a Delaware 
corporation with its headquarters in Houston, Texas, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and all of their directors, officers, 
managers, agents, and employees.
    D. ``Closing Date'' means the date upon which each transfer of the 
Divestiture Assets from the defendants to the Acquirer or Acquirers 
takes place.
    E. ``Dual Frequency Products'' means downstream refinery desalters 
that utilize dual frequency transformers and AC/DC power supplies.
    F. ``Dual Frequency Technology'' means any and all intellectual 
property, data, drawings, ideas, designs, concepts, know-how, 
procedures, processes, and any other assets primarily used in or 
necessary to the development, production, sale, repair, or service of 
Dual Frequency Products owned or controlled by defendants as of the 
time of the Closing Date.
    G. ``EDGE Business'' means the desalter and dehydrator assets 
purchased by Petreco International, Inc. from Howe Baker Engineers 
Ltd., a wholly owned subsidiary of Chicago Bridge & Iron N.V., pursuant 
to an Asset Purchase Agreement dated October 7, 2005, and any additions 
or improvements to such assets made through the Closing Date. The EDGE 
Business includes all inventory specifically related to the EDGE 
Business as of the Closing Date.
    H. ``Pilot plant'' means equipment used to evaluate and simulate 
performance of desalter technologies on oil samples.
    I. ``Refinery desalter'' means customized electrostatic desalters 
used in the downstream oil refining industry.
    J. ``Divestiture Assets'' means:

[[Page 5137]]

    1. All tangible assets primarily used in the EDGE Business, 
including, but not limited to, the inventory of spare parts for the 
EDGE Business; engineering drawings and documents related to all prior 
sales; all licenses, permits, and authorizations issued by any 
governmental organization relating to the EDGE Business; all contracts, 
teaming arrangements, agreements, leases, commitments, certifications, 
and understandings, relating principally to the EDGE Business, 
including supply agreements; all customer lists, contracts, accounts, 
and credit records; all repair and performance records and all other 
records relating to the EDGE Business;
    2. All intangible assets primarily used in the EDGE Business, 
including, but not limited to, the EDGE Desalter Installation Database 
and any accompanying design information; the unregistered trademarks 
``Edge'' and ``EDGE''; all data concerning installations or pilot 
testing; the EDGE Desalter Sizing Software Program and related 
documentation; any other intellectual property including patents and 
patent applications, licenses and sublicenses, copyrights, trademarks, 
trade names, service marks, service names, slogans, domain names, 
logos, and trade dress related to the EDGE Business; any other 
technical information, software and related documentation, know-how, 
trade secrets, drawings, blueprints, designs, design protocols, 
specifications for materials, specifications for parts and devices, 
safety procedures for the handling of materials and substances, quality 
assurance and control procedures, design tools and simulation 
capability, manuals and technical information used principally for the 
EDGE Business; all repair, performance, financial, and operational 
records, and all other records relating to the EDGE Business; and all 
research data concerning historic and current research and development 
efforts relating to the EDGE Business, including, but not limited to, 
designs of experiments, and the results of successful and unsuccessful 
designs and experiments;
    3. At the Acquirer's option, Cameron's pilot plant located in 
Houston, Texas or NATCO's pilot plant located in Tulsa, Oklahoma;
    4. A fully paid-up, non-exclusive, worldwide, non-sublicensable 
(except to subcontractors of the Acquirer solely for the purpose of 
having Dual Frequency Products made for the Acquirer) license to the 
Dual Frequency Technology for the development, production, sale, 
repair, and service of refinery desalters. This license shall be 
transferable two years after divestiture of the Divestiture Assets. 
Defendants shall retain the right and discretion to file and prosecute 
patent applications and maintain patents in the United States relating 
to any Dual Frequency Technology developed by defendants prior to the 
Closing Date, and any such patent shall be considered part of the Dual 
Frequency Technology and be licensed to the Acquirer. Any improvements 
or modifications to the Dual Frequency Technology (whether or not 
patentable) developed by either the defendants or the Acquirer shall be 
owned solely by such party.

