United States v. L.B. Foster Company and Portec Rail Products, Inc.; Proposed Final Judgment and Competitive Impact Statement, 79394-79404 [2010-31863]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 75, Number 243 (Monday, December 20, 2010)]
[Notices]
[Pages 79394-79404]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-31863]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. L.B. Foster Company and Portec Rail Products, 
Inc.; 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, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the United States District Court for the District 
of Columbia in United States v. L.B. Foster Company and Portec Rail 
Products, Inc., Civil Action No. 1:10-cv-02115. On December 14, 2010, 
the United States filed a Complaint alleging that the proposed 
acquisition by L.B. Foster Company (``Foster'') of Portec Rail 
Products, Inc. (``Portec'') would violate Section 7 of the Clayton Act, 
15 U.S.C. 18. The proposed Final Judgment, filed at the same time as 
the Complaint, requires Foster to divest Portec's entire rail joint 
operations (excluding some assets in the United Kingdom), including 
Portec's manufacturing facility located in Huntington, West Virginia 
and tangible and intangible assets associated with Portec's rail 
joints, as well as assets used to manufacture and sell certain other 
related and complementary products currently manufactured at the 
Huntington facility. The proposed Final Judgment requires that these 
assets be sold to Koppers Inc. 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 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,
Director of Civil Enforcement.

United States District Court for the District Of Columbia

United States of America, United States Department of Justice, 
Antitrust Division, 450 Fifth Street, NW., Suite 8700, Washington, DC 
20530, Plaintiff

v.

L.B. Foster Company, 415 Holiday Drive, Pittsburgh, Pennsylvania 15220, 
and Portec Rail Products, Inc., 900 Old Freeport Road, Pittsburgh, 
Pennsylvania 15238, Defendants.

    Case: 1:10-cv-02115.
    Assigned To: Urbina, Ricardo M.
    Assign. Date: 12/14/2010.
    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 L.B. Foster Company 
(``Foster'') and Portec Rail Products, Inc. (``Portec'') to enjoin 
Foster's proposed acquisition of Portec and to obtain other equitable 
relief. The United States complains and alleges as follows:

I. Nature of the Action

    1. On February 16, 2010, Foster and Portec entered into an 
Agreement and Plan of Merger (``Merger Agreement''). Pursuant to the 
Merger Agreement, on February 26, 2010, Foster made a cash tender offer 
to acquire all the outstanding shares of common stock of Portec for 
$11.71 per share. On August 30, 2010, Foster increased its offer to 
$11.80 per share. The transaction is valued at approximately $114 
million.
    2. In the United States, Foster's proposed acquisition of Portec 
likely would substantially lessen competition in two separate product 
markets--bonded insulated rail joints (``bonded joints'') and 
polyurethane-coated insulated rail joints (``poly joints''). Foster and 
Portec are virtually the only manufacturers of bonded joints in the 
United States and currently supply approximately 95 percent of the 
market. For many customers, Foster and Portec are the only approved 
suppliers of these joints. In addition, Foster and Portec are two of 
only three suppliers of poly joints in the United States and currently 
supply approximately 54 percent of the market.
    3. Elimination of the competition between Foster and Portec likely 
will result in Foster's ability to unilaterally raise prices of bonded 
joints and poly joints to most customers. The proposed acquisition also 
likely would reduce Foster's incentive to invest in innovation in 
bonded joints. In addition, by eliminating Portec as a supplier, the 
acquisition increases the likelihood of coordinated interaction between 
Foster and the other supplier of poly joints.
    4. As a result, the proposed acquisition likely would substantially 
lessen competition in the development, manufacture, and sale of bonded 
joints and in the development, manufacture, and sale of poly joints in 
the United States, in violation of Section 7 of the Clayton Act, 15 
U.S.C. 18.

II. The Defendants

    5. Foster is incorporated in Pennsylvania and has its headquarters 
in Pittsburgh, Pennsylvania. It manufactures and distributes numerous 
products and services for the rail, construction, energy, and utility 
industries and has approximately 30 locations throughout the United 
States. For the rail industry, Foster manufactures, among other 
products, bonded joints, poly joints, tie plates, and rails. Foster had 
total revenues of approximately $512 million in 2008 and approximately 
$382 million in 2009.
    6. Portec is incorporated in West Virginia and has its headquarters 
in Pittsburgh, Pennsylvania. Portec also manufactures and distributes 
numerous products and services for the rail industry and other 
industries. For the rail industry, Portec manufactures, among other 
things, bonded joints, poly joints, rail lubricators, end posts, and 
curv blocks. Portec has several locations in the United States and 
abroad. Portec had total revenues of approximately $109 million in 2008 
and approximately $92.2 million in 2009.

III. Jurisdiction and Venue

    7. 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.
    8. Defendants develop, manufacture, and sell bonded joints, poly 
joints, and other products in the flow of interstate commerce. 
Defendants' activities in the

[[Page 79395]]

development, manufacture, 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.
    9. Defendants have consented to venue and personal jurisdiction in 
this judicial district.

