Nufarm Limited; Analysis of Agreement Containing Consent Order to Aid Public Comment, 46940-46942 [2010-19079]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 75, Number 149 (Wednesday, August 4, 2010)]
[Notices]
[Pages 46940-46942]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19079]


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FEDERAL TRADE COMMISSION

[File No. 081 0130]


Nufarm Limited; Analysis of Agreement Containing Consent Order to 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order -- embodied in the consent 
agreement -- that would settle these allegations.

DATES: Comments must be received on or before August 30, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Nufarm, 
File No. 081 0130'' to facilitate the organization of comments. Please 
note that your comment -- including your name and your state -- will be 
placed on the public record of this proceeding, including on the 
publicly accessible FTC website, at (https://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c), 16 CFR 4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://ftcpublic.commentworks.com/ftc/nufarm/) and following the instructions 
on the web-based form. To ensure that the Commission considers an 
electronic comment, you must file it on the web-based form at the 
weblink: (https://ftcpublic.commentworks.com/ftc/nufarm/). If this 
Notice appears at (https://www.regulations.gov/search/index.jsp), you 
may also file an electronic comment through that website. The 
Commission will consider all comments that regulations.gov forwards to 
it. You may also visit the FTC website at (https://www.ftc.gov/) to read 
the Notice and the news release describing it.
    A comment filed in paper form should include the ``Nufarm, File No. 
081 0130'' reference both in the text and on the envelope, and should 
be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135 (Annex D), 600 
Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to

[[Page 46941]]

consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (https://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (https://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Leonard L. Gordon (212-607-2801) or 
Jonathan W. Platt (212-607-2819), FTC Northeast Regional Office, 600 
Pennsylvania Avenue, NW, Washington, D.C. 20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that 
the above-captioned consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for July 28, 2010), on the World Wide Web, at (https://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') from Nufarm Limited (``Nufarm'' or ``Respondent'') to 
remedy the anticompetitive effects stemming from Nufarm's acquisition 
of A.H. Marks Holding Limited (``A. H. Marks''). Under the terms of the 
Consent Agreement, Nufarm is required to divest to Commission-approved 
buyers certain A. H. Marks assets, including regulatory permits and 
intellectual property, and take certain additional measures to restore 
competition in the markets for three phenoxy herbicide products: MCPA, 
MCPP-p, and 2,4DB.
    On March 5, 2008, Nufarm acquired A. H. Marks. Both parties held, 
or had access to, regulatory approvals from the United States 
Environmental Protection Agency (``EPA'') to sell MCPA, MCPP-p, and 
2,4DB in the United States. The Commission's complaint alleges that the 
acquisition and acquisition agreement violated Section 7 of the Clayton 
Act, as amended, 15 U.S.C. Sec.  18, and Section 5 of the Federal Trade 
Commission Act (``FTC Act''), as amended, 15 U.S.C. Sec.  45, by 
lessening competition in the United States markets for the sale of the 
phenoxy herbicides: MCPA, MCPP-P, and 2,4DB.
    The Consent Agreement has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will review the Consent 
Agreement and comments received and decide whether to withdraw from the 
proposed Consent Agreement, modify it, or make final the Consent 
Agreement's proposed Decision and Order.

II. The Products and Structure of the Markets

    With its acquisition of A.H. Marks, Nufarm obtained monopoly 
positions in the United States markets for two phenoxy herbicide 
markets (MCPA and MCPP-p) and reduced a third phenoxy herbicide market 
(2,4DB) to a duopoly. Phenoxy herbicides are post-emergent selective 
broadleaf herbicides which are designed to act on full or partially 
grown weeds without damaging surrounding plants. They are used widely 
in the turf, lawn care, and agriculture industries to eliminate 
existing broadleaf weeds safely and cheaply. Nufarm and A.H. Marks sold 
these herbicides to agricultural and turf and lawn care formulators in 
their raw form as ``technical'' ingredients for their formulated 
herbicide products. Agricultural formulators generally purchase MCPA 
for use on cereal crops, such as wheat and barley, and 2,4DB for peanut 
and alfalfa crops. Turf and lawn care formulators purchase MCPP-p for 
turf care products used by landscape professionals or consumers. Each 
of the three herbicides is a highly cost-effective herbicide for its 
intended use with no equivalent substitutes. More expensive herbicides 
are generally used as complements and combined with phenoxy herbicides 
such as MCPA, MCPP-p, or 2,4DB, to increase the effectiveness of 
formulated herbicide products.

III. Entry

    Entry into the markets for MCPA, MCPP-p and 2,4DB would not be 
timely, likely, or sufficient to deter or counteract the 
anticompetitive effects of the acquisition. In order to obtain approval 
to sell herbicides for use on crops, turf, or lawns in the United 
States, the Environmental Protection Agency (``EPA'') requires 
manufacturers to submit extensive environmental and toxicology testing 
data. Herbicide manufacturers often generate such data by forming 
industry task forces to share the costs of testing. Later entrants are 
often required to compensate members of the task force to obtain 
intellectual property rights to existing testing data by either 
purchasing the rights to the data or obtaining a seat on the task 
force. The costs associated with obtaining either the testing data or a 
task force seat to enter the markets for MCPA, MCPP-p, and 2,4DB are 
high compared to the limited potential sales revenues available to an 
entrant in each of these markets. Additionally, obtaining EPA approval 
for the manufacture and sale of each of the relevant products can take 
several years due to the presence of regulatory barriers. As a result, 
entry into each relevant market would require substantial sunk costs 
that would make entry unattractive. In addition, prior to the 
acquisition, Nufarm had entered into contracts with several of its task 
force members which posed barriers to entry by these firms. Therefore, 
the prospect of entry into the relevant markets is very limited and 
does not alleviate the concerns about the adverse competitive effects 
of the acquisition.