III. Applicability

    A. This Final Judgment applies to Cameron and NATCO, as defined 
above, and all other persons in active concert or participation with 
either of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. If, prior to complying with Section IV and V of this Final 
Judgment, defendants sell or otherwise dispose of all or substantially 
all of their assets or of lesser business units that include the 
Divestiture Assets, they shall require the purchaser or purchasers to 
be bound by the provisions of this Final Judgment. Defendants need not 
obtain such an agreement from the Acquirer or Acquirers of the assets 
divested pursuant to this Final Judgment.

IV. Divestitures

    A. Defendants are ordered and directed, within ninety (90) calendar 
days after the filing of the Complaint in this matter, or five (5) 
calendar days after notice of the entry of this Final Judgment by the 
Court, whichever is later, to divest the Divestiture Assets in a manner 
consistent with this Final Judgment to an Acquirer or Acquirers 
acceptable to the United States, in its sole discretion. The United 
States, in its sole discretion, may agree to one or more extensions of 
this time period not to exceed sixty (60) calendar days in total, and 
shall notify the Court in such circumstances. Defendants agree to use 
their best efforts to divest the Divestiture Assets as expeditiously as 
possible.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
defendants promptly shall make known, by usual and customary means, the 
availability of the Divestiture Assets. Defendants shall inform any 
person making an inquiry regarding a possible purchase of the 
Divestiture Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendants shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to the 
attorney-client privilege or work-product doctrine. Defendants shall 
make available such information to the United States at the same time 
that such information is made available to any other person.
    C. Defendants shall provide the Acquirers or Acquirers and the 
United States information relating to the personnel involved in the 
development, production, sale, repair, and service of refinery 
desalters to enable them to make offers of employment. Defendants shall 
not interfere with any negotiations by the Acquirer or Acquirers to 
employ any defendant employee whose primary responsibility is 
development, production, sale, repair, and service of refinery 
desalters.
    D. Defendants shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities used for the Divestiture Assets; access to 
any and all environmental, zoning, and other permit documents and 
information; and access to any and all financial, operational, or other 
documents and information customarily provided as part of a due 
diligence process.
    E. Defendants shall warrant to the Acquirer or Acquirers that each 
asset will be operational on the date of sale.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    G. At the option of the Acquirer or Acquirers, defendants shall 
enter into a transition services agreement sufficient to meet all or 
part of the Acquirers' needs for assistance in matters relating to the 
utilization of the Divestiture Assets (including, but not limited to, 
the use of EDGE Desalter Sizing Software Program and the interpretation 
of test and field data) for a period of at least six (6) months. The 
terms and conditions of any contractual arrangement meant to satisfy 
this provision must be reasonably related to the market value of the 
expertise of the personnel providing any needed assistance.
    H. Defendants shall warrant to the Acquirer or Acquirers that there 
are no material defects in the environmental, zoning or other permits 
pertaining to the operation of each asset, and that following the sale 
of the Divestiture Assets, defendants will not undertake, directly or 
indirectly, any challenges to the environmental, zoning, or other

[[Page 5138]]

permits relating to the operation of the Divestiture Assets.
    I. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV, or by trustee appointed pursuant to 
Section V, of this Final Judgment, shall include the entire Divestiture 
Assets, and shall be accomplished in such a way as to satisfy the 
United States, in its sole discretion, that the Divestiture Assets can 
and will be used by the Acquirer or Acquirers as part of viable, 
ongoing businesses for the development, production, sale, repair, and 
service of refinery desalters. Divestiture of the Divestiture Assets 
may be made to one or more Acquirers, provided that the Divestiture 
Assets listed in paragraphs II(J)(1) and (2), above, are divested to 
the same Acquirer, that all the assets listed in paragraphs II(J)(3) 
and (4), above, are divested to the same Acquirer, and that in each 
instance the divestitures, whether pursuant to Section IV or Section V 
of this Final Judgment:
    1. Shall remedy the harm alleged in the Complaint;
    2. Shall be made to an Acquirer or Acquirers that, in the United 
States's sole judgment, have the intent and capability (including the 
necessary managerial, operational, technical, and financial capability) 
of competing effectively for the development, production, sale, repair, 
and service of refinery desalters; and
    3. Shall be accomplished so as to satisfy the United States, in its 
sole discretion, that none of the terms of any agreement between the 
Acquirer or Acquirers and defendants gives defendants the ability 
unreasonably to raise the Acquirers' costs, to lower the Acquirers' 
efficiency, or otherwise to interfere in the ability of the Acquirers 
to compete effectively.