IV. Trade and Commerce

A. Background

(1) Insulated Rail Joints
    10. Railroad tracks are divided into discrete sections, called 
track circuits. Electricity flows through the rail in each track 
circuit. Each track circuit is electrically isolated from the others. 
As the train enters a track circuit, the circuit allows the train to 
signal that it is passing through that particular circuit, which leads 
to the operation of automatic signals at rail crossings and switches 
farther up the line. The track circuit also enables the railroad 
operator to monitor the location of the trains.
    11. Railroad tracks are generally welded together, within a track 
circuit, forming the strongest possible bond. However, welding cannot 
be used to connect the pieces of rail between separate track circuits 
because that would allow the electric current to flow between the 
circuits and interfere with a train's signaling. Using an insulated 
rail joint is the only method available to connect the rail pieces at 
the ends of the track circuits and insulate the circuits from one 
another. Rail joints consist of steel bars that are bolted onto the 
ends of each of the rail pieces and are used to connect the abutting 
ends of the rails. Insulated rail joints are joints that are used to 
break the electric current flowing through the rail, using a material 
placed on the steel bars and between the two abutting pieces of rail.
    12. The reliability of an insulated rail joint is critical to the 
safety and efficient operation of the railroad. It is difficult to 
develop and manufacture insulated rail joints that can successfully 
withstand railroads' usage without failing, particularly in the most 
demanding applications. Rail connected by a rail joint is inherently 
weaker than rail that has been welded together. If the joint is 
subjected to heavy usage--for example, because the track it is on 
frequently carries heavily loaded rail cars--the joint may wear down 
over time and eventually break. In addition, an insulated rail joint 
may lose its insulating properties. If an insulated rail joint fails, 
the railroad operator will not know the location of the train and the 
signals will not operate properly. At the extreme, the failure of an 
insulated rail joint could cause a train derailment. At the least, 
failure of an insulated rail joint could cause the railroad to expend 
significant amounts of money determining the location of and replacing 
the failed joints. It could also bring the operation of the railroad to 
a halt while the failed joints are replaced.
    13. Ensuring that the insulated rail joints will last for the 
expected life of the joint without failure is vital to the railroads. 
It is costly to replace these joints and an unscheduled replacement can 
disrupt the operations of the railroad. As a result, the largest U.S. 
railroads, called Class 1 railroads, engage in extensive, multi-year 
testing to ensure that any new insulated rail joint, or any insulated 
rail joint offered by a new supplier, will meet their reliability and 
quality needs. The railroads must be assured that the joints are 
designed to last and the supplier's manufacturing processes are 
sufficiently well controlled that all joints will last the requisite 
time without failing.
    14. Railroads gain substantially from improvements in the 
reliability and effective life of insulated rail joints. Therefore, 
railroads have made research and development associated with these 
joints an important component of the competitive process. Manufacturers 
must make substantial investments in research and development to 
compete effectively for the business of the major railroads.
    15. The two primary types of insulated rail joints are bonded 
joints and poly joints. Customers seek bids for either bonded joints or 
poly joints, based on the particular application.
(2) Bonded Joints
    16. Bonded joints use epoxy in addition to bolts to bind the steel 
bars to the rails. With the addition of epoxy, the rails, bars, bolts, 
and insulating material that make up the joint are less subject to 
movement when a railcar passes over the joint and thus suffer less wear 
and tear. As a result, bonded joints are able to withstand the heaviest 
loads for extended periods of time. Because of their strength, certain 
of Foster's and Portec's bonded joints typically are guaranteed to last 
until 500 million gross tons have passed over the joints.
    17. The strength of bonded joints makes them necessary for the 
freight railroads' high-usage main track lines. This is especially true 
for the Class 1 railroads, which handle most of the heavy rail traffic 
in the United States. No other insulated rail joint is strong enough to 
withstand the heavy loads on these lines. Bonded joints are also 
necessary for some heavily traveled areas on main passenger lines and 
regional and short line railroads.
(3) Poly Joints
    18. Poly joints can be used to electrically isolate track circuits 
from one another. In contrast to bonded joints, poly joint components 
are not bound together by epoxy. Instead, electrical insulation in poly 
joints is provided by a polyurethane-covered bar that is bolted to the 
rail. No mechanism is added to provide additional strength, and nothing 
binds the joint to the rails except the bolts. Poly joints are not as 
strong and long lasting as bonded joints. They are significantly less 
expensive than bonded joints.
    19. Poly joints are generally used by Class 1 railroads to create 
track circuits in areas with lesser loads and traffic than on the main 
tracks, or on other less-heavily used sections of track. Poly joints 
also may be used as temporary replacements for bonded joints, but only 
until bonded joints can be installed. In addition, poly joints are used 
by some passenger railroads or other smaller railroads, which carry 
less weight on their tracks.

B. Relevant Markets

(1) Bonded Joints
    20. The development, manufacture, and sale of bonded joints in the 
United States is a line of commerce and relevant market within the 
meaning of Section 7 of the Clayton Act.
    21. Bonded joints have specific applications, for which other types 
of joints can rarely, if ever, be employed. Bonded joints are typically 
used on the main tracks of the freight railroads. Other types of 
joints, such as poly joints, cannot handle over time the heavy loads on 
these tracks because they are not strong enough.
    22. The vast majority of Foster's and Portec's sales of bonded 
joints are made to large customers located in the United States. Major 
U.S. customers consider only those suppliers of bonded joints located 
in the United States because of these suppliers' proximity to their 
rail lines. A supplier's proximity to customers' rail lines reduces 
both freight costs, which are a significant factor in the final cost of 
a bonded joint, and delivery times, and allows better customer service.
    23. A small but significant increase in the price of bonded joints 
would not cause U.S. customers of bonded joints to substitute a 
different joint or other product, reduce purchases of bonded joints, or 
turn to suppliers outside the United States, in volumes sufficient to 
make such a price increase unprofitable.

[[Page 79396]]

(2) Poly Joints
    24. The development, manufacture, and sale of poly joints in the 
United States is a line of commerce and relevant market within the 
meaning of Section 7 of the Clayton Act.
    25. A customer whose requirements will be satisfied by a poly joint 
would rarely, if ever, substitute a bonded joint, even if the price of 
poly joints were to rise.
    26. The three primary suppliers of poly joints in the United States 
ship poly joints to customers located throughout the United States. 
Because all three suppliers are located within approximately 200 miles 
of one another, customers pay only minimal differences in freight 
costs. U.S. customers of poly joints consider only those suppliers 
located in the United States to avoid higher freight costs, reduce 
delivery times, and allow better customer service.
    27. A small but significant increase in the price of poly joints 
would not cause U.S. customers of poly joints to substitute a different 
joint or other product, reduce purchases of poly joints, or turn to 
suppliers outside the United States, in volumes sufficient to make such 
a price increase unprofitable.