IV. Effects of the Acquisition

    The acquisition is likely to cause significant competitive harm to 
consumers in the relevant U.S. markets for MCPA, MCPP-p, and 2,4DB by 
eliminating the direct and substantial competition between Nufarm and 
A.H. Marks. There is evidence that Nufarm acquired A.H. Marks with the 
expectation that it would be able to increase prices as a result of the 
merger. In addition, the evidence indicated that in some instances 
Nufarm may have increased its prices for the three

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herbicides following the merger. As a result, the transaction increased 
the likelihood that Nufarm could unilaterally exercise market power and 
raise prices in each of the relevant markets.

V. Terms of the Proposed Decision and Order

    The Consent Agreement preserves competition in each of the relevant 
markets alleged in the complaint by requiring that Nufarm divest 
certain A.H. Marks assets to new entrants and take additional measures 
to restore competition in the markets for MCPA, MCPP-p, and 2,4DB. 
Specifically, Nufarm has agreed to sell A.H. Marks' EPA registration 
and task force seat for MCPA to Albaugh Inc., and A.H. Marks' EPA 
registration and task force seat for MCPP-p to PBI Gordon Corp. Nufarm 
has also agreed to modify its contractual agreements with Dow and Aceto 
relating to MCPA and 2.4-DB, which restricted these firms' competitive 
activities in the markets for MCPA and 2,4-DB. Staff has evaluated the 
proposed divestitures and modifications and concluded that these 
measures are sufficient to remedy the anticompetitive effects resulting 
from the transaction.
    For both MCPA and MCPP-p, the purchase of a task force seat and EPA 
registration will permit each divestiture purchaser to enter and 
compete in these markets. By acquiring A.H. Mark's task force seat and 
EPA registration, the divestiture purchasers will obtain EPA approval 
to distribute the herbicide in the United States and certify additional 
manufacturing sources of the herbicides. In addition to the task force 
seat and EPA registration, Nufarm is required to enter into supply 
agreements with each divestiture purchaser to permit these purchasers 
to compete with Nufarm as wholesale suppliers of the herbicides while 
new manufacturing sources are developed.
    With respect to MCPA, Nufarm would divest AH Mark's MCPA Task Force 
Seat and EPA registrations relating to MCPA to Albaugh. Albaugh is a 
qualified divestiture candidate that is uniquely situated to use the 
A.H. Marks assets and supply contract to compete with Nufarm in the 
market for MCPA. Albaugh is the largest privately-owned formulator of 
crop protection products. Albaugh is headquartered in Ankeny, Iowa and 
sells exclusively in the United States. Within the crop protection 
industry, Albaugh has extensive relationships with firms at every level 
of distribution. Given Albaugh's position, commitment, and experience 
in the MCPA market, staff believes that divestiture of A.H. Marks' MCPA 
assets will enable Albaugh to restore the competition lost as a result 
of the transaction.
    With respect to MCPP-p, Nufarm would divest A.H. Mark's MCPP-p Task 
Force Seat and EPA registrations relating to MCPP-p to PBI Gordon and 
enter a three-year supply arrangement. PBI Gordon, headquartered in 
Kansas City, Missouri, is a privately held company founded in 1947. PBI 
Gordon is a long-standing player in the turf care industry. Its primary 
business is the development, manufacture, and marketing of herbicides, 
pest management, and related products to the lawn, garden, professional 
turf, and specialty agricultural markets. It has an extensive 
distribution network and a wide customer base. PBI Gordon's presence in 
the market, combined with its expertise with herbicides, will ensure it 
will use the assets to compete with Nufarm in the market for MCPP-p.
    The Consent Agreement also addresses concerns regarding Nufarm's 
agreements with Dow and Aceto by preventing Nufarm from enforcing 
agreements which may limit or restrict competitive entry in the MCPA 
and 2,4DB markets. Pursuant to Section V of the proposed Decision and 
Order, Nufarm agreed not to enforce any provision, or otherwise take 
any future action, restricting competition in the manufacture or sale 
of MCPA, 2,4DB or MCPP-p. Nufarm's compliance with these provisions 
will enable Dow and Aceto to enter these respective markets, as 
manufacturers and/or wholesalers, and compete with Nufarm for sales. 
Equally important, Dow and Aceto will be able to use their task force 
seats and registrations to sponsor new entrants to the United States 
markets for these herbicides. The resulting entry, or threat of entry, 
is likely to serve as an additional competitive constraint in both the 
MCPA and 2,4DB markets. Lastly the Consent Agreement contains several 
other significant provisions. Section IV of the proposed Order permits 
Nufarm's customers to terminate their contracts with Nufarm with 
respect to the products. Section VII requires Nufarm to notify the 
Commission if it: (a) acquires any task force seat or registration with 
respect to the products or (b) enters into any agreements with task 
force members or registrants that contain non-compete, joint-marketing 
or other provisions restricting competition. Section VIII requires 
Nufarm to divest the MCPA and MCPP-p assets to a trustee in the event 
Nufarm fails to comply with the divestiture obligations for these 
assets in the proposed Order.
    The purpose of this analysis is to facilitate public comment on the 
proposed Decision and Order. This analysis is not intended to 
constitute an official interpretation of the Consent Agreement and the 
proposed Decision and Order.
    By direction of the Commission, Commissioner Ramirez recused.

Donald S. Clark
Secretary.
[FR Doc. 2010-19079 Filed 8-3-10; 7:33 am]
BILLING CODE 6750-01-S