V. Appointment of Trustee

    A. If defendants have not divested the Divestiture Assets within 
the time period specified in Section IV(A), defendants shall notify the 
United States of that fact in writing. Upon application of the United 
States, the Court shall appoint a trustee selected by the United States 
and approved by the Court to effect the sale of the Divestiture Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to one or more Acquirers acceptable to the United States at 
such price and on such terms as are then obtainable upon reasonable 
effort by the trustee, subject to the provisions of Sections IV, V, and 
VI of this Final Judgment, and shall have such other powers as this 
Court deems appropriate. Subject to Section V(D) of this Final 
Judgment, the trustee may hire at the cost and expense of defendants 
any investment bankers, attorneys, or other agents, who shall be solely 
accountable to the trustee, reasonably necessary in the trustee's 
judgment to assist in the divestiture.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of defendants, 
on such terms and conditions as the United States approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to defendants and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and defendants 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret or other confidential research, development, or 
commercial information. Defendants shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestiture ordered under this Final 
Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the trustee has not accomplished the divestiture ordered 
under this Final Judgment within six (6) months after its appointment, 
the trustee shall promptly file with the Court a report setting forth: 
(1) The trustee's efforts to accomplish the required divestiture; (2) 
the reasons, in the trustee's judgment, why the required divestiture 
has not been accomplished; and (3) the trustee's recommendations. To 
the extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. The trustee shall at the same time furnish such report to 
the United States which shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shall deem appropriate to 
carry out the purpose of the Final Judgment, which may, if necessary, 
include extending the trust and the term of the trustee's appointment 
by a period requested by the United States.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, defendants or the trustee, whichever is then 
responsible for effecting the divestiture required herein, shall notify 
the United States of any proposed divestiture required by Section IV or 
V of this Final Judgment. If the trustee is responsible, it shall 
similarly notify the defendants. The notice shall set forth the details 
of the proposed divestiture and list the name, address, and telephone 
number of each person not previously identified who offered or 
expressed an interest in or desire to acquire any ownership interest in 
the Divestiture Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from defendants, 
the proposed Acquirer or Acquirers, any other third party, or the 
trustee, if applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer or Acquirers, and any other 
potential

[[Page 5139]]

Acquirer. Defendants and the trustee shall furnish any additional 
information requested within fifteen (15) calendar days of the receipt 
of the request, unless the parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from defendants, the 
Acquirer or Acquirers or any proposed Acquirer, any third party, and 
the trustee, whichever is later, the United States shall provide 
written notice to defendants and the trustee stating whether or not it 
objects to the proposed divestiture. If the United States provides 
written notice that it does not object, the divestiture may be 
consummated, subject only to defendants' limited right to object to the 
sale under Section V(C) of this Final Judgment. Absent written notice 
that the United States does not object to the proposed Acquirer(s) or 
upon objection by the United States, a divestiture proposed under 
Section V shall not be consummated. Upon objection by defendants under 
Section V(C), a divestiture proposed under Section V shall not be 
consummated unless approved by the Court.

VII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. Hold Separate Stipulation and Order

    Until the divestiture required by this Final Judgment has been 
accomplished, defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or V, defendants 
shall deliver to the United States an affidavit as to the fact and 
manner of its compliance with Section IV or V of this Final Judgment. 
Each such affidavit shall include the name, address, and telephone 
number of each person who, during the preceding thirty (30) calendar 
days, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person during that 
period. Each such affidavit shall also include a description of the 
efforts defendants have taken to solicit buyers for the Divestiture 
Assets, and to provide required information to prospective Acquirers, 
including the limitations, if any, on such information. Assuming the 
information set forth in the affidavit is true and complete, any 
objection by the United States to information provided by defendants, 
including limitations on the information, shall be made within fourteen 
(14) calendar days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in defendants' earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days after 
the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time authorized representatives of the United States 
Department of Justice Antitrust Division (``United States''), including 
consultants and other persons retained by the United States, shall, 
upon written request of an authorized representative of the Assistant 
Attorney General in charge of the Antitrust Division, and on reasonable 
notice to defendants, be permitted:
    1. Access during defendants' office hours to inspect and copy, or 
at the option of the United States, to require defendants to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
defendants, relating to any matters contained in this Final Judgment; 
and
    2. To interview, either informally or on the record, defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
defendants shall submit written reports or responses to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to the United States, defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and defendants mark each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give defendants ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XI. Notification of Future Transactions