C. Market Participants

(1) Bonded Joints
    28. Foster and Portec are the only significant competitors in the 
U.S. market for bonded joints. Currently, Foster and Portec sell 
approximately 51 and 44 percent, respectively, of U.S. bonded joints. 
One other company accounts for the remaining five percent of this 
market. In addition, this third competitor does not have the same 
commitment to research and development as Foster and Portec. As a 
result, the combination of Foster and Portec will create a virtual 
monopoly in the U.S. market for bonded joints.
(2) Poly Joints
    29. Foster, Portec, and one other company are the only competitors 
in the U.S. market for poly joints. Currently, Foster and Portec sell 
approximately 21 and 33 percent, respectively, of U.S. poly joints. The 
third competitor accounts for the remaining sales in this market.

V. Competitive Effects

A. Bonded Joints

    30. Foster's proposed acquisition of Portec likely would 
substantially lessen competition in the U.S. market for bonded joints. 
Foster and Portec are the two primary suppliers of bonded joints to 
most U.S. customers. If the acquisition is not enjoined, the combined 
firm would supply approximately 95 percent of the bonded joints in the 
United States. Using a measure called the Herfindahl-Hirschman Index 
(``HHI'') (explained in Appendix A), the HHI would increase by 
approximately 4,500 points, resulting in a post-acquisition HHI of more 
than 9,000 points.
    31. Foster's and Portec's bidding behavior often has been 
constrained by the possibility of losing sales of bonded joints to the 
other. For many customers of bonded joints, Foster and Portec are 
either the only sources, or the two best sources.
    32. Customers have benefitted from the competition between Foster 
and Portec for sales of bonded joints by receiving lower prices. In 
addition, Foster and Portec have competed vigorously by providing 
innovations that have resulted in higher-quality and longer-lasting 
joints. The combination of Foster and Portec would eliminate this 
competition and its future benefits to customers. Post-acquisition, 
Foster likely would have the incentive and gain the ability profitably 
to increase prices, reduce quality, reduce innovation, and provide less 
customer service compared to these aspects of competition absent the 
acquisition. The small remaining competitor has limited customer 
acceptance and would not have the ability to make additional sales 
sufficient to discipline post-acquisition anticompetitive effects.
    33. The proposed acquisition, therefore, likely would substantially 
lessen competition in the United States for the development, 
manufacture, and sale of bonded joints. This likely would lead to 
higher prices, lower quality, less customer service, and less 
innovation in violation of Section 7 of the Clayton Act.

B. Poly Joints

    34. Foster's proposed acquisition of Portec likely would 
substantially lessen competition in the U.S. market for poly joints. If 
the acquisition is not enjoined, the combined firm would supply 
approximately 54 percent of the poly joints in the United States. The 
HHI would increase by more than 1,300 points, resulting in a post-
acquisition HHI of more than 5,000 points.
    35. Foster's and Portec's bidding behavior often has been 
constrained by the possibility of losing sales of poly joints to the 
other.
    36. Customers have benefitted from competition between Foster, 
Portec, and the other competitor by receiving lower prices. The 
products of the three firms are to some degree different, and the 
elimination of Portec likely would allow the two remaining competitors 
to increase prices. The combination of Foster and Portec would 
eliminate the significant competition between Foster and Portec and its 
future benefits to customers. Post-acquisition, Foster likely would 
have the incentive and gain the ability to profitably increase prices 
and provide less customer service compared to these aspects of 
competition absent the acquisition.
    37. In addition, by reducing the number of competitors in the U.S. 
market for poly joints from three to two, Foster and its only remaining 
competitor likely would gain the incentive and ability to raise prices 
through coordinated interaction by directly increasing prices, 
allocating customers, or restricting output or capacity. Coordination 
would be more likely or more effective because, with two significant 
competitors in the market, both could be reasonably certain of the 
identity of the other's customers, likely making cheating, such as 
discounting, easier to detect and discipline.
    38. The proposed acquisition, therefore, likely would substantially 
lessen competition in the United States for the development, 
manufacture, and sale of poly joints. This likely would lead to higher 
prices and less customer service in violation of Section 7 of the 
Clayton Act.

VI. Difficulty of Entry

A. Bonded Joints

    39. Sufficient, timely entry of additional competitors into the 
U.S. market for bonded joints is unlikely. Therefore, entry or the 
threat of entry into this market is not likely to prevent the harm to 
competition caused by the elimination of Portec as a supplier.
    40. Firms attempting to enter the U.S. market for the development, 
manufacture, and sale of bonded joints face several significant 
impediments to rapid, successful, and profitable entry. The new 
supplier of bonded joints must develop and successfully operate a 
production process that consistently produces a large number of high-
quality bonded joints that meet the rigorous specifications set by the 
railroads. In addition, a new entrant must be committed to investing in 
research and development to meet the railroads' ongoing desire for 
innovation. The design for bonded joints is continually evaluated in 
order to improve the strength and longevity of the joints. The 
technical know-how and expertise necessary to consistently manufacture 
a large number of high-quality bonded

[[Page 79397]]

joints and to design improvements that pass customers' qualification 
tests are difficult to obtain and learned only after years of direct 
experience.
    41. Further, a new supplier's bonded joint must pass potential 
customers' approval processes by demonstrating that the joints can meet 
rigorous quality and performance standards and perform well over time 
with heavy freight loads. For example, many railroads, especially the 
Class 1 railroads, insist that new bonded joints undergo laboratory 
testing plus several years of in-track testing. Railroads want to 
observe that the joints perform well over time before installing a 
significant number on their tracks. Moreover, attempts for approval are 
not guaranteed to be successful, and the approval process can take 
several years, especially if the first few attempts for approval are 
not successful. Because each customer's specifications may be unique, 
approval by one customer does not guarantee approval by any other 
customer.
    42. For these reasons, entry by new firms or the threat of entry by 
new firms into the U.S. market for the development, manufacture, and 
sale of bonded joints would not defeat the substantial lessening of 
competition that likely would result if Foster acquires Portec.