    Unless such transaction is otherwise subject to the reporting and 
waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
defendants, without providing advance notification to the Antitrust 
Division, shall not directly or indirectly acquire any assets of or 
interest, including any financial, security, loan, equity or management 
interest, in any entity that has sold, at any time in the three years 
prior to the Closing Date, a downstream refinery desalter that was used 
in or purchased by a customer in the United States during the term of 
this Final Judgment.
    Such notification shall be provided to the Antitrust Division in 
the same format as, and per the instructions relating to the 
Notification and Report Form set forth in the Appendix to Part 803 of 
Title 16 of the Code of Federal Regulations as amended, except that the 
information requested in Items 5

[[Page 5140]]

through 9 of the instructions must be provided only about refinery 
desalters. Notification shall be provided at least thirty (30) calendar 
days prior to acquiring any such interest, and shall include, beyond 
what may be required by the applicable instructions, the names of the 
principal representatives of the parties to the agreement who 
negotiated the agreement, and any management or strategic plans 
discussing the proposed transaction. If within the 30-day period after 
notification, representatives of the Antitrust Division make a written 
request for additional information, defendants shall not consummate the 
proposed transaction or agreement until thirty (30) calendar days after 
submitting all such additional information. Early termination of the 
waiting periods in this paragraph may be requested and, where 
appropriate, granted in the same manner as is applicable under the 
requirements and provisions of the HSR Act and rules promulgated 
thereunder. This Section shall be broadly construed and any ambiguity 
or uncertainty regarding the filing of notice under this Section shall 
be resolved in favor of filing notice.

XII. No Reacquisition

    Defendants may not reacquire any part of the Divestiture Assets 
during the term of this Final Judgment.

XIII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIV. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XV. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States's responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments filed with 
the Court, entry of this Final Judgment is in the public interest.

    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

United States District Judge.

    United States of America, Plaintiff, v. Cameron International 
Corporation, and NATCO Group Inc., Defendants.

Case No.: 09-cv-02165.
Judge: Hon. Rosemary M. Collyer.
Deck Type: Antitrust.
Date Stamp: Filed 1/20/2010.

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    Defendants Cameron International Corporation (``Cameron'') and 
NATCO Group Inc. (``NATCO'') entered into an Agreement and Plan of 
Merger, dated June 1, 2009, pursuant to which Cameron agreed to acquire 
NATCO in an all-stock transaction. On November 18, 2009, NATCO 
shareholders voted to approve the transaction and defendants closed the 
transaction that same day.
    The United States filed a civil antitrust Complaint on November 17, 
2009, seeking to enjoin Cameron's acquisition of NATCO. The Complaint 
alleged that the acquisition likely would substantially lessen 
competition for customized electrostatic desalters used in the oil 
refining industry (hereinafter, ``refinery desalters'') in violation of 
Section 7 of the Clayton Act, 15 U.S.C. 18. That loss of competition 
likely would result in higher prices, less favorable terms of sale, and 
less innovation in the U.S. refinery desalter market.
    The United States's Complaint also sought to remedy the harm 
resulting from Cameron's acquisition of certain refinery desalter 
assets from Chicago Bridge & Iron N.V. (``CB&I'') in 2005. In that 
acquisition, Cameron, through Petreco International, Inc., acquired the 
desalting, dehydration, distallate treating, and gas oil separation 
equipment business of Howe Baker Engineers Ltd., which was a wholly 
owned subsidiary of CB&I (hereinafter, the ``Howe Baker assets''). 
These assets primarily comprise the intellectual property and data 
necessary to manufacture desalters and dehydrators utilizing Howe 
Baker's Enhanced Deep-Grid Electrical (``EDGE'') technology, and the 
trademark to the EDGE name. Cameron's acquisition of the Howe Baker 
assets reduced from two to one the number of sellers of refinery 
desalters in the U.S. market at that time. The Complaint alleged that 
the acquisition substantially lessened competition for refinery 
desalters in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 
That loss of competition gave Cameron the power to raise prices, offer 
less favorable terms of sale, and invest less in technology in the U.S. 
refinery desalter market.
    At the same time the Complaint was filed, the United States filed a 
Hold Separate Stipulation and Order (``Hold Separate'') and proposed 
Final Judgment, which are designed to eliminate the anticompetitive 
effects of Cameron's proposed acquisition of NATCO and Cameron's 
consummated acquisition of the Howe Baker assets. Under the proposed 
Final Judgment, which is explained more fully below, Cameron is 
required to divest the Howe Baker desalter and dehydrator assets that 
it purchased from CB&I, as well as any additions to or improvements of 
those assets. In addition, Cameron is required to divest a fully paid-
up, non-exclusive, worldwide, irrevocable license to NATCO's refinery 
desalter technology that utilizes dual frequency transformers and AC/DC 
power supplies (hereinafter, ``dual frequency technology''). Finally, 
Cameron is required to divest an option to purchase either Cameron's or 
NATCO's pilot plant, which is equipment used to evaluate and simulate 
performance of desalter technologies on oil samples. Under the terms of 
the Hold Separate, Cameron and NATCO will take certain steps to ensure 
that the Howe Baker assets and the pilot plants are fully maintained in 
operable condition and that Cameron and NATCO maintain and adhere to 
normal repair and maintenance schedules for these assets.
    The United States and defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the Final Judgment and to punish violations thereof.

II. Description of the Events Giving Rise to the Alleged Violations

A. The Defendants

    Cameron is a worldwide provider of equipment used at or near oil or 
gas wells and in refineries. It also manufactures valves and flow 
measurement systems used in oil and gas drilling, production, 
transportation,

[[Page 5141]]

and refining, as well as compression products, systems, and services to 
the oil and gas industries. In 2008, Cameron reported total sales of 
approximately $5.85 billion. Cameron is the leading U.S. supplier of 
refinery desalters. Its sales of refinery desalters in the United 
States were approximately $10.2 million in 2008.
    NATCO is a worldwide provider of equipment used to separate oil, 
gas, and water within a production stream and to remove contaminants. 
It also sells equipment used in refinery and petrochemical facilities 
around the world to improve processing and separation. NATCO reported 
revenues of $657 million in 2008. After Cameron, NATCO is the next most 
significant U.S. supplier of refinery desalters. NATCO's sales of 
refinery desalters in the United States were approximately $10.55 
million in 2008.

B. The Competitive Effects of the Acquisitions on the U.S. Market for 
Refinery Desalters

1. Relevant Markets
    Desalting is a critical initial stage of the refining process. 
Refinery desalters are used to remove salt from crude oil 
``downstream,'' which is the oil refining stage of production.
    Refinery desalters consist of a steel pressure vessel with an 
external transformer and controller and a set of ``internals,'' 
consisting primarily of electrostatic separation grids. In a refinery 
desalter, fresh water is mixed into the incoming crude oil to dissolve 
various salts. Inside the pressure vessel, high-voltage electrical 
charges cause water droplets containing dissolved salts to coalesce 
into larger droplets. As the water droplets reach a critical size, they 
sink to the bottom of the vessel. Oil is removed from the top of the 
vessel for further processing in the refinery and waste water is 
removed from the vessel bottom. Solids that sink to the bottom of the 
vessel also are removed.
    Similarly, when oil is removed ``upstream'' from a production 
wellhead, it may be mixed with water, dissolved salts, and other 
impurities, including solids. A variety of separation equipment is used 
at the wellhead to remove these impurities from the oil. At times, 
electrostatic separation equipment is required to meet the 
specifications that are necessary for the oil to be transported away 
from the wellhead, with water typically removed to a volume of about 
one percent. Often there are no specifications for salt removal at the 
wellhead.
    Compared to the electrostatic separation equipment used at the 
wellhead, refinery desalters remove water and salt to lower specified 
levels. For example, in a refinery desalter, separation of the water 
from the oil results in the removal of salt to levels of no more than 
two pounds of salt per thousand barrels, and often significantly less, 
and of water to levels of approximately 0.2 to 0.5 percent by volume. 
Refinery desalters must also produce cleaner effluent water than 
electrostatic separation equipment used at the wellhead.
    Further, refinery desalters are more complex than electrostatic 
separation equipment used at the wellhead. For example, upstream 
electrostatic separation equipment removes water from only one kind of 
crude oil and the properties o