B. Poly Joints

    43. Sufficient, timely entry into the U.S. market for poly joints 
is also unlikely. Therefore, entry or the threat of entry into this 
market is not likely to prevent the harm to competition caused by the 
elimination of Portec as a supplier.
    44. The expertise to design and implement a process to manufacture 
a large number of high-quality poly joints on a consistent basis is 
difficult to obtain and takes years of experience to develop. In 
addition, a new poly joint supplier must obtain approvals from the 
railroads by demonstrating that its joints can meet the railroads' 
rigorous quality and performance standards. This rigorous approval 
process can take eighteen months or more. Further, attempts for 
approval are not guaranteed to be successful and can take several 
years, especially if the first few attempts for approval are 
unsuccessful.
    45. For these reasons, entry by new firms or the threat of entry by 
new firms into the U.S. market for the development, manufacture, and 
sale of poly joints would not defeat the substantial lessening of 
competition that would likely result if Foster acquires Portec.

VII. The Proposed Acquisition Violates Section 7 of the Clayton Act

    46. Foster's proposed acquisition of Portec likely would 
substantially lessen competition in the development, manufacture, and 
sale of bonded joints and the development, manufacture, and sale of 
poly joints in the United States in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18.
    47. Unless enjoined, the proposed acquisition likely would have the 
following anticompetitive effects, among others:
    (a) Actual and potential competition between Foster and Portec in 
the markets for the development, manufacture, and sale of bonded joints 
and the development, manufacture, and sale of poly joints in the United 
States would be eliminated;
    (b) Competition in the markets for the development, manufacture, 
and sale of bonded joints and the development, manufacture, and sale of 
poly joints in the United States likely would be substantially 
lessened;
    (c) For bonded joints in the United States, prices likely would 
increase and quality, customer service, and innovation likely would 
decrease; and
    (d) For poly joints in the United States, prices likely would 
increase and customer service likely would decrease.

VIII. Requested Relief

    48. The United States requests that this Court:
    (a) Adjudge and decree that Foster's acquisition of Portec would be 
unlawful and violate Section 7 of the Clayton Act, 15 U.S.C. 18;
    (b) Preliminarily and permanently enjoin and restrain Defendants 
and all persons acting on their behalf from consummating the proposed 
acquisition of Portec by Foster, or from entering into or carrying out 
any other contract, agreement, plan, or understanding, the effect of 
which would be to combine Foster with Portec;
    (c) Award the United States its costs for this action; and
    (d) Award the United States such other and further relief as the 
Court deems just and proper.

For Plaintiff United States of America:

Christine A. Varney,
Assistant Attorney General.

Molly S. Boast,
Deputy Assistant Attorney General.

Katherine B. Forrest,
Deputy Assistant Attorney General.

Patricia A. Brink,
Director of Civil Enforcement.

Maribeth Petrizzi (DC Bar 435204),
Chief, Litigation II Section.

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

Christine A. Hill (DC Bar 461048),
Leslie D. Peritz,
Robert W. Wilder,
Erin Carter Grace,
Attorneys, United States Department of Justice, Antitrust Division, 
450 Fifth Street, NW., Suite 8700, Washington, DC 20530. (202) 305-
2738.

Dated: December 14, 2010.

Appendix A

Definition of HHI

    The term ``HHI'' means the Herfindahl-Hirschman Index, a 
commonly accepted measure of market concentration. The HHI is 
calculated by squaring the market share of each firm competing in 
the market and then summing the resulting numbers. For example, for 
a market consisting of four firms with shares of 30, 30, 20, and 20 
percent, the HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). 
The HHI takes into account the relative size distribution of the 
firms in a market. It approaches zero when a market is occupied by a 
large number of firms of relatively equal size and reaches its 
maximum of 10,000 points when a market is controlled by a single 
firm. The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
    Markets in which the HHI is between 1,500 and 2,500 points are 
considered to be moderately concentrated, and markets in which the 
HHI is in excess of 2,500 points are considered to be highly 
concentrated. See Horizontal Merger Guidelines Sec.  5.3 (issued by 
the U.S. Department of Justice and the Federal Trade Commission on 
Aug. 19, 2010). Transactions that increase the HHI by more than 200 
points in highly concentrated markets will be presumed likely to 
enhance market power. Id.

United States District Court for the District of Columbia

United States of America, Plaintiff

v.

L.B. Foster Company and Portec Rail Products, Inc,. Defendants.
    Case: 1:10-cv-02115.
    Assigned To: Urbina, Ricardo M.
    Assign. Date: 12/14/2010.
    Description: Antitrust.

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 L.B. Foster Company (``Foster'') and Portec Rail 
Products, Inc. (``Portec'') entered into an Agreement and Plan of 
Merger, dated February 16, 2010. Pursuant to the Merger Agreement, 
on February 26, 2010, Foster made a cash tender offer to acquire all 
the outstanding shares of common stock of Portec for $11.71 per 
share. Foster later

[[Page 79398]]

increased its offer to $11.80 per share. The transaction value is 
currently approximately $114 million.
    The United States filed a civil antitrust Complaint on December 
14, 2010, seeking to enjoin the proposed acquisition, alleging that 
it likely would substantially lessen competition in two separate 
product markets--bonded insulated rail joints (``bonded joints'') 
and polyurethane-coated insulated rail joints (``poly joints'')--in 
violation of Section 7 of the Clayton Act, 15 U.S.C. 18. Foster and 
Portec are virtually the only manufacturers of bonded joints in the 
United States. The loss of competition from the acquisition likely 
would result in higher prices, lower quality, less customer service, 
and less innovation in the development, manufacture, and sale of 
bonded joints in the United States. In addition, Foster and Portec 
are two of only three suppliers of poly joints in the United States. 
The loss of competition from the acquisition likely would result in 
higher prices and less customer service in the development, 
manufacture, and sale of poly joints in the United States.
    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 that would result from Foster's acquisition 
of Portec. Under the proposed Final Judgment, which is explained 
more fully below, Foster is required to divest Portec's entire rail 
joint business,\1\ including Portec's only U.S. manufacturing 
facility, located in Huntington, West Virginia. Foster is also 
required to divest several other products currently manufactured in 
Portec's Huntington facility. Under the terms of the Hold Separate, 
Foster's and Portec's operations will remain entirely separate until 
the divestiture takes place. Pursuant to the Hold Separate, Foster 
and Portec must take certain steps to ensure that the assets being 
divested continue to be operated in a competitively and economically 
viable manner and that competition for the products being divested 
is maintained during the pendency of the divestiture.
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    \1\ This excludes, however, Portec's Coronet products, which are 
manufactured in the United Kingdom. The Coronet rail joints are 
based on different specifications than the rail joints manufactured 
and sold by Portec in the United States. In addition, the Coronet 
rail joints have never been sold in the United States.
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    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

    Foster manufactures and distributes numerous products and 
services for the rail, construction, energy, and utility industries. 
For the rail industry, Foster manufactures, among other products, 
bonded joints, poly joints, tie plates, and rails. Foster had total 
revenues of approximately $512 million in 2008 and approximately 
$382 million in 2009. Foster supplies approximately 51 percent of 
the bonded joints and 21 percent of the poly joints in the United 
States.
    Portec also manufactures and distributes numerous products and 
services for the rail industry and other industries. For the rail 
industry, Portec manufactures, among other things, bonded joints, 
poly joints, rail lubricators, end posts, and curv blocks. Portec 
had total revenues of approximately $109 million in 2008 and 
approximately $92.2 million in 2009. Portec supplies approximately 
44 percent of the bonded joints and 33 percent of the poly joints in 
the United States.

B. The Competitive Effects of the Acquisition on the U.S. Markets 
for Bonded Joints and Poly Joints

 1. Relevant Markets

    Railroad tracks are divided into discrete sections, called track 
circuits. Electricity flows through the rail in each track circuit, 
and each track circuit is electrically isolated from the others. As 
the train enters a track circuit, the circuit allows the train to 
signal that it is passing through that particular circuit, which 
leads to the operation of automatic signals at rail crossings and 
switches. The track circuits also enable the railroad operator to 
monitor the location of the trains. Most pieces of railroad track 
are welded together within a track circuit, forming the strongest 
possible bond. However, welding cannot be used to connect the pieces 
of rail between separate track circuits because that would allow the 
electric current to flow between the circuits and interfere with the 
train's signaling. Using an insulated rail joint is the only method 
available to connect the rail pieces at the ends of the track 
circuits and insulate the circuits from one another. Rail joints 
consist of steel bars that are bolted onto the ends of each of the 
rail pieces and are used to connect the abutting ends of the rails. 
Insulated rail joints contain material placed on the steel bars and 
between the two abutting pieces of rail, which prevents the electric 
current from flowing between the track circuits.
    The reliability of an insulated rail joint is critical to the 
safety and efficient operation of the railroad. It is difficult to 
develop and manufacture insulated rail joints that can successfully 
withstand railroads' usage without failing, particularly in the most 
demanding applications. Rail connected by a rail joint is inherently 
weaker than rail that has been welded together, and if the joint is 
subjected to heavy usage, the joint may wear down over time and 
eventually break. An insulated rail joint may also lose its 
insulating properties over time. The consequences of a failed 
insulated joint can be quite serious, as the railroad operator will 
not know the location of the train and the signals will not operate 
properly.
    It is vital to the railroads that insulated rail joints last for 
their expected life without failure. To that end, the largest U.S. 
railroads engage in extensive, multi-year testing to ensure than any 
new insulated rail joint product, or any insulated rail joint 
offered by a new supplier, will meet their reliability and quality 
needs. The railroads must be assured that the joints are designed to 
last and the supplier's manufacturing processes are sufficiently 
well controlled that all joints will last the requisite time without 
failing. Railroads gain substantially from improvements in the 
reliability and effective life of joints. Consequently, research and 
development is an important component of the competitive process, 
and insulated joint manufacturers must make substantial investments 
in research and development to compete effectively for sales to the 
major railroads.
    The two primary types of insulated rail joints are bonded joints 
and poly joints. Customers seek bids for either bonded joints or 
poly joints, based on the particular application. Bonded joints use 
epoxy in addition to bolts to bind the steel bars to the rails. With 
the addition of epoxy, the rails, bars, bolts, and insulating 
material that make up the joint are less subject to movement when a 
railcar passes over the joint, and thus suffer less wear and tear. 
Bonded joints are able to withstand the heaviest loads for extended 
periods of time, and are typically guaranteed to last until 500 
million gross tons have passed over them.
    Because of their strength, bonded joints are necessary for the 
freight railroads' high-usage main track lines. This is especially 
true for the Class 1 railroads, which are the largest U.S. railroads 
and handle most of the heavy freight rail traffic in the United 
States. No other insulated rail joint is strong enough to withstand 
the heavy loads on these lines over time. Bonded joints are also 
necessary for some heavily traveled areas on main passenger lines 
and regional and short line railroads. Bonded joints have specific 
applications, for which any other type of joint can rarely, if ever, 
be employed.
    The vast majority of Foster's and Portec's sales of bonded 
joints are made to large customers located in the United States. 
Major U.S. customers consider only those suppliers of bonded joints 
located in the United States because of these suppliers' proximity 
to their rail lines, which significantly reduces both freight costs 
and delivery times and allows better customer service. A small but 
significant increase in the price of bonded joints would not cause 
U.S. customers of bonded joints to substitute a different joint or 
any other type of product, reduce purchases of bonded joints, or 
turn to suppliers outside the United States, in volumes sufficient 
to make such a price increase unprofitable. Thus, the development, 
manufacture, and sale of bonded joints in the United States is a 
line of commerce and relevant market within the meaning of Section 7 
of the Clayton Act.
    Like bonded joints, poly joints also are used to electrically 
isolate track circuits. Unlike bonded joints, the electrical 
insulation in poly joints is provided by a polyurethane-covered bar 
that is bolted to the rail. The joint components are not bound 
together by epoxy, and no mechanism is added to provide additional 
strength to the joint. Poly joints are not as strong and do not last 
as long as bonded joints. They are also

[[Page 79399]]

significantly less expensive than bonded joints. Because they are 
weaker than bonded joints, freight railroads typically use poly 
joints to create track circuits in areas with lesser loads and 
traffic than on the main tracks or on other less-heavily used 
sections of track. Poly joints also may be used as temporary 
replacements for bonded joints, but only until bonded joints can be 
installed. Poly joints are used by some passenger railroads or other 
smaller railroads, which carry less weight on their tracks. A 
customer whose requirements will be satisfied by a poly joint would 
rarely, if ever, substitute a bonded joint, even if the price of 
poly joints were to rise.
    The three primary suppliers of poly joints in the United States 
ship poly joints to customers located throughout the United States. 
Because all three suppliers are located within approximately 200 
miles of one another, customers pay only minimal differences in 
freight costs. U.S. customers of poly joints consider only those 
suppliers located in the United States to avoid higher freight 
costs, reduce delivery times, and allow better customer service.
    A small but significant increase in the price of poly joints 
would not cause U.S. customers of poly joints to substitute a 
different joint or any other type of product, otherwise reduce 
purchases of poly joints, or turn to suppliers outside the United 
States, in volumes sufficient to make such a price increase 
unprofitable. Thus, the development, manufacture, and sale of poly 
joints in the United States is a line of commerce and relevant 
market within the meaning of Section 7 of the Clayton Act.

2. Anticompetitive Effects

    Foster's acquisition of Portec likely would substantially lessen 
competition in the United States for bonded joints and poly joints. 
For most U.S. customers of bonded joints, Portec and Foster are the 
two primary suppliers and are often the only suppliers. Currently, 
Foster and Portec sell approximately 51 and 44 percent, 
respectively, of U.S. bonded joints. One other company, which does 
not have the same commitment to research and development as Foster 
and Portec, accounts for the remaining five percent of sales. If the 
acquisition is not enjoined, the combined firm would supply 
approximately 95 percent of bonded joints in the United States and 
would have a virtual monopoly in that market. Using a measure called 
the Herfindahl/Hirschman Index (``HHI''), the HHI would increase by 
approximately 4,500 points, resulting in a post-acquisition HHI of 
more than 9,000 points.
    The possibility of losing sales of bonded joints to each other 
has often constrained Foster's and Portec's bidding behavior. The 
competition between Foster and Portec for sales of bonded joints has 
resulted in lower prices and innovations that have produced higher-
quality and longer-lasting joints. Without the competition provided 
by Portec on bonded joints, Foster would have the incentive and gain 
the ability profitably to increase prices, reduce quality, reduce 
innovation, and provide less customer service. The remaining 
competitor, with only five percent of bonded joint sales, has 
limited customer acceptance and would not be able to increase its 
sales post-acquisition sufficiently to discipline the 
anticompetitive effects of the acquisition.
    For most U.S customers, Foster and Portec are two of only three 
suppliers of poly joints. Currently, Foster and Portec sell 
approximately 21 and 33 percent, respectively, of poly joints in the 
United States. The third competitor accounts for the remaining sales 
in this market. If the acquisition is not enjoined, the combined 
firm would supply approximately 54 percent of poly joints in the 
United States. The HHI would increase by more than 1,300 points, 
resulting in a post-acquisition HHI of more than 5,000 points. The 
possibility of losing sales of poly joints to each other has often 
constrained Foster's and Portec's bidding behavior. Competition 
among the three poly joint suppliers has resulted in lower prices. 
As the products of the three companies are to some degree different, 
the acquisition of Portec likely will eliminate the closest 
competitor to Foster for some customers and thus allow the two 
remaining competitors to increase prices. Also, because the price 
levels and the dollar magnitude of the margins are higher for bonded 
joints than poly joints, any sales diverted from poly joints to 
bonded joints offer the prospect of additional profits to the merged 
firm. The acquisition of Portec by Foster would eliminate the 
significant competition between Foster and Portec and its future 
benefits to customers. Post-acquisition Foster likely would have the 
incentive and gain the ability to profitably increase prices and 
provide less customer service.
    If the number of competitors in the U.S. poly joint market is 
reduced from three to two, Foster and its only remaining competitor 
will have the incentive and ability to raise prices through 
coordinated interaction by directly increasing prices, allocating 
customers, or restricting output or capacity. Unlike in the bonded 
joint market where post-acquisition Foster will have close to a 
monopoly, coordination will be more likely or more effective in the 
poly joint market because, with two significant competitors, both 
could be reasonably certain of the identity of each other's 
customers, likely making cheating, such as discounting, easier to 
detect and discipline. The enhanced ability to detect cheating would 
be facilitated by, among other things, the fact that bids by public 
transit companies are often or usually made public.

3. Entry

    Sufficient, timely entry of additional competitors into either 
the U.S bonded joint market or the U.S. poly joint market is 
unlikely, and the threat of entry thus will not prevent the likely 
competitive harm resulting from Foster's acquisition of Portec. For 
bonded joints, rapid, successful, and profitable entry requires that 
a new supplier develop and successfully operate a production process 
that consistently produces a large number of high-quality bonded 
joints that meet the railroads' rigorous specifications. A new 
supplier of bonded joints also must invest in research and 
development to meet the railroads' desire for innovation and 
increased strength and longevity. These capabilities are difficult 
to obtain, and it takes years for a joint manufacturer to develop 
the know-how and expertise required to meet customers' qualification 
requirements. Further, many Class 1 railroads insist that new bonded 
joints undergo not only laboratory testing, but also several years 
of in-track testing on the railroads' lines, to ensure that the 
joints meet the railroads' performance standards under actual usage 
conditions. Attempts by suppliers to meet a Class 1 railroad's 
requirements may not be successful, and approval by one railroad 
does not guarantee approval by others.
    Similarly, a new supplier of poly joints in the United States 
must develop the expertise to manufacture a large number of joints 
on a consistent base, which could take years. A new poly joint 
supplier must obtain approvals from its customers, whose rigorous 
approval processes can take eighteen months or more. Approval by any 
customer cannot be assured, and approval by one customer does not 
guarantee approval by any other.
    Therefore, entry by new firms or the threat of entry by new 
firms would not defeat the substantial lessening of competition in 
the development, manufacture, and sale of bonded joints and poly 
joints in the United States that likely would result from Foster's 
acquisition of Portec.

III. Explanation of the Proposed Final Judgment

    The divestiture required by the proposed Final Judgment will 
eliminate the anticompetitive effects that likely would result from 
Foster's acquisition of Portec. This divestiture will preserve 
competition in the development, manufacture, and sale of bonded 
joints and the development, manufacture, and sale of poly joints by 
creating an independent, economically viable competitor to Foster in 
the United States for these products.
    The acquirer of the divested assets will obtain from Defendants 
the assets it needs to replace the competition in the sale of bonded 
joints and poly joints that would be lost as a result of Foster's 
acquisition of Portec. The proposed Final Judgment requires 
Defendants to divest the assets used to manufacture and sell 
Portec's bonded joints and poly joints, including Portec's facility 
in Huntington, West Virginia, and the tangible and intangible assets 
used to manufacture and sell these joints. The tangible assets 
include, among other things, manufacturing equipment, tooling, 
inventory, and materials. The intangible assets include, among other 
things, patents, licenses, intellectual property, know-how, trade 
secrets, trade names, drawings, specifications, computer software, 
marketing and sales data, manuals and technical information, and 
research data. The divested assets will provide the acquirer with 
the assets it needs to successfully manufacture and sell bonded 
joints and poly joints in the United States.
    This divestiture also ensures that the Huntington facility will 
be able to operate efficiently. Defendants are required to divest 
the assets used to manufacture and sell the following other Portec 
products currently manufactured at the Huntington facility: end

[[Page 79400]]

posts, polyurethane-coated gauge and tie plates, fiberglass joint 
kits, plastic insulation, standard rail joints, compromise and 
transitional rail joints, and Weldmate joint bars. These assets need 
to be divested because the products use the same inputs or machinery 
as bonded joints and poly joints or are closely related or 
complementary to the bonded joints and poly joints. The assets used 
to manufacture these related or complementary products will be sold 
to the acquirer so the acquirer's ability to continue producing 
bonded joints and poly joints efficiently at that facility will not 
be impaired. These products together constitute Portec's full line 
of rail joints and complementary products and will make the acquirer 
a stronger competitor than if it acquired only the bonded joint and 
poly joint assets. This full range of products will allow the 
Huntington facility to be operated as a viable standalone facility.
    A few other Portec products currently being manufactured at the 
Huntington facility, primarily friction management products and 
Shipping Systems Division (``SSD'') products, are not being 
divested. These products are not related to bonded joints and poly 
joints and do not use the same equipment or inputs. For example, the 
friction management and SSD products are merely assembled at 
Huntington from off-the-shelf parts. As a result, the products not 
being divested do not directly alter the efficient operation of the 
bonded joint and poly joint assets.
    The proposed Final Judgment designates Koppers Inc. as the 
company to which the divested assets must be sold. While the United 
States does not generally require that the purchaser of the divested 
assets be identified and approved prior to and as a condition of 
settlement, the unique circumstances of this case necessitate such 
an approach. In many cases, numerous potential acquisition 
candidates would be acceptable to the customers and the United 
States. Also, acquirers in most cases would be able to continue 
selling the divested products without significant delays made 
necessary by extensive testing requirements. Here, the upfront 
designation of the acquirer ensures the sale will be made to an 
acquirer with the expertise and resources necessary to replace 
Portec immediately as a full-fledged competitor to Foster.
    Because bonded joints and poly joints are critical to the safe 
and efficient operation of a railroad, customers must be confident 
that the acquirer of the divested assets will be able to maintain 
the current quality and long-term reliability of these joints. If 
the customers lack this confidence, they likely would conduct 
lengthy in-track testing before purchasing joints from a new 
supplier in significant quantities. Such lengthy testing periods 
could mean that the divested Portec joint businesses would not 
provide meaningful competition to Foster for several years, and, as 
a result, the divestiture would not remedy the competitive harm that 
would likely result from Foster's acquisition of Portec. The 
possibility that customers would require long testing periods before 
purchasing from an acquirer led the United States to require an 
acceptable acquirer prior to entering into a settlement.
    Defendants presented Koppers to the United States as a potential 
acquirer of the divested assets. Foster and Koppers entered into an 
agreement for the purchase of the divested assets on December 9, 
2010. Koppers is a global integrated producer of carbon compounds 
and treated and untreated wood products and services for use in a 
variety of industries, including the rail industry. In 2009, Koppers 
had total revenues of approximately $1.12 billion. Approximately 58 
percent of its 2009 sales were generated in the United States. 
Koppers currently supplies all the Class 1 railroads. In addition, 
Koppers maintains relationships with many short-line and regional 
rail lines. Koppers has a strong relationship with the Class 1 
railroads, an excellent reputation as a supplier to railroads, and 
is committed to research and development. The United States 
determined, after a thorough investigation, that railroad customers 
would be sufficiently confident in Koppers's ability consistently to 
manufacture quality bonded joints and poly joints and, therefore, 
would not be likely to insist upon a lengthy in-track testing period 
for these joints.
    The United States typically requires that assets be divested 
within 60 to 90 days after the filing of the Complaint or five days 
after the entry of the Final Judgment by the Court. Because the 
acquirer of the divested assets has been selected and approved by 
the United States prior to the filing of the Complaint, there is no 
need for 60 to 90 days to engage in a search for an acquirer. 
Further, the United States has already reviewed the documents 
related to the divestiture. Accordingly, the proposed Final Judgment 
requires that the divested assets be sold to Koppers within ten days 
after the Court signs the Hold Separate.\2\ The entry of the Hold 
Separate was chosen as the date upon which the divestiture period 
begins to run because Foster cannot consummate its acquisition of 
Portec until the Court enters the Hold Separate, and that 
acquisition must be consummated before the divested assets are sold.
---------------------------------------------------------------------------

    \2\ The Hold Separate requires that until the assets being 
divested are sold according to the terms of the proposed Final 
Judgment, Foster and Portec must continue to operate their entire 
businesses as independent, ongoing, and economically viable 
businesses that are held entirely separate, distinct, and apart. 
Foster and Portec shall not coordinate their production, marketing, 
or terms of sale until the assets being divested are sold. It is 
necessary to keep Portec's entire business separate from Foster's 
business in the event the divested assets are not sold to Koppers 
for any reason. If the assets are not sold to Koppers, Foster and 
Portec will be unable to combine their operations, thereby 
preserving Portec as an independent competitor in the bonded joint 
and poly joint markets.
---------------------------------------------------------------------------

    The proposed Final Judgment prohibits Defendants from 
interfering with any negotiations by Koppers to employ any current 
or former Portec employee who is responsible in any way for the 
design, production, and sale of the products being divested. It also 
requires that Defendants waive any non-compete agreements for 
current or former employees involved in the design, production, and 
sale of the products being divested. The proposed Final Judgment 
also requires that the assets being divested be operational on the 
date of sale. In addition, the proposed Final Judgment requires that 
Defendants divest Portec's entire business relating to each of the 
divested products and not manufacture any products using the 
intangible assets divested pursuant to the proposed Final Judgment. 
To allow Foster time to remove the assets used for those products 
not being divested, the proposed Final Judgment allows Defendants to 
occupy that portion of the Huntington facility that is used to 
manufacture the products not being divested for sixty days from the 
date Foster acquires Portec.
    Finally, the proposed Final Judgment requires that Defendants 
provide advance notice to the United States of any acquisition of 
the assets of or any interest in, any company in the business of 
designing, developing, producing, marketing, servicing, 
distributing, and/or selling bonded joints and/or poly joints, or 
any company in the business of producing, marketing, distributing, 
and/or selling friction management products; or any relationship 
with another company that involves the distribution of friction 
management products in North America.\3\ Until very recently, Foster 
and Portec competed in the sale of friction management products in 
the United States. Few competitors sell these products in the United 
States. Portec is the leader in the development, production, and 
sale of certain friction management products. Foster was a 
distributor of friction management products for an overseas 
manufacturer and it recently terminated its relationship with that 
manufacturer. However, in the future Foster could begin selling 
friction management products made by that manufacturer or others. As 
a result, the proposed Final Judgment ensures that the United States 
will have the ability to investigate the competitive impact if 
Foster attempts to resume its sale of friction management products 
in the United States.
---------------------------------------------------------------------------

    \3\ Friction management products are defined as wayside gauge-
face lubrication systems, top-of-rail lubrication systems, and any 
other system or equipment used to lubricate rail.
---------------------------------------------------------------------------

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. Sec.  15, provides that 
any person who has been injured as a result of conduct prohibited by 
the antitrust laws may bring suit in Federal court to recover three 
times the damages the person has suffered, as well as costs and 
reasonable attorneys' fees. Entry of the proposed Final Judgment 
will neither impair nor assist the bringing of any private antitrust 
damage action. Under the provisions of Section 5(a) of the Clayton 
Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima facie 
effect in any subsequent private lawsuit that may be brought against 
Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Defendants have stipulated that the 
proposed Final Judgment may be entered by the Court after compliance 
with the provisions of the APPA, provided that the United States has 
not withdrawn its

[[Page 79401]]

consent. The APPA conditions entry upon the Court's determination 
that the proposed Final Judgment is in the public interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding 
the proposed Final Judgment. Any person who wishes to comment should 
do so within sixty (60) days of the date of publication of this 
Competitive Impact Statement in the Federal Register, or the last 
date of publication in a newspaper of the summary of this 
Competitive Impact Statement, whichever is later. All comments 
received during this period will be considered by the United States 
Department of Justice, which remains free to withdraw its consent to 
the proposed Final Judgment at any time prior to the Court's entry 
of judgment. The comments and the response of the United States will 
be filed with the Court and published in the Federal Register. 
Written comments should be submitted to: Maribeth Petrizzi, Chief, 
Litigation II Section, Antitrust Division, United States Department 
of Justice, 450 Fifth Street, NW., Suite 8700, Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States could have continued the litigation and sought 
preliminary and permanent injunctions preventing Foster's 
acquisition of Portec. The United States is satisfied, however, that 
the divestiture of the assets described in the proposed Final 
Judgment will preserve competition for the development, manufacture, 
and sale of bonded joints and poly joints in the United States. 
Thus, the proposed Final Judgment would achieve all or substantially 
all of the relief the United States would have obtained through 
litigation, but avoids the time, expense, and uncertainty of a full 
trial on the merits of the Complaint.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination 
in accordance with the statute, the court is required to consider:
    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) The impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.
    15 U.S.C. 16(e)(1)(A)-(B). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States 
v. Microsoft Corp., 56 F.3d 1448, 1461 (DC Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) 
(assessing public interest standard under the Tunney Act); United 
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ]76,736, 2009 
U.S. Dist. LEXIS 84787, No. 08-1965 (JR), at *3 (D.D.C. Aug. 11, 
2009) (noting that the court's review of a consent judgment is 
limited and only inquires ``into whether the government's 
determination that the proposed remedies will cure the antitrust 
violations alleged in the complaint was reasonable, and whether the 
mechanisms to enforce the final judgment are clear and 
manageable.'').
    As the United States Court of Appeals for the District of 
Columbia has held, under the APPA, a court considers, among other 
things, the relationship between the remedy secured and the specific 
allegations set forth in the government's complaint, whether the 
decree is sufficiently clear, whether enforcement mechanisms are 
sufficient, and whether the decree may positively harm third 
parties. See Microsoft, 56 F.3d at 1458-62. With respect to the 
adequacy of the relief secured by the decree, a court may not 
``engage in an unrestricted evaluation of what relief would best 
serve the public.'' United States v. BNS, Inc., 858 F.2d 456, 462 
(9th Cir. 1988) (citing United States v. Bechtel Corp., 648 F.2d 
660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; 
United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); 
InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that:
    [t]he balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.
    Bechtel, 648 F.2d at 666 (emphasis added) (citations 
omitted).\4\ In determining whether a proposed settlement is in the 
public interest, the court ``must accord deference to the 
government's predictions about the efficacy of its remedies, and may 
not require that the remedies perfectly match the alleged 
violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17; see also 
Microsoft, 56 F.3d at 1461 (noting the need for courts to be 
``deferential to